What changed in this filing

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Item 1A. Risk Factors

2024-03-05 compared with 2023-03-02 · 205 added, 211 removed, 1101 unchanged (27% of the section changed)

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Risks related to operational, commercial and manufacturing matters

We currently rely on our RNS System, which can only be marketed in the United States for use in adults with drug-resistant focal epilepsy, and is recommended as well as implanted primarily at Level 4 CECs.

If we are not successful in enhancing awareness of our RNS System, driving adoption across our current target population, expanding referral pathways to increase referrals to Level 4 CECs, reaching beyond Level 4 CECs and expanding the population of eligible patients, our sales, business, financial condition and results of operations will be negatively affected.

Our business currently depends primarily on our ability to successfully market our RNS System, which includes increasing the number of patients treated at CECs, increasing adoption of our RNS System across CECs, and driving utilization by clinicians within CECs.

We currently rely on our RNS System, which can only be marketed in the United States for use in adults with drug-resistant focal epilepsy, as our primary source of revenue.

Our RNS System was historically recommended as well as implanted primarily at Level 4 CECs and has recently expanded outside of Level 4 CECs and into the community setting.

If we are not successful in enhancing awareness of our RNS System, driving utilization and adoption across Level 4 CECs, growing utilization and adoption in the community setting, expanding referral pathways to increase referrals to Level 4 CECs, reaching beyond Level 4 CECs and expanding the population of eligible patients, our sales, business, financial condition and results of operations will be negatively affected.

Our business currently depends primarily on our ability to successfully market our RNS System, which includes increasing the number of patients treated at CECs, increasing adoption of our RNS System across CECs and in the community setting, as well as driving utilization by clinicians within CECs and in the community setting.

Currently, our RNS System can only be marketed for use in adults with drug-resistant focal epilepsy in the United States.

Additionally, our RNS System is primarily recommended and implanted at Level 4 CECs, which provide advanced diagnosis and management of epilepsy.

Therefore, we are dependent on widespread market adoption of our RNS System within a limited number of accounts.

We are aiming to increase awareness about our RNS System, including earlier in the diagnostic process through our partnership with DIXI Medical, expand the population of patients we can treat with our RNS System, as well as the number of physicians that can prescribe and the number of centers at which neurosurgeons can implant our RNS System, but there can be no assurance that we will succeed.

Historically our RNS System was primarily recommended and implanted at Level 4 CECs, which provide advanced diagnosis and management of epilepsy.

We only recently began expanding our commercial efforts to target and be able to qualify the additional 1,800 epileptologists outside of Level 4 CECs and the entire population of functional neurosurgeons as a result of the FDA approval of a PMA-S in 2023, which updated the qualification criteria for centers and clinicians that may prescribe and implant the RNS System.

Therefore, we have been dependent on widespread market adoption of our RNS System within a limited number of accounts.

We are aiming to increase awareness about our RNS System, including earlier in the diagnostic process through our partnership with DIXI Medical, expand the population of patients we can treat with our RNS System, and increase utilization and adoption across physicians that prescribe and implant our RNS System both within Level 4 CECs and outside of Level 4 CECs, in the community setting, but there can be no assurance that we will succeed.

The commercial success of our RNS System will continue to depend on a number of factors, including the following:

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• our ability to provide earlier awareness of and education about our RNS System to patients and clinicians, including through our partnership with DIXI Medical;

• the degree to which clinicians, patients and hospital facilities, primarily Level 4 CECs, adopt our RNS System;

• the continued effects of the COVID-19 pandemic;

• the degree to which clinicians, patients and hospital facilities, including at CECs and outside of CECs, in the community setting, adopt our RNS System;

• the availability, relative cost and perceived advantages and disadvantages of alternative technologies or treatment methods for epilepsy;

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• our ability to predict product performance;

• the strength of our marketing and distribution infrastructure, including our ability to drive adoption and utilization of our RNS System, our ability to develop and maintain relationships with programming centers, and our ability to expand referral pathways to CECs;

• the strength of our marketing and distribution infrastructure, including our ability to drive adoption and utilization of our RNS System, our ability to expand referral pathways to CECs and beyond, and our ability to grow the market outside of Level 4 CECs, in the community;

• our ability to obtain, maintain, protect, enforce and defend our intellectual property rights, including in and to our RNS System;

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If we are unable to successfully achieve substantial market acceptance and adoption of our RNS System, our sales, business, financial condition and results of operations would be harmed.

Our commercial success will depend in large part on the further acceptance by clinicians, patients and hospital facilities of our RNS System as safe, useful, and cost-effective, and increasing the number of patients treated at Level 4 CECs and other facilities.

We cannot predict how quickly, if at all, additional clinicians, patients, and hospital facilities will adopt our RNS System over continued noninterventional therapies or competing neuromodulation devices or surgical treatment options at Level 4 CECs and other facilities.

For example, clinicians may be reluctant to use our RNS System due to familiarity with neuromodulation devices that are more established.

Alternatively, in the community setting, neuromodulation may not be a common practice, if it is done at all.

Clinicians, patients, and hospital facilities may continue to prefer noninvasive therapeutic options, resective or ablative surgery, or alternative neuromodulation therapies such as VNS and DBS.

Moreover, we cannot predict how quickly, if at all, those currently living with epilepsy but who are not being treated will seek treatment or utilize Level 4 CECs for treatment.

Moreover, we cannot predict how quickly, if at all, those currently living with epilepsy but who are not being treated will seek treatment.

Our ability to grow sales of our RNS System and drive market acceptance will depend on successfully educating clinicians, patients, and hospital facilities of the relative benefits of our RNS System.

Additionally, patients rely on their healthcare providers, including epileptologists and neurosurgeons to recommend a course of treatment.

If we are unable to successfully achieve substantial market acceptance and adoption of our RNS System by additional clinicians, patients, and hospital facilities, patients may be reluctant to

use our products over alternative neuromodulation therapies.

If we are unable to successfully achieve substantial market acceptance and

adoption of our RNS System by additional clinicians, patients, and hospital facilities, or to expand the clinicians’ perspective as to the types of patients that can benefit from our RNS System, patients may be reluctant to use our products over alternative neuromodulation therapies.

If we are unable to successfully drive patient interest in our RNS System, including through our partnership with DIXI Medical, our business, financial condition and results of operations would be harmed.

Our commercial success will depend on a continued flow of patient referrals to Level 4 CECs from treating primary care physicians, neurologists, and other healthcare providers and from caregiver support and encouragement around physician referrals and self-referrals to Level 4 CECs.

If we are unable to successfully expand our referral pathways to achieve an increased patient referral pipeline into Level 4 CECs, our sales, business, financial condition and results of operations would be harmed.

Our commercial success will depend on a continued flow of patient referrals to CECs from treating primary care physicians, neurologists, and other healthcare providers and from caregiver support and encouragement around physician referrals and self-referrals to CECs.

If we are unable to successfully expand our referral pathways to achieve an increased patient referral pipeline into CECs or develop opportunities outside of Level 4 CECs, in the community setting, our sales, business, financial condition and results of operations would be harmed.

Our commercial success will depend in large part on continued referrals of appropriate patients from treating primary care physicians, neurologists, and other healthcare providers to epileptologists, neurosurgeons, and other clinicians, primarily at Level 4 CECs.

We estimate that of the approximately 575,000 adults with drug-resistant focal epilepsy in the United States, approximately 24,000 adult drug-resistant focal epilepsy patients are treated in Level 4 CECs annually.

We cannot predict how quickly, if at all, we can build that pipeline through our sales and marketing efforts and whether primary care physicians, neurologists, and other healthcare providers, as well as caregivers will support patient referrals to epileptologists and neurosurgeons at Level 4 CECs over other therapy options.

We cannot predict how quickly, if at all, we can grow utilization and adoption at the Level 4 CECs and in the community setting to build a pipeline through our sales and marketing efforts and whether primary care physicians, neurologists, and other healthcare providers, as well as caregivers will support use of our RNS System in the community setting or patient referrals to epileptologists and neurosurgeons at CECs over other therapy options.

Primary care physicians, neurologists, and other healthcare providers may continue to prefer traditional treatments, such as additional attempts to treat with new therapeutic drugs that become available from time to time, including for fear of losing management of the patient’s care.

If we are unable to educate clinicians to follow national guidelines, which recommend that patients whose seizures have not been brought under control after three months of care by a primary care physician or after 12 months of seeing a general neurologist be referred to a CEC, or that patients that are considered drug resistant because they failed to achieve sustained seizure freedom after trying two antiseizure medications be referred to a tertiary epilepsy center to evaluate potential interventions, or if we are unable to convince them as to the merits of our RNS System inside a CEC or in the community setting, we may be unable to successfully build our patient pipeline.

This could harm our business, financial condition and results of operations.

Various factors outside our direct control, including the COVID-19 pandemic, may negatively impact our manufacturing of our RNS System, which could harm our business, financial condition, and results of operations.

Various factors outside our direct control may negatively impact our manufacturing of our RNS System, which could harm our business, financial condition, and results of operations.

We manufacture our RNS System at our manufacturing facility in Mountain View, California.

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As a result, deviations from our forecasts could cause us to fail to meet demand for our products.

Since we produce our products in one manufacturing facility, any contamination of the controlled environment, equipment malfunction, supply issues, personnel issues, including human error, or failure to strictly follow procedures can significantly reduce our yield.

procedures can significantly reduce our yield.

A drop in yield can increase our cost to manufacture our products or, in more severe cases, require us to halt the manufacture of our products until the problem is resolved.

Identifying and resolving the cause of a drop in yield can require substantial time and resources.

In addition, if demand for our

products shifts such that our manufacturing facility is operated below our forecasts for an extended period, we may adjust our manufacturing operations to reduce fixed costs, which could lead to uncertainty and delays in manufacturing times and quality during any transition period.

In addition, if demand for our products shifts such that our manufacturing facility is operated below our forecasts for an extended period, we may adjust our manufacturing operations to reduce fixed costs, which could lead to uncertainty and delays in manufacturing times and quality during any transition period.

The manufacturing, sterilization and distribution of our products are technically challenging.

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As a result, our dependence on third-party, including single source, suppliers, subjects us to a number of risks that could impact our ability to manufacture our products and harm our business, financial condition, and results of operations, including:

• interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations, including due to the COVID-19 pandemic;

• interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations;

• delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s failure to produce components that consistently meet our quality specifications;

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We source and rely upon materials, components, and sub-assemblies of our RNS System, as well as manufacturing services from approved suppliers, most of which are single source suppliers.

For example, Micro Systems Technologies Management AG and Greatbatch Ltd are single source suppliers of several key components

of our products, including printed circuit assemblies and batteries.

For example, Micro Systems Technologies Management AG and Greatbatch Ltd are single source suppliers of several key components of our products, including printed circuit assemblies and batteries.

In addition, certain of our suppliers are not under long-term contracts with us.

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Obtaining the necessary FDA or international approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property or other proprietary rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs that may be passed on to us.

Our results of operations may be harmed if we are unable to accurately forecast customer demand for our products.

We do not maintain large amounts of excess inventory at any given time.

To ensure adequate supply, we must forecast inventory needs and manufacture our products based on our estimates of future demand.

Our ability to accurately forecast demand for our products, including our distributed DIXI Medical products, could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, our inability to forecast the lifecycle of our products, an increase or decrease in customer demand for our products or for competitor products, our failure to accurately forecast customer adoption of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand.

Conversely, if we underestimate customer demand for our products, our manufacturing team, or that of DIXI Medical, may not be able to deliver products to meet our requirements, and this could result in damage to our reputation and customer relationships.

In addition, if we experience a significant increase in demand,

additional supplies of components, materials, or services, or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, which may negatively affect our business, financial condition, and results of operations.

If we fail to optimize our sales and marketing capabilities and develop widespread brand awareness cost-effectively, our growth will be impeded and our business may suffer.

We are actively expanding our presence in the United States through additional sales and education efforts to drive awareness of our RNS System amongst patients, clinicians and hospital facilities, to drive adoption of our RNS System at Level 4 CECs and increase utilization of our RNS System within new and existing accounts.

We are actively expanding our presence in the United States through additional sales and education efforts to drive awareness of our RNS System amongst patients, clinicians and hospital facilities, to drive adoption of our RNS System at Level 4 CECs and in the community setting and to increase utilization and adoption of our RNS System within new and existing accounts.

We also plan to explore regulatory and reimbursement approval pathways to expand our presence in international territories.

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In particular, if we are unable to hire, develop and retain talented sales personnel or if new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenue.

Additionally, if we do not hire the correct type of or appropriate number of sales personnel as we expand into the community setting, our efforts to grow our market and business outside of the Level 4 CECs may be harmed.

We dedicate significant financial and other resources to our customer outreach and training programs, which may require us to incur significant upfront costs.

For example, we may need to conduct additional physician trainings across hospital facilities, including Level 4 CECs.

Our sales force may also need to develop additional

efficiencies and approaches to address potential growth as we expand referral pathways, expand into additional existing Level 4 CECs as well as new Level 4 CECs, offer new products, including those distributed through our partnership with DIXI Medical, and increase the number of epileptologists recommending, and neurosurgeons implanting, our RNS System within each Level 4 CEC.

For example, we may need to conduct additional physician trainings across hospital facilities, both at CECs and as we expand into the community setting.

Our sales force may also need to develop additional efficiencies and approaches to address potential growth as we expand referral pathways, expand into additional existing Level 4 CECs as well as new CECs, grow our presence in the community setting, offer new products, including those distributed through our partnership with DIXI Medical, increase the number of epileptologists recommending, and neurosurgeons implanting, our RNS System, and increase the numbers and types of patients being prescribed and implanted with the RNS System by current clinicians.

Our business would be harmed if our programs and associated expenditures do not generate a corresponding increase in revenue.

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Our industry is competitive and has been evolving rapidly with not only existing treatment options, but also the introduction of new products and technologies as well as the market activities of industry participants.

Our RNS System is indicated for adult patients with drug-resistant focal epilepsy in the United States and we primarily market our device to customers, primarily consisting of the clinicians within Level 4 CECs that treat these patients.

Our RNS System is indicated for adult patients with drug-resistant focal epilepsy in the United States and we have historically primarily marketed our device to clinicians within Level 4 CECs that treat these patients.

As a result of the recent approval of a PMA-S, we are now able to expand our commercial efforts to the additional epileptologists and functional neurosurgeons practicing outside of Level 4 CECs, in the community setting.

In our target patient population, there are two primary treatment options (i) an ablative or resective surgery, or (ii) implantation of a neuromodulation device.

Patients may also choose not to actively seek additional treatment for epilepsy or may choose to try new therapeutic drugs that become available from time to time.

Patients may also choose not to actively seek additional treatment for epilepsy or may

choose to try new therapeutic drugs that become available from time to time.

We estimate that approximately 80% of drug-resistant focal epilepsy patients are either not ideal candidates for ablative or resective surgery or are unwilling to undergo a destructive surgical procedure and we compete primarily with two manufacturers of neuromodulation devices for the treatment of these patients.

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• expand our referral pathways;

• expand the number of Level 4 CECs implanting our RNS System and increase utilization across these Level 4 CECs;

• drive awareness to increase the number of drug-resistant epilepsy patients referred to Level 4 CECs;

• expand the number of CECs implanting our RNS System and increase utilization across existing clinicians using the RNS System and adoption across new clinicians within these CECs;

• increase the utilization and adoption of our RNS System outside of Level 4 CECs, in the community setting;

• drive awareness to increase the number of drug-resistant epilepsy patients referred to CECs and treated outside of CECs, in the community setting;

• maintain adequate reimbursement for implant procedures and for clinicians to provide ongoing care of patients treated with our RNS System;

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Further, if we cannot maintain strong working relationships with clinicians and continue to receive their advice and input, the marketing of our products could suffer, which could harm our business, financial condition and results of operations.

The COVID-19 pandemic and related restrictions on access to clinicians as well as hospital staffing shortages have impacted, and will likely continue to impact, our ability to maintain such relationships.

Certain restrictions on access to clinicians as well as hospital staffing shortages have impacted, and will likely continue to impact, our ability to maintain such relationships.

Finally, although we have demonstrated the safety, effectiveness and clinical advantages of our products in pivotal clinical studies, neuromodulation is still a relatively new approach to treating drug-resistant focal epilepsy.

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If the results of our products do not meet the expectations of the patients, or the patient experiences adverse events, it could discourage the patient from continuing to use our device or referring our products to others.

Dissatisfied patients may express

negative opinions through social media, advocacy, or other publicity.

Dissatisfied patients may express negative opinions through social media, advocacy, or other publicity.

Any failure to meet patient expectations and any resulting negative publicity could harm our reputation and future sales.

Our sales, business, financial condition and results of operations have been and continue to be impacted by the COVID-19 pandemic.

The global spread of the COVID-19 pandemic, including the different COVID-19 variants and measures introduced by local, state and federal governments to contain the virus and mitigate its public health effects have significantly impacted the global economy and negatively impacted our business.

We have seen and may continue to be negatively impacted by decreased and delayed procedures being performed to implant our RNS System, hospital staffing shortages, delayed and decreased epilepsy diagnostic evaluations at epilepsy monitoring units, or EMUs, which create the majority of our pipeline for new RNS System implants and increased vacation demand by both patients and clinicians as a result of loosening travel restrictions, Given the uncertainty around the duration and extent of the COVID-19 pandemic, we expect continued, lingering, and far-reaching adverse impacts to our business, results of operations, financial condition, and liquidity, but cannot accurately predict at this time the extent of the future potential impacts.

The widespread pandemic has also had a significant negative effect on the U.S.

and global economies and, if the COVID-19 pandemic results in a prolonged economic recession, it would continue to harm our sales, business, operating results, and financial condition.

Additionally, quarantines or government reaction or shutdowns for COVID-19 have disrupted and may disrupt our supply chain, especially for components we source from single-source suppliers.

Travel and cargo restrictions may also disrupt our ability to distribute our RNS System or engage with our customers in the ordinary course of business.

Any cargo restrictions related to raw materials used to manufacture our RNS System or its components may restrict our ability to manufacture and ship devices and harm our sales, business, operating results, and financial condition.

If adequate reimbursement becomes unavailable for the procedures to implant our RNS System and for clinicians to provide ongoing care for patients treated with our RNS System, it could diminish our sales or affect our ability to sell our RNS System profitably.

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Instead, we invoice healthcare providers for our RNS System and the cost is bundled into the reimbursement received by healthcare providers for the procedures in which our RNS System is used.

We expect our RNS System will continue to be purchased by hospital facilities, primarily Level 4 CECs, and other providers who will then seek reimbursement from third-party payors for brain-responsive neuromodulation for drug resistant focal epilepsy.

While third-party payors currently cover and provide reimbursement for both implant procedures of our RNS System as well as for clinicians providing ongoing patient care, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement, or that current reimbursement levels for implant procedures as well as clinician-provided ongoing patient care will continue.

We expect our RNS System will continue to be purchased by hospital facilities who will then seek reimbursement from third-party payors for brain-responsive neuromodulation for drug resistant focal epilepsy.

While third-party payors currently cover and provide reimbursement for both implant procedures of our RNS System as well as for clinicians providing ongoing patient care, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement, or that current reimbursement levels for diagnostic, implant or replacement procedures as well as clinician-provided ongoing patient care will continue.

Furthermore, the overall amount of reimbursement available for brain-responsive neuromodulation for drug resistant focal epilepsy could decrease in the future.

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Additionally, we cannot be sure that the reimbursement amounts available for brain-responsive neuromodulation for drug resistant focal epilepsy will not reduce or otherwise negatively impact the demand for our marketed RNS System.

Failure by Level 4 CECs and other users of our RNS System to obtain coverage and adequate reimbursement for the implant procedures or for clinicians providing ongoing patient care would cause our business, financial condition, and results of operations to suffer.

Failure by users of our RNS System to obtain coverage and adequate reimbursement for the implant procedures or for clinicians providing ongoing patient care would cause our business, financial condition, and results of operations to suffer.

Additionally, a third-party payor’s decision to provide coverage for a brain-responsive neuromodulation for drug resistant focal epilepsy does not imply that an adequate reimbursement rate will be approved.

Further, coverage policies and third-party reimbursement rates may change at any time.

Even if favorable coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be implemented in the future.

Use of our RNS System requires appropriate neurosurgeon training for implantation and epileptologist training for programming and ongoing patient care, and inadequate training may lead to negative patient outcomes, which could harm our business, financial condition, and results of operations.

The successful use of our RNS System depends in part on the training and skill of the neurosurgeon performing the implant procedure as well as the clinician, typically an epileptologist, performing the subsequent programming of our RNS System and monitoring the patient response.

Clinicians could experience difficulty with the technique necessary to successfully implant and program our RNS System, and monitor patients if they do not receive appropriate training.

Clinicians, including those practicing outside of Level 4 CECs and in the community setting, could experience difficulty with the technique necessary to successfully implant and program our RNS System, and monitor patients if they do not receive appropriate training.

Moreover, clinicians rely on their previous medical training and experience when recommending or implanting our RNS System, and we cannot guarantee that all neurosurgeons will have the necessary implantation skills to properly perform the procedure.

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To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have issued stock options that vest over time.

The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies.

The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that are beyond our

control, and may at any time be insufficient to counteract more lucrative offers from other companies.

Despite our efforts to retain valuable employees, members of our management and other key personnel may terminate their employment with us on short notice.

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A decline in the amount that third-party payors reimburse our customers for ongoing patient care could also make it difficult for programming centers to conduct ongoing patient support without a corresponding reduction in prices for our products.

If we are forced to lower or are unable to increase the price we charge for our RNS System, our gross margins will decrease, which will harm our ability to invest in and grow our business.

If we are forced to lower or are unable to increase the price we charge for our RNS System, our gross margins will decrease, which will harm our ability to invest in and

grow our business.

If we are unable to maintain our prices, or if our costs increase and we are unable to offset such increase with an increase in our prices, our margins could erode, which could harm our business and results of operations.

Our results of operations may be harmed if we are unable to accurately forecast customer demand for our products.

We do not maintain large amounts of excess inventory at any given time.

To ensure adequate supply, we must forecast inventory needs and manufacture our products based on our estimates of future demand.

Our ability to accurately forecast demand for our products could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, our inability to forecast the lifecycle of our products, an increase or decrease in customer demand for our products or for competitor products, our failure to accurately forecast customer adoption of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions, as well as the ongoing COVID-19 pandemic.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could

impair the strength of our brand.

Conversely, if we underestimate customer demand for our products, our manufacturing team may not be able to deliver products to meet our requirements, and this could result in damage to our reputation and customer relationships.

In addition, if we experience a significant increase in demand, additional supplies of components, materials, or services, or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, which may negatively affect our business, financial condition, and results of operations.

We are seeking expanded FDA labeling for our RNS System to be able to treat patients with generalized drug-resistant epilepsy as well as patients between the age of 12 and 17 with drug-resistant focal epilepsy, but if we are unable to broaden the indications for our RNS System to include these patients, our growth potential could be harmed.

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Our inability to successfully enter all our desired international markets and manage business on a global scale could harm our growth potential.

Further, there are foreign privacy laws and regulations that impose restrictions on the collection, use, storage, disclosure, transfer and other processing of personal data, including health information.

For example, the European Union General Data Protection Regulation, or the GDPR, imposes stringent data protection requirements, including, for example, more robust disclosures to individuals, a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of data, such as health data, and additional obligations regarding third-party processors in connection with the processing of the personal data.

Our failure to comply with the GDPR or other applicable foreign privacy laws or regulations or significant changes in the laws and regulations restricting our ability to obtain or use required patient information could significantly impact our business and our future business plans.

Risks related to government regulation and our industry

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The laws that may affect our ability to operate include, among others:

services for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

• the Anti-Kickback Statute, which prohibits, among other things, knowingly and willingly soliciting, offering, receiving or paying remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual, or the purchase, order or recommendation of, items or services for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws, including the FCA, and civil monetary penalties laws, which prohibits, among other things, persons or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds and knowingly making, using or causing to be made or used, a false record or statement to get a false claim paid or to avoid, decrease or conceal an obligation to pay money to the federal government;

• the Health Insurance Portability & Accountability Act of 1996, or HIPAA, which applies to our customers and some of their downstream vendors and contractors, imposes criminal and civil liability for, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making a materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services;

• various state laws governing the privacy and security of personal information, including the California Consumer Privacy Act, or the CCPA, which became effective on January 1, 2020, and California Privacy Rights Act of 2020, or the CPRA, which amends and expands the CCPA and goes into effect in January 2023, which regulates the processing of personal information of California residents and increases the privacy and security obligations of covered companies handling such personal information.

The CCPA and the CRPA requires covered companies to, amongst other things, provide new and additional disclosures to California residents, and affords such residents new abilities to access their personal information and opt out of certain sales of personal information;

representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services;

• the federal Physician Payments Sunshine Act, also known as Open Payments, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually, with certain exceptions to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other “transfers of value” made to physicians, as defined by such law, other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.

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Any action or investigation against us for the violation of these healthcare fraud and abuse laws, even if successfully defended, could result in significant legal expenses and could divert our management’s attention from the operation of our business.

Companies settling federal civil FCA, Anti-Kickback Statute or civil monetary penalties law cases also may be required to enter into a Corporate Integrity

Agreement with the Office of Inspector General, or OIG, in order to avoid exclusion from participation (such as loss of coverage for their products) in federal healthcare programs such as Medicare and Medicaid.

Companies settling federal civil FCA, Anti-Kickback Statute or civil monetary penalties law cases also may be required to enter into a Corporate Integrity Agreement with the Office of Inspector General, or OIG, in order to avoid exclusion from participation (such as loss of coverage for their products) in federal healthcare programs such as Medicare and Medicaid.

Corporate Integrity Agreements typically impose substantial costs and operational burdens on companies to ensure compliance.

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(iii) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws;

or (iv) laws that require the true, complete and accurate reporting of financial information or data.

or (iv) laws that require the true, complete and accurate

reporting of financial information or data.

These laws may impact, among other things, future sales, marketing and education programs.

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Complying with these regulations is costly, time-consuming, complex and uncertain.

For instance, before a new medical device, or a new intended use for an existing device, can be marketed in the United States, a company must first submit and receive either 510(k)

clearance or approval of a PMA from the FDA, unless an exemption applies.

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

FDA regulations and regulations of similar agencies are wide-ranging and include, among other things, oversight of:

• product design, development, manufacturing (including suppliers) and testing;

• product design, development, manufacturing (including suppliers and materials) and testing;

• laboratory, preclinical and clinical studies;

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regulatory agencies.

Further, improvements of our existing products, any potential new products, and new indications for use of our current products will be subject to extensive regulation, and we may require permission from regulatory agencies and ethics boards to conduct clinical studies, as well as clearance or approval from the FDA prior to commercial sale.

Further, improvements of or changes to our existing products, any potential new products, and new indications for use of our current products will be subject to extensive regulation, and we may require permission from regulatory agencies and ethics boards to conduct clinical studies, as well as clearance or approval from the FDA prior to commercial sale.

In order to commercialize and distribute our products in markets outside of the United States, it will require approval from non-U.S.

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Failure to comply with applicable U.S.

requirements regarding, for example, promoting, manufacturing or labeling our RNS System, may subject us to a variety of administrative or judicial actions and sanctions, such as Form 483 observations, warning letters, untitled letters, product recalls, product seizures, and total or partial

suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Any enforcement action by the FDA and other comparable non-U.S.

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Our operations are subject to pervasive and continuing FDA regulatory requirements, and failure to comply with these requirements could harm our business, financial condition and results of operations.

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

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

In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is substantially equivalent to a legally-marketed predicate device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S.

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In the United States, our RNS System is marketed pursuant to a PMA order issued by the FDA.

Any modifications to a PMA-approved device that could significantly affect its safety or effectiveness, including significant design and manufacturing changes, or that would constitute a major change in its intended use, manufacture, design, components, or technology requires approval of a new PMA application or PMA supplement.

For instance, we believe that the change in the expected average battery life of our RNS System requires a label change, and we have submitted this to the FDA as a PMA supplement for review.

Any modifications to a PMA-approved device that could significantly affect its safety or effectiveness, including significant design and manufacturing changes, or that would constitute a major change in its intended use, manufacture, design, components, materials, or technology requires approval of a new PMA application or PMA supplement.

However, certain changes to a PMA-approved device do not require submission and approval of a new PMA or PMA supplement and may only require notice to FDA in a PMA 30-Day Notice, Special PMA Supplement - Changes Being Effected or PMA Annual Report.

The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision.

The FDA may not agree with our decisions regarding whether new approvals are necessary.

The FDA may not agree with our decisions regarding whether new approvals are necessary for products that we manufacture and distribute.

If the FDA disagrees with our determination and requires us to seek new PMA approvals for modifications to our previously approved products for which we have concluded that new approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

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Any of these actions could harm our business, financial condition and results of operations.

Our products or products we sell may be subject to recalls after receiving FDA approval or clearance, which could divert managerial and financial resources, harm our reputation and our business.

Our products or products we distribute may be subject to recalls after receiving FDA approval or clearance, which could divert managerial and financial resources, harm our reputation and our business.

The FDA has the authority to require the recall of our products or products we sell because of any failure to comply with applicable laws and regulations, or defects in design or manufacture.

A government mandated or voluntary product recall by us could occur because of, for example, component failures, device malfunctions or other adverse events, such as serious injuries or deaths, or quality-related issues, such as manufacturing errors or design or labeling defects.

Any future recalls of our products or products we sell could divert managerial and financial resources, harm our reputation and negatively impact our business.

A government mandated or voluntary product recall by us could occur because of, for example, component failures, device malfunctions or

other adverse events, such as serious injuries or deaths, or quality-related issues, such as manufacturing errors or design or labeling defects.

Any future recalls of our products or products we distribute could divert managerial and financial resources, harm our reputation and negatively impact our business.

If we initiate a correction or removal of one of our products to reduce a risk to health posed by the device, we would be required to submit a publicly available Correction and Removal report to the FDA and, in many cases, similar reports to other regulatory agencies.

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Furthermore, the submission of these reports has been and could be used by competitors against us and could harm our reputation, which could cause customers to delay purchase decisions, cancel orders or decide not to purchase our products and could cause patients to lose trust in and decide not to implant our RNS System.

If any of our products cause or contribute to a death or a serious injury or malfunction in certain ways, we will be required to report under applicable medical device reporting regulations, or MDRs, which can result in voluntary corrective actions or agency enforcement actions and harm our reputation, business, financial condition and results of operations.

If any of our products or products that we distribute cause or contribute to a death or a serious injury or malfunction in certain ways, we will be required to report under applicable medical device reporting regulations, or MDRs, which can result in voluntary corrective actions or agency enforcement actions and harm our reputation, business, financial condition and results of operations.

Under MDRs, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur.

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There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare.

We cannot predict the initiatives that may be adopted in the future or their full impact.

We cannot predict the initiatives that may be adopted in the future or

their full impact.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may harm:

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Further, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S.

Congressional inquiries and proposed and enacted federal legislation designed to bring transparency to product pricing and reduce the cost of products and services under government healthcare programs, such as the recently enacted Inflation Reduction Act.

Additionally, individual states in the United States have also increasingly passed legislation and implemented regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.

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Any new federal and state healthcare initiatives that may be adopted could limit the amounts that federal and state governments will pay for healthcare products and services, and could harm our business, financial condition and results of operations.

Our collection, use, storage, disclosure, transfer and other processing of sensitive and personal information subject us to stringent and evolving U.S.

and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security that could give rise to significant costs, liabilities and other risks, including as a result of investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about our privacy and data protection practices, which may disrupt our business operations and harm our business and reputation, financial conditions, results of operations and prospects and cause other adverse business consequences.

In the course of our operations, we receive, collect, use, generate, store, disclose, transfer, make accessible, protect, secure, dispose of, transmit, share and otherwise process an increasing volume of sensitive, and personal information, including detailed recordings of iEEGs from patients as well as information from our employees and third parties with whom we conduct business.

Our data processing activities may subject us to data privacy and security obligations, such as various laws, rules, regulations, guidance and industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

When conducting clinical studies, we face risks associated with collecting trial participants’ data, especially health data, in a manner consistent with applicable laws and regulations, such as GCP guidelines or FDA human subject protection regulations.

Our collection, use, storage, disclosure, transfer and other processing of sensitive and personal information may subject us to stringent and evolving U.S.

and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to significant costs, liabilities and other risks, including as a result of investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about our data privacy and security practices, which may disrupt our business operations and harm our business and reputation, financial conditions, results of operations and prospects and cause other adverse business consequences.

In the course of our operations, we receive, collect, use, generate, store, disclose, transfer, make accessible, protect, secure, dispose of, transmit, share and otherwise process (collectively, process) an increasing volume of sensitive and personal information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, and detailed recordings of iEEGs from patients as well as information from our employees and third parties with whom we conduct business.

Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, rules, regulations, guidance and industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

We are subject to many diverse laws and regulations relating to data privacy and security.

In the United States, various federal and state regulators have adopted, or are considering adopting, laws and regulations concerning personal information and data security.

In the United States, various federal and state regulators have adopted, or are considering adopting, laws and regulations concerning personal information and data security, including data breach notification laws.

In the past few years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal information.

As applicable, such rights may include the right to access, correct, or delete certain personal information, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to provide our products and services.

Certain states also impose stricter requirements for processing certain personal information, including sensitive information, such as conducting data privacy impact assessments.

These state laws allow for statutory fines for noncompliance.

Additionally, our customers may be subject to additional federal and state privacy and security laws, rules, regulations and standards, including HIPAA, that they may require us to comply with through contractual obligations.

This patchwork of legislation and regulation may give rise to conflicts or differing views of personal privacy rights.

Additionally, new privacy rules are being enacted in the United States and globally, and existing ones are being updated and strengthened.

This patchwork of legislation and

regulation may give rise to conflicts or differing views of personal privacy rights.

For example, the CCPA applies to personal information of consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.

The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents.

The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal information we maintain about California residents.

In addition, the California Privacy Rights Act of 2020, or CPRA, expands the CCPA’s requirements, including by adding a new right for individuals to correct their personal information and establishing a new regulatory agency to implement and enforce the law.

Other states, such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.

While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely.

In the event we expand our operations internationally, we may become subject to additional foreign data privacy and security laws, rules, regulations, requirements, and standards, which in the European Union, for instance, have been significantly reformed.

While the laws and regulations of other states also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties upon whom we rely.

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

For example, the European Union’s General Data Protection Regulation, or EU GDPR, the United Kingdom’s GDPR, or UK GDPR, and Canada’s Personal Information Protection and Electronic Documents Act, or PIPEDA, impose strict requirements for processing personal data.

Under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to €20 million Euros or four percent of annual global revenues, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

For example, the EU GDPR, the United Kingdom’s GDPR, or UK GDPR, and Canada’s Personal Information Protection and Electronic Documents Act, or PIPEDA, impose strict requirements for processing personal information.

Under EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to €20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR, or, in each case, four percent of annual global revenues, whichever is greater;

or private litigation related to processing of personal information brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

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If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

We make public statements about our use and disclosure of personal information through our privacy policies, information provided on our website and press statements.

Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so.

The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices.

Any concerns about our data privacy and security practices, even if unfounded, could damage the reputation of our business and harm our business, financial condition and results of operations.

In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are, or may become subject to such obligations in the future.

Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations.

We or the third parties upon which we rely may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations.

Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.

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government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-action claims);

litigation (including class-action claims) and mass arbitration demands;

additional reporting requirements and/or oversight;

bans on processing personal data;

and orders to destroy or not use personal data.

bans on processing personal information;

and orders to destroy or not use personal information.

In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands.

Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:

loss of customers;

inability to process personal data or to operate in certain jurisdictions;

inability to process personal information or to operate in certain jurisdictions;

limited ability to develop or commercialize our products;

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or substantial changes to our business model or operations.

Significant disruptions in our information technology systems or those of third parties upon which we rely, whether through breaches or failures of our systems, unauthorized access or otherwise, may result in both an adverse impact to our products, as well as the unauthorized use, disclosure, modification or misappropriation of patient personal information, the occurrence of fraudulent activity, or other data security-related incidents, all of which could result in adverse consequences, including but not limited to regulatory investigations or actions;

Disruptions in our information technology systems or data or those of third parties upon which we rely, whether through breaches or failures of our systems, ransomware, unauthorized access or otherwise, may result in both an adverse impact to our products, as well as the unauthorized use, disclosure, modification or misappropriation of patient or other personal or sensitive information, the occurrence of fraudulent activity, or other information security-related incidents, all of which could result in adverse consequences, including but not limited to regulatory investigations or actions;

fines and penalties;

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and other adverse consequences, which could have a material and adverse impact on our business, financial condition and results of operations.

We are increasingly dependent on complex information technology systems for the efficient functioning of our business, including the manufacture, distribution and maintenance of our products, as well as for accounting, data storage, compliance, purchasing and inventory management purposes.

Further, our products collect, use, store, disclose, transfer, and otherwise process sensitive patient data, such as detailed recordings of iEEGs to help clinicians make more informed treatment decisions and optimize their patients’ care.

We are dependent on complex information technology systems for the functioning of our business, including the manufacture, distribution and maintenance of our products, as well as for accounting, data storage, compliance, purchasing and inventory management purposes.

We process and collect data about trial participants in connection with clinical trials and patient data, such as detailed recordings of iEEGs to help clinicians make more informed treatment decisions and optimize their patients’ care.

These data are recorded by our RNS System and can be viewed by the physician during regular patient visits using the Physician Tablet or on demand through a secure website.

We also collect, use, store, disclose, transfer, and otherwise process a growing volume of other personal information and confidential, proprietary and sensitive data, which may include procedure-based information and sensitive healthcare data, credit card, and other financial information, insurance information, and other potentially personally identifiable information.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties upon which we rely.

Further, in the ordinary course of our business, we and the third parties upon which we rely process a growing volume of personal information and confidential, proprietary and sensitive information, which may include procedure-based information and sensitive healthcare data, credit card and other financial information, and insurance information.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.

Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services.

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.

During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services.

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.

Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

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In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations.

We rely on third-party service providers and technologies to operate critical business systems to process sensitive data in a variety of contexts, such as and without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, such as and without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

We also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business.

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In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties upon whom we rely.

A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services.

We may expend significant resources or modify our business activities to try to protect against security incidents.

Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data.

We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.

Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.

These vulnerabilities pose material risks to our business.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely).

We may not, however, detect and remediate all such vulnerabilities on a timely basis.

Further, we may experience delays in deploying remedial measures designed to address any such identified vulnerabilities.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.

A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents.

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additional reporting requirements and/or oversight;

restrictions on processing sensitive data (including personal data);

restrictions on processing sensitive information (including personal information);

litigation (including class claims);

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and other similar harms.

Security incidents and attendant consequences may cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.

Security incidents and attendant consequences may cause customers to stop using our products and services, deter new customers from using our products and services, and negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

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Furthermore, certain health privacy laws, data breach notification laws, consumer protection laws and genetic testing laws may apply directly to our operations or those of our collaborators and may impose restrictions on our collection, use and dissemination of individuals’ health information As such, we may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, including certain health information, which is a broader class of information than the health information protected by HIPAA.

To the extent we engage in clinical studies outside the United States, we may implicate foreign data privacy and security laws and regulations, including the GDPR and legislation of the European Union member states implementing it.

If we do business in international markets in the future, any failure by us or our third-party contractors to comply with the strict rules on the transfer of personal data outside of the European Union and the United Kingdom into the United States in accordance with such laws and regulations may result in the imposition of criminal and administrative sanctions on such contractors, which could adversely affect our business.

Moreover, patients about whom we or our contractors or collaborators obtain or share health information, as well as the providers who share this information with us or whom we share this data with, may have statutory or

contractual rights that limit our ability to use and disclose the information.

We may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws.

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Our products may also contain hazardous substances, and they are subject laws and regulations relating to labeling requirements and to their sale, collection, recycling, treatment, storage and disposal.

Compliance with these laws and regulations may be expensive and noncompliance could result in substantial fines and penalties.

Compliance with these laws and regulations may be

expensive and noncompliance could result in substantial fines and penalties.

Environmental laws and regulations also impose liability for the remediation of releases of hazardous substances into the environment and for personal injuries resulting from exposure to hazardous substances, and they can give rise to substantial remediation costs and to third-party claims, including for property damage and personal injury.

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• delays or failure to reach agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• delays in patient enrollment and variability in the number and types of patients available for clinical studies, including due to COVID-19, and delays in or the inability to monitor enrolled patients, including due to COVID-19;

• delays in patient enrollment and variability in the number and types of patients available for clinical studies and delays in or the inability to monitor enrolled patients;

• the inability to enroll a sufficient number of patients in studies to observe statistically significant treatment effects in the trial;

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• exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical studies.

We could also encounter delays if a clinical study is suspended or terminated by us, by the IRBs or the Ethics Committees of institutions at which such studies are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities.

trial or by the FDA or other regulatory authorities.

Such authorities may suspend or terminate a clinical study due to a number of factors, including failure to conduct the clinical study in accordance with regulatory requirements, including GCP regulations, or our clinical protocols, inspection of the clinical study operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate safety and effectiveness, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical study.

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Risks related to our intellectual property

develop and commercialize products similar to or competitive with our products, our ability to continue to commercialize our RNS System, or our other products, may be harmed.

If we are unable to obtain, maintain, protect, enforce and defend patent or other intellectual property protection for our products, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, or as a result of our existing or any future out-licenses of our intellectual property, our competitors could develop and commercialize products similar to or competitive with our products, our ability to continue to commercialize our RNS System, or our other products, may be harmed.

As with other medical device companies, our success depends in large part on our ability to obtain, maintain, protect, enforce and defend a proprietary position for our products, which will depend upon our success in obtaining and maintaining effective patent and other intellectual property protection in the United States and other countries into which we may expand our business in the future that covers our RNS System and any other products, their manufacturing processes and their intended methods of use.

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Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art.

In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our

inventions and the prior art allow our inventions to be patentable over the prior art.

Furthermore, the publication of discoveries in scientific literature often lags behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.

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The strength of patent rights generally, and particularly the patent position of medical device companies, involves complex legal and scientific questions, can be uncertain, and has been the subject of much litigation in recent years.

This uncertainty includes changes to the patent laws through either legislative action to change

statutory patent law or court action that may reinterpret existing law or rules in ways affecting the scope or validity of issued patents.

This uncertainty includes changes to the patent laws through either legislative action to change statutory patent law or court action that may reinterpret existing law or rules in ways affecting the scope or validity of issued patents.

Our current or future patent applications may fail to result in issued patents in the United States or foreign countries with claims that cover our products, including our RNS System.

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Further, if we encounter delays in our development efforts, the period of time during which we could market our products under patent protection would be reduced and, given the amount of time required for the development, testing and regulatory review of planned or future products, patents protecting such products might expire before or shortly after such products are commercialized.

Our issued patents are expected to continue to expire through August 2038 without taking into account all possible patent term adjustments, extensions, or abandonments, and assuming payment of all appropriate maintenance, renewal, annuity, and other governmental fees.

As our patents expire, the scope of our patent protection will be reduced, which may reduce or eliminate any competitive advantage afforded by our patent portfolio.

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We may find it necessary or prudent to acquire or obtain licenses to intellectual property or proprietary rights held by third parties that we may identify as necessary or important to our business operations.

However, we may be

unable to acquire or secure such licenses to any or all intellectual property or proprietary rights from third parties that we identify as necessary for our RNS System or any future products we may develop.

However, we may be unable to acquire or secure such licenses to any or all intellectual property or proprietary rights from third parties that we identify as necessary for our RNS System or any future products we may develop.

The acquisition or licensing of third-party intellectual property or proprietary rights is a competitive area, and our competitors may pursue strategies to acquire or license third-party intellectual property or proprietary rights that we may consider attractive or necessary.

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These and other claims that we have misappropriated the confidential information or trade secrets of third parties can have a similar negative impact on our business to the infringement claims discussed above.

Even if we are successful in defending against intellectual property claims, litigation or other legal proceedings relating to such claims may cause us to incur significant expenses, cause reputational harm, and could distract our technical and management personnel from their normal responsibilities.

technical and management personnel from their normal responsibilities.

If we fail in defending any such claims, in addition to paying monetary damages or other settlements, we may lose valuable intellectual property rights or personnel, which could harm our business, financial condition and results of operations.

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If we fail to comply with our obligations in any current or future agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

We are and may become party to license or collaboration agreements with third parties to advance our research or allow commercialization of our products.

We are and may become party to license or collaboration agreements with third parties, such as our collaboration agreement with Rapport Therapeutics, Inc., or Rapport, to advance our research or allow commercialization of our products.

Such agreements may impose numerous obligations, such as development, diligence, payment, commercialization, funding, milestone, royalty, sublicensing, insurance, patent prosecution, enforcement and other obligations on us and may require us to meet development timelines, or to exercise certain efforts to develop and commercialize licensed products, in order to maintain the licenses.

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Further, if this occurs, our competitors may take advantage of our investment in development and studies by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

we do not have adequate patent protection or other exclusivity for our products, our business, financial condition or results of operations could be adversely affected .

If we do not have adequate patent protection or other exclusivity for our products, our business, financial condition or results of operations could be adversely affected .

We have limited foreign intellectual property rights and may not be able to protect our intellectual property and proprietary rights throughout the world, which could harm our business, financial condition and results of operations.

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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.

In addition, many countries limit the enforceability of patents against government agencies or government contractors.

In addition, many countries limit the enforceability of patents against government agencies or

government contractors.

In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.

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This will require us to be cognizant of the time from invention to filing of a patent application.

Since patent applications in the United States and most other countries are confidential for a period of time after filing or

until issuance, we could continue incurring costs without being certain that we were the first to file any patent application related to our products or invent any of the inventions claimed in our patents or patent applications.

Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we could continue incurring costs without being certain that we were the first to file any patent application related to our products or invent any of the inventions claimed in our patents or patent applications.

The America Invents Act also includes a number of significant changes that affect the way patent applications are prosecuted and also may affect patent litigation.

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Such licenses may not be available on commercially reasonable terms, or at all, or may be non-exclusive.

unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of one or more of our products.

If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of one or more of our products.

The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products.

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As the number of competitors in our market grows and the number of patents issued in this area increases, the possibility of patent infringement claims against us escalates.

Moreover, we may face claims from non-practicing entities, or NPEs, which have no relevant product revenue and against whom our own patent portfolio may have no deterrent effect.

Moreover, we may face claims from non-practicing entities, or NPEs, which have no relevant product revenue and against whom our own patent

portfolio may have no deterrent effect.

Third parties, including NPEs, may in the future claim, that our products infringe or violate their patents or other intellectual property rights.

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If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, we may be unable to commercialize our products, or such commercialization efforts may be significantly delayed, which could in turn significantly harm our business.

Defense of infringement claims, regardless of their merit or outcome, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and

may impact our reputation.

In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing the infringing products and/or have to pay substantial damages for use of the asserted intellectual property, including treble damages and attorneys’ fees were we found to willfully infringe such intellectual property.

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An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly.

Furthermore, because of the

substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our management and other personnel from their normal responsibilities.

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Over the long term, if we are unable to establish name recognition based on our trademarks, trade names, domain names or other intellectual property, then we may not be able to compete effectively and our business may be adversely affected.

Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names or other intellectual property may be ineffective, could result in substantial costs, diversion of resources, or adverse impact to our brand and could harm our business, financial condition and results of operations.

Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names or other intellectual property may be ineffective, could result in

substantial costs, diversion of resources, or adverse impact to our brand and could harm our business, financial condition and results of operations.

Intellectual property rights do not necessarily address all potential threats, and limitations in intellectual property rights could harm our business, financial condition and results of operations.

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We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes.

Furthermore, we may not be able to prevent the unauthorized disclosure or use of our

technical knowledge or other trade secrets by such third parties, despite the existence generally of these confidentiality restrictions.

Furthermore, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such third parties, despite the existence generally of these confidentiality restrictions.

These contracts may not provide meaningful protection or equitable remedies for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information.

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

The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products, substantially and adversely impact our sales and commercial operations and harm our business.

theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products, substantially and adversely impact our sales and commercial operations and harm our business.

Additionally, the value of our investment in development or business acquisitions could be reduced and third parties might make claims against us related to losses of their confidential or proprietary information.

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If we are unable to raise additional capital or generate sufficient cash from operations to adequately fund our operations, we will need to curtail planned activities to reduce costs, which will likely harm our ability to execute on our business plan and continue operations.

We are party to an existing Term Loan Agreement, which contains restrictive covenants as well as financial maintenance covenants, and if we are unable to comply with these covenants then the lenders could declare an event of default wherein we may need to immediately repay the amounts due under the Term Loan Agreement.

We are party to an existing Term Loan Agreement, which contains restrictive covenants as well as financial maintenance covenants, and if we are unable to comply with these covenants then the lenders could declare an event of default and we may need to immediately repay the amounts due under the Term Loan Agreement.

In September 2020, we entered into a Term Loan Agreement, or the Term Loan, pursuant to which the lender has made available to us an aggregate principal amount not to exceed $60.0 million, of which, as of December 31, 2023, we have drawn $50.0 million and the remainder was available to be drawn only if we met certain financial thresholds, which we did not meet.

The Term Loan contains customary affirmative and restrictive covenants, including with respect to our ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to our holders, make investments, merge or consolidate with any other person or engage in transactions with our affiliates, as well as financial maintenance covenants, including minimum liquidity and annual revenue covenants.

In February 2023, the Term Loan was amended to reduce the minimum annual revenue covenant.

In February 2023, the Term Loan was amended to reduce the minimum annual revenue covenant and increase the annual interest rate from 12.5% to 13.5%, effective March 1, 2023.

If we fail to comply with the covenants or payments specified in the Term Loan, the lenders could declare an event of default, which would give it the right to terminate its commitment to provide additional loans and declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.

In addition, borrowings under the Term Loan are secured by substantially all of our properties, rights and assets, including intellectual property.

To support our continued operations and the growth of our business, we may need to seek additional capital through new equity or debt financings, which sources of additional capital may not be available to us on acceptable terms or at all.

To support our continued operations and the growth of our business, we may need access to our existing capital or to seek additional capital through new equity or debt financings, which sources of existing or additional capital may not be available to us on acceptable terms or at all.

If we are unable to obtain, if needed, adequate financing or financing on terms satisfactory to us, it could harm our business and growth prospects.

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As of December 31, 2023, we had $66.5 million of cash, cash equivalents and short-term investments and $16.2 million in current liabilities.

Our cash is invested in major financial institutions in the United States and cash equivalents are invested in money market funds.

Deposits in these financial institutions may exceed federally insured limits, and we may be exposed to credit risk on deposits in the event of default of the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation.

Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including our growth rate, the growth of sales and marketing teams and activities, our expense management initiatives, the expansion of the population of eligible patients, geographies we may choose to enter and commercialize in, updates to our products, potential introduction of new products, either developed internally or acquired, the continued oversight of regulatory agencies, and the continuing market acceptance of our products.

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In addition, during times of economic instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing, and we may not be able to obtain additional financing, if needed, on commercially reasonable terms, if at all.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, if needed, it could harm our business and growth prospects.

If we are unable to access our existing capital or obtain adequate financing or financing on terms satisfactory to us, if needed, it could harm our business and growth prospects.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

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Other risks facing our company

The estimates of market opportunity and forecasts of market and revenue growth included in this Annual Report on Form 10-K, including growth in the number of Level 4 CECs, epileptologists and neurosurgeons, as well as our projections related to the DIXI Medical distribution agreement, may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Our estimates of market opportunity and forecasts of market and revenue growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty.

Our estimates of the annual total addressable markets for our RNS System are based on a number of internal and third-party estimates and assumptions, including, without limitation, our assumptions relative to the number of adults with drug-resistant focal epilepsy in the United States who are treated at Level 4 CECs each year;

the number of neuromodulation procedures annually in the United States;

the growth in number of Level 4 CECs, epileptologists, and neurosurgeons;

the growth in number of patients referred to Level 4 CECs;

and the potential growth of our market opportunity with the expansion of treatment to patients under age 18 and with drug-resistant generalized epilepsy patients.

the number and growth in number of CECs, epileptologists, and neurosurgeons, in the CECs and in the community setting;

the growth in number of patients referred to CECs;

the patients receiving neuromodulation therapy outside in the community setting;

and the potential growth of our market opportunity with the expansion of treatment to patients in the community setting, as well as those suffering from generalized epilepsy or are under age 18.

In addition, our projections related to becoming the exclusive U.S.

distributor of DIXI Medical products are based on a number of estimates and assumptions, including, without limitation, information obtained from DIXI Medical related to historical performance and future projections.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, including as a result of the COVID-19 pandemic, thereby reducing the predictive accuracy of these underlying factors.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

As a result, our estimates of the annual total addressable market for our RNS System may prove to be incorrect.

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Alternatively, if the actual annual total addressable market for our RNS System is bigger than we have estimated, we may not be ready to manage such growth, which may impair our sales and have an adverse impact on our business.

Additionally, if our projections regarding the revenue we anticipate receiving from our collaboration

with Rapport are inaccurate, we may not attain our revenue projections, which could harm our business, result in investors losing confidence in our financial reporting, and our stock price may decline.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit or halt the marketing and sale of our products.

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distributor of DIXI Medical’s product line, under which DIXI Medical provides us with ongoing commercial support and supplies us with DIXI Medical products, as ordered by us.

Additionally, in November 2023, we entered into a collaboration agreement with Rapport, whereby we agreed to provide them certain data, biomarker monitoring and data analysis capabilities.

Using these third parties poses a number of risks, such as:

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Although the prospects for the imminent enactment of major legislation are not certain at this time, the enactment of more targeted measures may be more likely due to the increased possibility of bipartisan support for consideration of such measures.

In addition, the Biden administration could impose new or modified COVID-19 programs and restrictions, and may propose additional fiscal or tax measures, or additional regulatory requirements that would apply to us or our customers, thereby impacting our business, operations and profitability.

In addition, the Biden administration may propose additional fiscal or tax measures, or additional regulatory requirements that would apply to us or our customers, thereby impacting our business, operations and

profitability.

Moreover, changes in the leadership and senior staffs of the FDA could impact the rulemaking, supervision, examination and enforcement priorities and policies of the agency.

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If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

We will continue to have broad discretion in the use of proceeds from our initial public offering and may invest or spend the proceeds in ways with which investors do not agree and in ways that may not yield a return.

We will continue to have broad discretion over the use of proceeds from our initial public offering.

Investors may not agree with our decisions, and our use of the proceeds may not yield any return on your investment.

We currently are using or intend to use the net proceeds from our initial public offering to expand our sales and marketing efforts, increase our research and development activities, conduct or sponsor clinical studies, expand internationally, and provide for working capital and other general corporate purposes.

We also used a portion of the net proceeds we received from our initial public offering to repay approximately $4.0 million of principal indebtedness, plus accrued interest, under our Paycheck Protection Program loan.

Our failure to apply the net proceeds of our initial public offering effectively could impair our ability to pursue our growth strategy or could require us to raise additional capital.

In addition, pending their use, the proceeds of our initial public offering may have been or could be placed in investments which may not produce income or that may lose value.

Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to decline.

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We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

As of December 31, 2022, we had a total of approximately 25,045,751 shares outstanding of common stock, of which 15,105,804 shares are held by directors, executive officers and other affiliates.

As of December 31, 2023, we had a total of approximately 27.8 million shares outstanding of common stock, of which 11.1 million shares are held by directors, executive officers and other affiliates.

These shares will be subject to volume limitations under Rule 144 under the Securities Act, and may also be subject to vesting requirements.

As of December 31, 2022, the re were approximatel y 7,076,678 shares of common stock subject to outstanding stock options and restricted stock units (RSUs) or reserved for future i ssuance under our equity incentive plans.

All of the shares of common stock issuable upon exercise of outstanding stock options, vesting and settlement of RSUs, and exercise of settlement of any options or other equity incentives are registered for public resale under the Securities Act.

As of December 31, 2023, the re were approximatel y 6.7 million shares of common stock reserved for future i ssuance under our equity incentive plans.

All of the shares of common stock issuable upon exercise of outstanding stock options, vesting and settlement of restricted stock units, or RSUs, and exercise or settlement of any other equity incentives are registered for public resale under the Securities Act.

Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements, subject to the lock-up agreements and, for our affiliates, volume limitations described above.

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We are an emerging growth company and a smaller reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our common stock less attractive to investors.

regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements.

We are an emerging growth company, as defined in the JOBS Act, and we expect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this Annual Report on Form 10-K and our periodic reports and proxy statements.

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We will remain an emerging growth company until the earliest of (i) December 31, 2026, (ii) the first fiscal year after our annual gross revenues exceed $1.235 billion, (iii) the date on which we have, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities, or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year .

Anti-takeover provisions in our charter and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management without the consent of our board of directors.

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General risk factors

Unfavorable U.S.

and global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the U.S.

economy and financial markets and adverse geopolitical and macroeconomic developments.

and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including component shortages and related supply chain challenges, geopolitical developments such as the ongoing COVID-19 pandemic and the conflict between Ukraine and Russia and related sanctions, and increasing inflation rates and the responses by central banking authorities to control such inflation, among others.

General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our manufacturers and our suppliers operate.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, changes in interest rates and uncertainty about economic stability.

For example, the Russia-Ukraine war and the conflict in the Middle East has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.

Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.

A severe or prolonged global economic downturn could result in a variety of risks to our business.

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Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

Risks of a prolonged global economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis.

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

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

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

Additionally, financial markets around the world experienced volatility following the recent invasion of Ukraine by Russia.Our operations could be disrupted by tariffs, international conflict or war.

For example, in late February 2022, Russia initiated significant military action against Ukraine.

In response, the United States and certain other countries imposed significant sanctions and trade actions against Russia, and the United States and certain other countries could impose further sanctions, trade restrictions and other retaliatory actions should the conflict continue or worsen.

It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions that may be taken by the United States and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response.

Such conflict may cause regional instability, geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.

In particular, while it is difficult to anticipate the impact of any of the foregoing on us, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics or pandemics, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured.

Our ability to obtain components for our products could be disrupted if the operations of our suppliers were affected by a man-made or natural disaster or other business interruption.

In addition, our corporate headquarters and manufacturing facility is

located in Mountain View, California, near major earthquake faults and fire zones.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, public health crises, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured.

Our ability to obtain components

for our products could be disrupted if the operations of our suppliers were affected by a man-made or natural disaster or other business interruption.

In addition, our corporate headquarters and manufacturing facility is located in Mountain View, California, near major earthquake faults and fire zones.

Should our facilities be significantly damaged or destroyed, it could take months to relocate or rebuild, during which time our manufacturing would cease or be delayed and our RNS System may be unavailable.

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• general economic, regulatory, and market conditions, including economic recessions or slowdowns;

• the impact of the COVID-19 pandemic;

• changes in the structure of healthcare payment systems;

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We are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of these internal controls may negatively impact investor confidence in our company and, as a result, the value of our common stock.

We are required pursuant to Section 404 of the Sarbanes-Oxley Act to include in our annual reports, the first of which being for the year ending December 31, 2022, a report by management on, among other things, the effectiveness of our internal control over financial reporting.

This assessment needs to include disclosure of any

material weaknesses identified by our management in our internal control over financial reporting.

We are required pursuant to Section 404 of the Sarbanes-Oxley Act to include in our annual reports a report by management on, among other things, the effectiveness of our internal control over financial reporting.

This assessment needs to include disclosure of any material weaknesses identified by our management in our internal

control over financial reporting.

In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the Securities and Exchange Commission, or the SEC, following the date we are no longer an emerging growth company.

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If we are unable to conclude that our internal control over financial reporting is effective, or if we identify additional material weaknesses in our internal control over financial reporting, our reputation could be negatively impacted, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities and our access to the capital markets could be restricted in the future.

Our operating results may fluctuate across periods, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.

Our operating results may fluctuate across periods, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly and annual operating results may fluctuate across periods, which makes it difficult for us to predict our future operating results.

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• the timing of customer orders or scheduling of implants using our products and the number of available selling days in any quarterly period, which can be impacted by holidays, vacations, the mix of products sold and the geographic mix of where products are sold, including any related foreign currency impact;

• the impact of COVID-19 on procedure volume or otherwise;

• the impact of hospital accessibility and staffing shortages on procedure volume or otherwise;

• the timing and cost of, and level of investment in, research, development, licenses, regulatory approval, commercialization activities, acquisitions and other strategic transactions, or other significant events relating to our products, which may change from time to time;

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If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, it could harm our business, financial condition, and results or operations.

Our actual operating results may differ significantly from any guidance provided.

Our guidance, including forward-looking statements, is prepared by management and is qualified by, and subject to, a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies.

Many of these uncertainties and contingencies are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.

We generally state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the suggested ranges.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results.

In particular, guidance offered in periods of extreme uncertainty, such as the uncertainty caused by macroeconomic conditions, is inherently more speculative in nature than guidance offered in periods of relative stability.

Accordingly, any guidance with respect to our projected financial performance is necessarily only an estimate of what management believes is realizable as of the date the guidance is given.

Actual results will vary from the guidance and the variations may be material.

Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data is forecasted.

Actual operating results may be different from our guidance, and such differences may be adverse and material.

In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

In addition, the market price of our common stock may reflect various market assumptions as to the accuracy of our guidance.

If our actual results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.

We will continue to incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

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Furthermore, partnerships or acquisitions may require large, one-time charges and can result in increased debt or contingent liabilities, a negative impact to our gross margins, adverse tax consequences, additional stock-based compensation expenses and the recording and subsequent amortization of amounts related to certain purchased intangible assets, any of which items could negatively affect our future results of operations.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors