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What changed in RxSight, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RxSight, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+428 added−476 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-06)

Top changes in RxSight, Inc.'s 2023 10-K

428 paragraphs added · 476 removed · 345 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

84 edited+9 added−14 removed290 unchanged
Biggest changeIn approving a PMA application, as a condition of approval, the FDA may also require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device.
Biggest changePMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel, depending on the nature of the proposed change. 18 In approving a PMA application, as a condition of approval, the FDA may also require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device.
This creates an excess concentration of free macromers in the unexposed portion of the lens and sets up a diffusion gradient over which the unpolymerized macromers move from the concentrated area to the less concentrated area. Over the next one to two days, the unpolymerized macromers 6 redistribute across the lens to achieve a uniform distribution.
This creates an excess concentration of free macromers in the unexposed portion of the lens and sets up a diffusion gradient over which the unpolymerized macromers 6 move from the concentrated area to the less concentrated area. Over the next one to two days, the unpolymerized macromers redistribute across the lens to achieve a uniform distribution.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: • The FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; • Patients do not enroll in clinical trials at the rate expected; • Patients do not comply with trial protocols; • Patient follow-up is not at the rate expected; 16 • Patients experience adverse events; • Patients die during a clinical trial, even though their death may not be related to the products that are part of the trial; • Device malfunctions occur with unexpected frequency or potential adverse consequences; • Side effects or device malfunctions of similar products already in the market that change the FDA’s view toward approval of new or similar PMAs or result in the imposition of new requirements or testing; • Institutional review boards and third-party clinical investigators may delay or reject the trial protocol; • Third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, investigator agreement, investigational plan, good clinical practices, the IDE regulations, or other FDA or IRB requirements; • Third-party investigators are disqualified by the FDA; • We or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans, or otherwise fail to comply with the IDE regulations governing responsibilities, records, and reports of sponsors of clinical investigations; • Third-party clinical investigators have significant financial interests related to us or our study such that the FDA deems the study results unreliable, or we or investigators fail to disclose such interests; • Regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; • Changes in government regulations or administrative actions; • The interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; or • The FDA concludes that our trial design is unreliable or inadequate to demonstrate safety and effectiveness.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: • The FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; • Patients do not enroll in clinical trials at the rate expected; • Patients do not comply with trial protocols; • Patient follow-up is not at the rate expected; • Patients experience adverse events; • Patients die during a clinical trial, even though their death may not be related to the products that are part of the trial; 16 • Device malfunctions occur with unexpected frequency or potential adverse consequences; • Side effects or device malfunctions of similar products already in the market that change the FDA’s view toward approval of new or similar PMAs or result in the imposition of new requirements or testing; • Institutional review boards and third-party clinical investigators may delay or reject the trial protocol; • Third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, investigator agreement, investigational plan, good clinical practices, the IDE regulations, or other FDA or IRB requirements; • Third-party investigators are disqualified by the FDA; • We or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans, or otherwise fail to comply with the IDE regulations governing responsibilities, records, and reports of sponsors of clinical investigations; • Third-party clinical investigators have significant financial interests related to us or our study such that the FDA deems the study results unreliable, or we or investigators fail to disclose such interests; • Regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; • Changes in government regulations or administrative actions; • The interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; or • The FDA concludes that our trial design is unreliable or inadequate to demonstrate safety and effectiveness.
The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations; • Analogous state and foreign laws and regulations, such as state anti-kickback, anti-referral, and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require certain biotechnology, pharmaceutical, and medical device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require applicable manufacturers to disclose or report certain information related to payments and other transfers of value to doctors and entities or sales, marketing, pricing, clinical trials, marketing expenditures and activities, and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus 22 complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations; • Analogous state and foreign laws and regulations, such as state anti-kickback, anti-referral, and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require certain biotechnology, pharmaceutical, and medical device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require applicable manufacturers to disclose or report certain information related to payments and other transfers of value to doctors and entities or sales, marketing, pricing, clinical trials, marketing expenditures and activities, and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
Our LDD uses proprietary software and algorithms to deliver a short UV light exposure treatment that polymerizes specific portions of the lens and allows doctors to adjust spherical and cylindrical refraction in 0.25 diopter increments, similar to the adjustment increments used to refract patients for glasses or contact 1 lenses, as well as in other refractive procedures like LASIK.
Our LDD uses proprietary software and algorithms to deliver a short UV light exposure treatment that polymerizes specific portions of the lens and allows doctors to adjust spherical and cylindrical refraction in 0.25 diopter increments, similar to the adjustment increments used to refract patients for glasses or contact lenses, as well as in other refractive procedures like LASIK.
Our RxSight system enables patients to preview and compare possible vision outcomes after surgery based on their unique preferences and lifestyle requirements before they select a final 7 prescription for their LAL. With up to three possible adjusting light treatments, patients can dial-in their optimal visual acuity through an interactive and iterative process; • No increase in glare and halo.
Our RxSight system enables patients to preview and compare possible vision outcomes after surgery based on their unique preferences and lifestyle requirements before they select a final prescription for their LAL. With up to three possible adjusting light treatments, patients can dial-in their optimal visual acuity through an interactive and iterative process; • No increase in glare and halo.
Our RxSight system has approval in Mexico and Canada for improving uncorrected visual acuity by adjusting the LAL power to correct residual postoperative refractive error. We may selectively pursue commercial expansion outside the United States that accept these approvals in the future, with a priority on markets where we see significant potential growth opportunities.
Our RxSight system has approval in Mexico and Canada for improving uncorrected visual acuity by adjusting the LAL power to correct residual 9 postoperative refractive error. We may selectively pursue commercial expansion outside the United States that accept these approvals in the future, with a priority on markets where we see significant potential growth opportunities.
New approvals may also be sought in large cataract markets with more complex regulatory environments such as Asia. 9 FDA clinical studies In July 2016, we completed our FDA Phase 3 pivotal randomized clinical study of 600 subjects, designed to evaluate the safety and effectiveness of performing light treatments to correct postoperative spherical and cylindrical refractive error.
New approvals may also be sought in large cataract markets with more complex regulatory environments such as Asia. FDA clinical studies In July 2016, we completed our FDA Phase 3 pivotal randomized clinical study of 600 subjects, designed to evaluate the safety and effectiveness of performing light treatments to correct postoperative spherical and cylindrical refractive error.
Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE mark can be placed on a product. Conformity assessments for our products are carried out as required by the MDD. Each member state can appoint Notified Bodies within its jurisdiction.
Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE mark can be placed on a product. Conformity assessments for our products are carried out as required by the MDD. Each member state 20 can appoint Notified Bodies within its jurisdiction.
They create an elongated focal point that allows for a broader range of vision, although patients will still often require glasses for distance and near vision. EDOF lenses will still typically result in glare and halos, as well as reduced contrast vision, although generally less severe than those experienced with multifocal lenses; and • Astigmatism-Correcting or Toric Lenses.
They create an elongated focal point that allows for a broader range of vision, although patients will still often require glasses for distance and near vision. EDOF lenses will still typically result in glare and 4 halos, as well as reduced contrast vision, although generally less severe than those experienced with multifocal lenses; and • Astigmatism-Correcting or Toric Lenses.
As a practical matter, clearance often takes longer, and clearance is never assured. Thus, as a practical matter, clearance often takes longer than 90 days. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination 17 regarding substantial equivalence, which may significantly prolong the review process.
As a practical matter, clearance often takes longer, and clearance is never assured. Thus, as a practical matter, clearance often takes longer than 90 days. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process.
Our suppliers are evaluated, qualified, and approved as part of our supplier quality program, which includes verification and monitoring procedures to ensure that our suppliers comply with FDA and ISO standards, as well as our own specifications and requirements. We inspect and verify externally sourced components under strict processes supported by internal policies and procedures.
Our suppliers are evaluated, qualified, and approved as part of our supplier quality program, which includes verification and monitoring procedures to ensure that our suppliers comply with FDA and ISO standards, as well as our own 11 specifications and requirements. We inspect and verify externally sourced components under strict processes supported by internal policies and procedures.
(“QAD”) dated October 29, 2015 (the “QAD Agreement”), we received a nonexclusive, non-transferable, perpetual license to use certain QAD software at the physical location where we install the software. Under the agreement, we purchase such QAD software through individual orders (“Purchase Orders”), and each 13 Purchase Order has a respective payment fee and maintenance fee.
(“QAD”) dated October 29, 2015 (the “QAD Agreement”), we received a nonexclusive, non-transferable, perpetual license to use certain QAD software at the physical location where we install the software. Under the agreement, we purchase such QAD software through individual orders (“Purchase Orders”), and each Purchase Order has a respective payment fee and maintenance fee.
Each certified device is marked with the CE mark which shows that the device has a Certificat de Conformité. There are national bodies known as Competent Authorities in each member state which oversee the implementation of the MDD within their jurisdiction. The means for achieving the requirements for 20 the CE mark vary according to the nature of the device.
Each certified device is marked with the CE mark which shows that the device has a Certificat de Conformité. There are national bodies known as Competent Authorities in each member state which oversee the implementation of the MDD within their jurisdiction. The means for achieving the requirements for the CE mark vary according to the nature of the device.
A manufacturer can also submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. Medical devices can only be marketed for the indications for which they are cleared or approved.
A 17 manufacturer can also submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. Medical devices can only be marketed for the indications for which they are cleared or approved.
In other countries, such dual 12 billing is not allowed, forcing patients to pay for the entire cost of the cataract surgery and IOL when a premium IOL is used. In such markets, it may be possible for doctors to charge separately for the cost of light treatments, which are not part of the cataract procedure.
In other countries, such dual billing is not allowed, forcing patients to pay for the entire cost of the cataract surgery and IOL when a premium IOL is used. In such markets, it may be possible for doctors to charge separately for the cost of light treatments, which are not part of the cataract procedure.
In our most recent Phase IV commercial study data over 90% of LAL patients who chose to optimize vision with both eyes, achieved 20/20 distance vision and were also able to read 5-point font without glasses; • Postoperative customization.
In our most recent Phase IV commercial study data over 90% of LAL patients who chose to optimize vision with both eyes, achieved 20/20 distance vision and were also able to read 5-point font without glasses; 7 • Postoperative customization.
Because the interpretation and application of laws, regulations, standards and other obligations relating to data privacy and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted and applied in a manner that is inconsistent with our data processing practices and policies.
Because the interpretation and application of laws, regulations, standards and other obligations relating to privacy, data protection and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted and applied in a manner that is inconsistent with our data processing practices and policies.
For some patients these become more pronounced and can lead to explantation (removal of the IOL and replacement with another type of IOL). Extended-depth-of-focus (“EDOF”) lenses are similar to multifocals, except they have 4 only one corrective zone.
For some patients these become more pronounced and can lead to explantation (removal of the IOL and replacement with another type of IOL). Extended-depth-of-focus (“EDOF”) lenses are similar to multifocals, except they have only one corrective zone.
QAD provides limited warranties to the software and retains all intellectual property ownership rights in the QAD software including any modifications made by us, however we receive a license to use any modifications made by us. Unless earlier terminated, the term of the QAD agreement is perpetual.
QAD provides limited 13 warranties to the software and retains all intellectual property ownership rights in the QAD software including any modifications made by us, however we receive a license to use any modifications made by us. Unless earlier terminated, the term of the QAD agreement is perpetual.
The 15 PMA approval process is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction.
The PMA approval process is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction.
Penalties for violations of the Anti- Kickback Statute include, but are not limited to, criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from Medicare, Medicaid 21 and other federal healthcare programs.
Penalties for violations of the Anti- Kickback Statute include, but are not limited to, criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from Medicare, Medicaid and other federal healthcare programs.
Certain of these changes could impose additional limitations on the rates we will be able to charge for our current and future products or the amounts of reimbursement available for our current and future products from governmental agencies or third-party payors.
Certain of these changes could impose additional limitations on the rates we will be able to charge for our current and future products or the amounts of reimbursement 23 available for our current and future products from governmental agencies or third-party payors.
Facilities Our corporate headquarters is in Aliso Viejo, California where we lease four facilities housing our headquarters, manufacturing, research and development and administrative offices. The facility leases are for approximately 121,000 square feet in the aggregate.
Facilities Our corporate headquarters are in Aliso Viejo, California where we lease four facilities housing our headquarters, manufacturing, research and development and administrative offices. The facility leases are for approximately 121,000 square feet in the aggregate.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2031 absent additional congressional action, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional action is taken by Congress.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2032 absent additional congressional action, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional action is taken by Congress.
The FDA uses the same procedures and actions in reviewing PMA supplements as it does in reviewing original PMA applications. FDA regulations require us to register as a medical device manufacturer with the FDA.
The FDA uses the same procedures and actions in reviewing PMA supplements as it does in reviewing original PMA applications. 19 FDA regulations require us to register as a medical device manufacturer with the FDA.
Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the 23 procedures associated with the use of our products.
Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our products.
The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.
The 15 PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.
All other premium IOLs are fixed-power lenses that cannot be adjusted following surgery; • Delivering superior visual outcomes with low risk of side effects.
All other premium IOLs are fixed-power lenses that cannot be adjusted following surgery; 1 • Delivering superior visual outcomes with low risk of side effects.
The growth of our business and sales organization and our expansion outside of the United States may increase the potential of violating these laws or our internal policies and procedures.
The growth of our business and 22 sales organization and our expansion outside of the United States may increase the potential of violating these laws or our internal policies and procedures.
Any issued patents that we may own or in-license in the future may be challenged, invalidated, narrowed, held unenforceable, infringed or circumvented. As of December 31, 2022, our patent estate is directed to various aspects of our programs and technology, including our LAL and our LDD as well as lens adjustment procedure and other technology.
Any issued patents that we may own or in-license in the future may be challenged, invalidated, narrowed, held unenforceable, infringed or circumvented. As of December 31, 2023, our patent estate is directed to various aspects of our programs and technology, including our LAL and our LDD as well as lens adjustment procedure and other technology.
Our U.S. commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 3,000 U.S. cataract surgeons that perform 70%-80% of all premium IOL procedures.
Our U.S. commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 4,000 U.S. cataract surgeons that perform 70%-80% of all premium IOL procedures.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Personally identifiable health information is considered sensitive data that merits stronger safeguards.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of personal information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Personally identifiable health information is considered sensitive data that merits stronger safeguards.
Toric lenses correct for astigmatism, a condition in which the cornea is not uniformly curved leading to distortion of near and distance vision. According to the 2022 Market Scope IOL Report, approximately 70% of the population has clinically significant astigmatism of 0.5 diopters or more.
Toric lenses correct for astigmatism, a condition in which the cornea is not uniformly curved leading to distortion of near and distance vision. According to the 2023 Market Scope IOL Report, approximately 70% of the population has clinically significant astigmatism of 0.5 diopters or more.
Sales and marketing We commenced commercial launch of our RxSight system in the United States in 2019 and are initially focused on the estimated 3,000 surgeons that perform 70%-80% of premium cataract surgery procedures. These surgeons are usually part of larger ophthalmology practices with multiple cataract surgeons.
Sales and marketing We commenced commercial launch of our RxSight system in the United States in 2019 and are initially focused on the estimated 4,000 surgeons that perform 70%-80% of premium cataract surgery procedures. These surgeons are usually part of larger ophthalmology practices with multiple cataract surgeons.
Even when HIPAA does not apply, failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C § 45(a).
Even when HIPAA does not apply, failing to take appropriate steps to keep personal information secure may constitute a violation of laws or unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C § 45(a).
In recent years, the number of suits brought against healthcare companies by private individuals has increased dramatically.
In 21 recent years, the number of suits brought against healthcare companies by private individuals has increased dramatically.
HIPAA imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
HIPAA imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon “covered entities” (health plans, health care clearinghouses and certain health care providers), and their respective “business associates,” individuals or entities that create, received, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
Ongoing regulation by the FDA Even after the FDA permits a device to be marketed, numerous regulatory requirements apply, including but not limited to: • establishment registration and device listing; • the QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation, and other quality assurance procedures during the manufacturing process; • labeling regulations, advertising and promotion requirements, restrictions on sale distribution or use of a device, each including the FDA general prohibition against the promotion of products for any uses other than those authorized by the FDA, which are commonly known as “off label” uses; • the Medical Device Reporting (“MDR”) regulation, which requires that manufactures report to the FDA if their device may have caused or contributed to a death or serious injury or if their device malfunctioned and the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur; • medical device corrections and removal reporting regulations, which require that manufactures report to the FDA field corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of the FDCA Act that may present a risk to health; • recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; • an order of repair, replacement or refund; • device tracking requirements; and • post market study and surveillance requirements.
Ongoing regulation by the FDA Even after the FDA permits a device to be marketed, numerous regulatory requirements apply, including but not limited to: • establishment registration and device listing; • the QSR, or Quality Management System Regulation (“QMSR”), which goes into effect in February 2026, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation, and other quality assurance procedures during the manufacturing process; • labeling regulations, advertising and promotion requirements, restrictions on sale distribution or use of a device, each including the FDA general prohibition against the promotion of products for any uses other than those authorized by the FDA, which are commonly known as “off label” uses; • the Medical Device Reporting (“MDR”) regulation, which requires that manufactures report to the FDA if their device may have caused or contributed to a death or serious injury or if their device malfunctioned and the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur; • medical device corrections and removal reporting regulations, which require that manufactures report to the FDA field corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of the FDCA Act that may present a risk to health; • recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; • an order of repair, replacement or refund; • device tracking requirements; and • post market study and surveillance requirements.
To grow our installed base, we are focused primarily on converting high-volume premium cataract surgeons to the RxSight system by highlighting its clinical, economic and workflow benefits vs. competing premium IOL technologies.
To grow our installed base, we are focused primarily on converting high-volume premium cataract surgeons to the RxSight system by highlighting its clinical, economic and workflow benefits compared to competing premium IOL technologies.
If our practices are not consistent, or are viewed as not consistent, with changes in laws, regulations and standards or new interpretations or applications of existing laws, regulations and standards, we may also become subject to fines, audits, inquiries, whistleblower complaints, adverse media coverage, investigations, lawsuits, loss of export privileges, severe criminal or civil sanction or other penalties.
If our practices are not consistent, or are viewed as not consistent, with changes in laws, regulations and standards or the interpretations or applications of existing laws, regulations and standards, 24 we may also become subject to fines, audits, inquiries, whistleblower complaints, adverse media coverage, investigations, lawsuits, loss of export privileges, severe criminal or civil sanction or other penalties.
Actual or perceived failure to comply with these laws, where applicable, can result in private claims, demands and litigation, regulatory investigations and other proceedings, and the imposition of significant civil and/or criminal penalties and other relief. For example, California enacted the California Consumer Privacy Act, (“CCPA”), which went into effect January 1, 2020.
Any actual or perceived failure to comply with these laws can result in private claims, demands and litigation, regulatory investigations and other proceedings, and the imposition of significant civil and/or criminal penalties and other relief. For example, California enacted the California Consumer Privacy Act, (“CCPA”), which went into effect January 1, 2020.
The leases terminate on (a) September 30, 2024, with one option to extend for five years; (b) January 31, 2026, with three options to extend for five years each; (c) March 31, 2023, with two options to extend for five years each; and (d) August 31, 2024, with one option to extend for five years.
The leases terminate on (a) September 30, 2024, with one option to extend for five years; (b) January 31, 2026, with three options to extend for five years each; (c) March 31, 2025, with two options to extend for five years each; and (d) August 31, 2024, with one option to extend for five years.
Key growth drivers include the increasing number of patients who prefer to be glasses-free, technological innovations, increased access to healthcare and rising disposable income; and • In the United States, there are approximately 10,000 ophthalmic surgeons that perform cataract surgery, including approximately 3,000 that perform roughly 70%-80% of premium IOL cataract procedures.
Key growth drivers include the increasing number of patients who prefer to be glasses-free, technological innovations, increased access to healthcare and rising disposable income; and • In the United States, there are approximately 8,000 ophthalmic surgeons that perform cataract surgery, including approximately 4,000 that perform roughly 70%-80% of premium IOL cataract procedures.
New customer contracts typically include sale of the LDD between approximately $115,000 - $120,000, sale of LALs for approximately $1,000 each and an LAL consignment agreement. Once the LDD is installed, our clinical specialists work closely with the practice’s doctors, technicians and staff members to ensure that they are fully trained, proficient LAL providers.
New customer contracts typically include sale of the LDD between approximately $110,000 - $145,000, sale of LALs for approximately $1,000 each and an LAL consignment agreement. Once the LDD is installed, our clinical specialists work closely with the practice’s doctors, technicians and staff members to ensure that they are fully trained, proficient LAL providers.
While our current commercial focus is on the large opportunity within the United States, we believe the RxSight system offers compelling benefits for cataract doctors and patients in select international markets. According to the Market Scope 2022 Premium Report, over 70% of the premium IOL procedures in 2022 were outside the United States.
While our current commercial focus is on the large opportunity within the United States, we believe the RxSight system offers compelling benefits for cataract doctors and patients in select international markets. According to the Market Scope 2023 Premium Report, over 75% of the premium IOL procedures in 2023 were outside the United States.
Employees and human capital As of December 31, 2022, we had 292 full-time employees. All of our employees are full-time and none of our employees are represented by a labor union or covered under a collective bargaining agreement. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Employees and human capital As of December 31, 2023, we had 374 full-time employees. All of our employees are full-time and none of our employees are represented by a labor union or covered under a collective bargaining agreement. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Any U.S. or foreign patents issued or pending would be scheduled to expire on various dates from 2023 and 2041, without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, and other governmental fees.
Any U.S. or foreign patents issued or pending would be scheduled to expire on various dates from 2025 and 2043, without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, and other governmental fees.
We began commercializing our solution in the United States in 2019 and are focused on establishing the RxSight system as the standard of care for premium IOL procedures. As of December 31, 2022, we had an installed base of 400 LDDs in ophthalmology practices, and since our inception over 42,000 surgeries have been performed with our RxSight system.
We began commercializing our solution in the United States in 2019 and are focused on establishing the RxSight system as the standard of care for premium IOL procedures. As of December 31, 2023, we had an installed base of 666 LDDs in ophthalmology practices, and since our inception over 96,000 surgeries have been performed with our RxSight system.
In the United States, procedures are expected to grow at a CAGR of 4.3% to 5.3 million by 2027; • The United States is the world’s largest premium IOL market.
In the United States, procedures are expected to grow at a CAGR of 4.5% to 5.9 million by 2028; • The United States is the world’s largest premium IOL market.
We recently commenced limited sales activities in Canada through a distribution partner. Research and development Our research and development activities are focused on programs that improve clinical outcomes, improve customer experience, expand our indications for use, reduce manufacturing costs and lifecycle management.
We sell our products in Canada through a distribution partner. Research and development Our research and development activities are focused on programs that improve clinical outcomes, improve customer experience, expand our indications for use, reduce manufacturing costs and lifecycle management.
The FDA enforces the QSR through periodic inspections and may also inspect the facilities of our suppliers. We moved to our current Aliso Viejo, California facilities starting in April 2016, all of which have been registered with the FDA, the State of California, and the European Notified Body (British Standards Institution) for the manufacture and distribution of medical devices.
The FDA enforces the QSR through periodic inspections and may also inspect the facilities of our suppliers. All of our current Aliso Viejo, California facilities have been registered with the FDA, the State of California, and the European Notified Body (British Standards Institution) for the manufacture and distribution of medical devices.
As of December 31, 2022, we had established an installed base of 400 LDDs in ophthalmology practices and, since our inception though December 31, 2022, surgeons have implanted over 42,000 LALs.
As of December 31, 2023, we had established an installed base of 666 LDDs in ophthalmology practices and, since our inception though December 31, 2023, surgeons have implanted over 96,000 LALs.
In the United States, the world’s largest premium IOL market, 2022 premium procedures represented about 25% of all cataract procedures and generated approximately $760 million in revenue, a figure that is projected to grow at a 12% compound annual growth rate (“CAGR”) by 2027, according to the Market Scope 2022 Premium Cataract Surgery Market Report.
In the United States, the world’s largest premium IOL market, 2023 premium procedures represented about 21% of all cataract procedures and generated approximately $780 million in revenue, a figure that is projected to grow at a 9.5% compound annual growth rate (“CAGR”) by 2028, according to the Market Scope 2023 Premium Cataract Surgery Market Report.
Our market opportunity According to the Market Scope 2022 Premium Cataract Surgery Market Report and 2022 Market Scope IOL Report: • Approximately 28 million cataract surgeries were performed globally in 2022, including 4.6 million in the United States. The number of procedures worldwide is projected to grow at a CAGR of 6.3% to over 38 million by 2027.
Our market opportunity According to the Market Scope 2023 Premium Cataract Surgery Market Report and 2023 Market Scope IOL Report: • Approximately 31 million cataract surgeries were performed globally in 2023, including 4.7 million in the United States. The number of procedures worldwide is projected to grow at a CAGR of 3.9% to over 37 million by 2028.
To create the LAL, we use a composition of silicone polymers and monomers, the latter which we call “macromers” mixed with photo-active molecules and other compounds. The initial composition of our lens material is a viscous liquid that is thermally cured in a lens mold.
To create the LAL, we use a composition of silicone polymers including low molecular weight functionalized polymer, we call them “macromers”, mixed with photo-active molecules and other compounds. The initial composition of our lens material is a viscous liquid that is thermally cured in a lens mold.
For U.S. premium cataract procedures, the healthcare payor (primarily CMS) reimburses the same surgeon and facility fees, but the patient pays the surgeon an additional fee between $1,000-$2,000 for implantation of a toric IOL and an average between $2,000-$4,000 for implantation of other premium lenses, which includes the cost of the premium IOL.
The surgeon fee covers all pre-operative cataract testing, the cataract operation and follow-up care for three months. 3 For U.S. premium cataract procedures, the healthcare payor (primarily CMS) reimburses the same surgeon and facility fees, but the patient pays the surgeon an additional fee between $1,000-$2,000 for implantation of a toric IOL and an average between $2,000-$4,000 for implantation of other premium lenses, which includes the cost of the premium IOL.
Since our initial FDA approval in November 2017 through December 31, 2022, we have received 20 supplemental approvals.
Since our initial FDA approval in November 2017 through December 31, 2023, we have received approximately 30 supplemental approvals.
The PC and Toric versions of these lenses represented over half of all premium multifocal IOLs sold in 2022. The rest of the market is shared between several smaller companies each with under 5% market share.
The Acrysof and Tecnis families of IOLs are available in a monofocal Toric, multifocal Toric and EDOF Toric versions. The PC and Toric versions of these lenses represented over half of all premium multifocal IOLs sold in 2023. The rest of the market is shared between several smaller companies each with under 5% market share.
Also, in these circumstances, we may be subject to significant regulatory fines and penalties. 19 Some changes to an approved PMA device, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new PMA application or PMA supplement, as appropriate, before the change can be implemented.
Some changes to an approved PMA device, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new PMA application or PMA supplement, as appropriate, before the change can be implemented.
These regulations require that we manufacture our products and maintain related documentation in a prescribed manner with respect to manufacturing, testing and control activities. Further, the FDA requires us to comply with various FDA regulations regarding labeling.
The FDA will begin to enforce the QMSR requirements upon the effective date, February 2, 2026. These regulations require that we manufacture our products and maintain related documentation in a prescribed manner with respect to manufacturing, testing and control activities. Further, the FDA requires us to comply with various FDA regulations regarding labeling.
We believe our technology offers a differentiated value proposition to doctors and patients, providing us an opportunity to grow our share in the 8 premium IOL market and increase the penetration of premium IOLs in the broader cataract surgery market.
Our growth strategies include: • Establishing new customers and growing our installed base of LDDs. We believe our technology offers a differentiated value proposition to doctors and patients, providing us an opportunity to grow our share in the premium IOL market and increase the penetration of premium IOLs in the broader cataract surgery market.
In addition, based on an average of 9 LALs implanted per month at these practices, doctors observed a payback period of approximately nine months for the LDD, based on the current list purchase price. Following this payback period, practices continue to reap the financial benefit of converting patients to the RxSight system.
In addition, based on an average of 9 LALs implanted per month at these practices, doctors observed a payback period of approximately nine months for the LDD, based on the current list purchase price.
Externally sourced components include off-the-shelf chemical, materials, microchips integrated into printed circuit boards and cables, sub-assemblies, and custom parts that are provided by qualified and approved suppliers. We also employ a third-party sterilization vendor. Some components are provided by single-source or sole source suppliers.
We rely on third parties, including single and sole source suppliers, to manufacture certain components and subcomponents of our products that include off-the-shelf chemical, materials, microchips integrated into printed circuit boards and cables, sub-assemblies, and custom parts that are provided by qualified and approved suppliers. We also employ a third-party sterilization vendor.
Further, the United Kingdom’s exit from the EU has 24 created uncertainty with regard to data protection regulation in the United Kingdom. We are subject to the UK General Data Protection Regulation and UK Data Protection Act of 2018, which retains the GDPR in the United Kingdom’s national law and provides for a penalty structure similar to the GDPR.
Further, the United Kingdom has adopted the UK General Data Protection Regulation and UK Data Protection Act of 2018, which retains the GDPR in the United Kingdom’s national law and provides for a penalty structure similar to the GDPR.
Research and development expenses were $26.0 million and $24.5 million for the years ended December 31, 2022 and 2021, respectively. 10 Manufacturing and supply We currently manufacture, assemble, test, and ship our LAL and LDD, and various accessory products including a custom injector system for use with our LAL at our campus of four facilities and approximately 121,000 total square feet in Aliso Viejo, California.
Research and development expenses were $29.1 million and $26.0 million for the years ended December 31, 2023 and 2022, respectively. 10 Manufacturing and supply We currently manufacture, assemble, test, and ship our LAL and LDD in Aliso Viejo, California at our campus of four facilities which consist of an aggregate of approximately 121,000 total square feet.
The FDA could also require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or a PMA is obtained.
The FDA could also require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or a PMA is obtained. Also, in these circumstances, we may be subject to significant regulatory fines and penalties.
According to the Market Scope 2022 Premium Report Alcon, Johnson & Johnson, Bausch + Lomb are three of the top IOL manufacturers, with an estimated 2022 revenue share of the world-wide premium IOL market of approximately 51%, 25%, and 2% respectively. The PanOptix and Tecnis families of IOLs are available in a monofocal Toric, multifocal Toric and EDOF Toric versions.
The most popular premium IOLs families approved for cataract treatment are toric and multifocal Acrysof and Tecnis IOL models. According to the Market Scope 2023 Premium Report Alcon, Johnson & Johnson, Bausch + Lomb are three of the top IOL manufacturers, with an estimated 2022 revenue share of the world-wide premium IOL market of approximately 51%, 24%, and 2% respectively.
No. 10,166,731, which is expected to expire in 2036. • Our RxSight system accessories: A patent directed to our RxSight system accessories includes, for example, U.S. Pat. No. 10,456,240, which is expected to expire in 2038. Pursuant to the agreement with QAD, Inc.
No. 10,166,731, which is expected to expire in 2036. • Our RxSight system accessories: Some of the patents directed to our RxSight system accessories include, for example, U.S. Pat. No. 11,083,568, which is expected to expire in 2037. Pursuant to the agreement with QAD, Inc.
The PMA process can be expensive, uncertain and lengthy and a number of devices for which the FDA approval has been sought by other companies have never been approved by the FDA for marketing. 18 New PMA applications or PMA supplements are required for modification to the manufacturing process, equipment or facility, quality control procedures, sterilization, packaging, expiration date, labeling, device specifications, ingredients, materials or design of a device that has been approved through the PMA process.
New PMA applications or PMA supplements are required for modification to the manufacturing process, equipment or facility, quality control procedures, sterilization, packaging, expiration date, labeling, device specifications, ingredients, materials or design of a device that has been approved through the PMA process.
In 2022, premium IOL procedures represented approximately 25% and 12% of cataract surgeries in the United States and worldwide, respectively; • In 2022, premium IOL revenue was approximately $2.1 billion globally and $760 million in the United States, and is expected to grow at a CAGR of 13% and 12%, respectively, through 2027.
In 2023, premium IOL procedures represented approximately 21% and 11% of cataract surgeries in the United States and worldwide, respectively; • In 2023, premium IOL revenue was approximately $2.4 billion globally and $780 million in the United States, and is expected to grow at a CAGR of 11.0% and 9.5%, respectively, through 2028.
Current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. Data privacy and security Medical device companies may be subject to U.S. federal and state health information privacy, security and data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other personal information.
Data privacy and security Medical device companies may be subject to foreign and U.S. federal and state health information privacy, data protection, security and data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other personal information.
A silicone molecule consists of an inorganic silicon-oxygen backbone, which is a chain of alternating silicon and oxygen atoms with an attached side group, which is a pair of organic molecules bonded to each silicon atom in the chain.
Silicone consists of an inorganic silicon-oxygen backbone, which is a chain of alternating silicon and oxygen atoms with an attached side group, which is a pair of organic molecules bonded to each silicon atom in the chain. Combined with organic side functionality including reactive groups, silicones can be cross-linked at multiple points resulting in three-dimensional structures.
We anticipate that the combination of these strategies will drive margin improvement in the future when introduced into production and offered for sale; and • Growing our commercial operations in international markets.
We are also concurrently executing on our strategy to optimize our diverse supply chain and to develop second sources from less expensive suppliers. We anticipate that the combination of these strategies will drive margin improvement in the future when introduced into production and offered for sale; and • Growing our commercial operations in international markets.
Since our initial FDA approval in November 2017 through December 31, 2022, we have received approximately 20 supplemental approvals that advance these objectives. On January 31, 2023, the FDA approved our PMA supplement to our LDD for various modifications that are intended to reduce the cost to manufacture the device.
Since our initial FDA approval in November 2017 through December 31, 2023, we have received approximately 30 supplemental approvals that advance these objectives. In January 2023, the FDA approved our PMA supplement to our compact LDD for various modifications. This LDD will also require a submission for approval in countries outside the United States.
According to Market Scope, the global cataract IOL market is highly concentrated, with these top three players accounting for approximately 78% of the total U.S. premium cataract surgery market and approximately 61% of the global manufacturer market revenue.
According to Market Scope, the global cataract IOL market is highly concentrated, with these top three players accounting for approximately 77% of the total U.S. premium cataract surgery market and approximately 61% of the global manufacturer market revenue. Our competitors are significantly larger than us with greater financial, marketing, sales and personnel resources, greater brand recognition and longer operating histories.
The fully assembled LDD is put through an electrical safety and final acceptance test process, and then reviewed by quality control, packaged and shipped directly to our customers for installation. In addition, to aid the doctor in implanting the LAL, we provide several accessories including a custom insertion system and a contact lens.
The fully assembled LDD is put through an electrical safety and final acceptance test process, and then reviewed by quality control, packaged and shipped directly to our customers for installation. We use a combination of internally manufactured and externally sourced components to produce the LAL and LDD.
Our growth strategies We are leveraging the tangible and compelling benefits of our RxSight solution to achieve broad adoption of our technology and establish it as the standard of care for premium cataract surgery. Our growth strategies include: • Establishing new customers and growing our installed base of LDDs.
Following this payback period, practices continue to reap the financial benefit of converting patients to the RxSight system. 8 Our growth strategies We are leveraging the tangible and compelling benefits of our RxSight solution to achieve broad adoption of our technology and establish it as the standard of care for premium cataract surgery.
Intellectual Property, License Agreements, and Other Material Agreements Our success depends in part on our ability to obtain, maintain, protect, and enforce our intellectual property rights, including our patent rights, preserve the confidentiality of our trade secrets, operate without infringing, misappropriating or otherwise violating the intellectual property rights of others and prevent others from infringing, misappropriating or otherwise violating our intellectual property rights.
There is no assurance that these methodologies will be allowed or that an adequate level of payment will be established, or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably. 12 Intellectual Property and License Agreements Our success depends in part on our ability to obtain, maintain, protect, and enforce our intellectual property rights, including our patent rights, preserve the confidentiality of our trade secrets, operate without infringing, misappropriating or otherwise violating the intellectual property rights of others and prevent others from infringing, misappropriating or otherwise violating our intellectual property rights.
In addition, patients who receive an LAL will be required to wear UV protective glasses until final lock-in which is approximately 4-5 weeks after surgery. They will also be required to return for an additional two to three clinic visits compared to traditional cataract surgery. The additional clinic visits are non-surgical but do require the patient’s eyes to be dilated.
They will also be required to return for an additional two to three clinic visits 14 compared to traditional cataract surgery. The additional clinic visits are non-surgical but do require the patient’s eyes to be dilated. Due to these additional requirements, market acceptance of the LAL may be impacted.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements.
Biggest changeIf we are unable to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act effectively and if management identifies one or more significant deficiencies or material weaknesses, or if our independent registered public accounting firm is unable to attest that our management’s report is fairly stated or if they are unable to express an opinion on the effectiveness of our internal controls or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements any of which could result in a loss of investor confidence or negative investor perceptions.
Environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes.
Environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes.
Additionally, in the United States, California adopted CCPA in January 2020, which requires certain companies that process information of California consumers to, among other things, provide new disclosures to California consumers and afford such consumers new abilities to exercise certain rights with respect to their personal information and opt out of certain sales of personal information, in addition to severely limiting our ability to use their information.
Additionally, in the United States, California adopted the CCPA in January 2020, which requires certain companies that process information of California consumers to, among other things, provide new disclosures to California consumers and afford such consumers new abilities to exercise certain rights with respect to their personal information and opt out of certain sales of personal information, in addition to severely limiting our ability to use their information.
Even if we are able to raise awareness, doctors tend to be slow in changing their medical treatment practices and may be hesitant to select our products for recommendation to their patients for a variety of reasons, including: • long-standing relationships with competing companies and distributors that sell other products; • competitive response and negative selling efforts from providers of alternative products; • lack of experience with our products and concerns that we are relatively new to market; • lack or perceived lack of sufficient clinical evidence, including long-term data, supporting safety or clinical benefits; • time commitment and skill development that may be required to gain familiarity and proficiency with our products; • patient confusion regarding the wide range of commercially available premium IOL offerings and their ability to deliver promised results at near, middle and far distances without reliance on glasses; • patient reticence to select a premium IOL due to nonperformance and adverse side effects associated with competing products in the market; • patient non-compliance with the RxSight system requirement to wear protective glasses following surgery until the LAL is locked to avoid UV exposure and an unintended change to the LAL, resulting in patient dissatisfaction with the results and possible need to remove the LAL; and • an inability to generate patient referral due to dissatisfaction with results obtained through treatment with our products, the out-of-pocket cost of treatments using our products or otherwise.
Even if we are able to raise 31 awareness, doctors tend to be slow in changing their medical treatment practices and may be hesitant to select our products for recommendation to their patients for a variety of reasons, including: • long-standing relationships with competing companies and distributors that sell other products; • competitive response and negative selling efforts from providers of alternative products; • lack of experience with our products and concerns that we are relatively new to market; • lack or perceived lack of sufficient clinical evidence, including long-term data, supporting safety or clinical benefits; • time commitment and skill development that may be required to gain familiarity and proficiency with our products; • patient confusion regarding the wide range of commercially available premium IOL offerings and their ability to deliver promised results at near, middle and far distances without reliance on glasses; • patient reticence to select a premium IOL due to nonperformance and adverse side effects associated with competing products in the market; • patient non-compliance with the RxSight system requirement to wear protective glasses following surgery until the LAL is locked to avoid UV exposure and an unintended change to the LAL, resulting in patient dissatisfaction with the results and possible need to remove the LAL; and • an inability to generate patient referral due to dissatisfaction with results obtained through treatment with our products, the out-of-pocket cost of treatments using our products or otherwise.
Additional risks related to operating in foreign countries include: • differing regulatory requirements and reimbursement regimes in foreign countries, including changes to regulatory requirements and implementation of new regulations in foreign countries; • difficulties in compliance with non-U.S. laws and regulations; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • trade protection measures, import or export licensing requirements, or other restrictive actions by U.S. or non-U.S. governments; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • potential liability under the FCPA or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism.
Additional risks related to operating in foreign countries include: • differing regulatory requirements and reimbursement regimes in foreign countries, including changes to regulatory requirements and implementation of new regulations in foreign countries; • difficulties in compliance with non-U.S. laws and regulations; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • trade protection measures, import or export licensing requirements, or other restrictive actions by U.S. or non-U.S. governments; • economic weakness, including inflation, or political instability in particular foreign economies and markets; 40 • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • potential liability under the FCPA or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism.
Moreover, the ACA provides that the government may assert that a 65 claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; • the Federal False Claims Act, including its civil provisions that can be enforced by private citizens through civil whistleblower or qui tam actions, and civil monetary penalties prohibiting individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government, and/or impose exclusions from federal health care programs and/or penalties for parties who engage in such prohibited conduct; • the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations also impose obligations on covered entities such as health insurance plans, healthcare clearinghouses, and certain health care providers and their respective business associates and their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • the federal Physician Payments Sunshine Act, also referred to as the CMS Open Payments, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information regarding certain payments and other transfers of value to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws that require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require medical device manufacturers to report information related to payments and other transfers of value to doctors or marketing expenditures and require the registration of their sales representatives; state laws that require medical device companies to report information on the pricing of certain medical device products; and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; • the Federal False Claims Act, including its civil provisions that can be enforced by private citizens through civil whistleblower or qui tam actions, and civil monetary penalties prohibiting individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government, and/or impose exclusions from federal health care programs and/or penalties for parties who engage in such prohibited conduct; 64 • the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations also impose obligations on covered entities such as health insurance plans, healthcare clearinghouses, and certain health care providers and their respective business associates and their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • the federal Physician Payments Sunshine Act, also referred to as the CMS Open Payments, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information regarding certain payments and other transfers of value to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws that require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require medical device manufacturers to report information related to payments and other transfers of value to doctors or marketing expenditures and require the registration of their sales representatives; state laws that require medical device companies to report information on the pricing of certain medical device products; and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
These provisions, among other things: • establish a classified Board of Directors so that not all members of our board are elected at one time; • permit only the Board of Directors to establish the number of directors and fill vacancies on the board; • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a poison pill); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; 79 • prohibit cumulative voting; • authorize our Board of Directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and • require a super-majority vote of stockholders to amend some provisions described above.
These provisions, among other things: • establish a classified Board of Directors so that not all members of our board are elected at one time; • permit only the Board of Directors to establish the number of directors and fill vacancies on the board; • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a poison pill); • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • prohibit cumulative voting; • authorize our Board of Directors to amend the bylaws; • establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and • require a super-majority vote of stockholders to amend some provisions described above.
Collaborations are subject to numerous risks, which may include that: • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our current and future products; • a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; 53 • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Collaborations are subject to numerous risks, which may include that: • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our current and future products; • a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; 52 • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Any such actual or perceived access, disclosure or other security breach or incident, loss, or unauthorized processing of information (whether affecting us or one of our third-party service providers) could result in legal claims and proceedings, regulatory investigations, and other proceedings and liability under laws that protect the privacy of personal information, significant regulatory penalties or other fines or remedies, and such an event could disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to commercialize our products and conduct clinical trials, which could adversely affect our reputation and delay the commercialization of our RxSight system and clinical development of our current and future products.
Any such actual or perceived access, disclosure or other security breach or incident, loss, or unauthorized processing of information (whether affecting us or one of our third-party service providers) could result in legal claims and proceedings, regulatory investigations, and other proceedings and liability under laws that protect the privacy of personal information, significant regulatory penalties or other fines or remedies, and such an event could disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to commercialize our products and 79 conduct clinical trials, which could adversely affect our reputation and delay the commercialization of our RxSight system and clinical development of our current and future products.
If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, additional integrity reporting and oversight obligations, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations.
If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, 68 monetary fines, disgorgement, individual imprisonment, additional integrity reporting and oversight obligations, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations.
These factors also make it difficult for us to forecast our financial performance and growth, and such forecasts are subject to a number of uncertainties, including our ability to successfully develop additional products that add functionality, reduce the cost of products sold, and broaden our commercial portfolio offerings and our ability to obtain the required regulatory approvals and clearances under applicable law both domestically and internationally, including FDA 510(k) clearance or pre-market approval, or PMA, for, and successfully commercialize, market and sell, our planned or future products in the United States or in international markets.
These factors also make it difficult for us to forecast our financial performance and growth, and such forecasts are subject to a number of uncertainties, including our ability to successfully develop additional products that add functionality, reduce the cost of products sold, and broaden our commercial portfolio offerings and our ability to obtain the required regulatory approvals and clearances under applicable law both domestically and internationally, including FDA 510(k) 27 clearance or pre-market approval, or PMA, for, and successfully commercialize, market and sell, our planned or future products in the United States or in international markets.
If these third parties do not successfully carry out their duties or meet expected deadlines, or if the quality, completeness or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical trial protocols or for other reasons, our clinical studies or trials may be extended, delayed or terminated or may otherwise prove to 73 be unsuccessful, and we may have to conduct additional studies, which would significantly increase our costs, in order to obtain the regulatory clearances or approvals that we need to commercialize our products.
If these third parties do not successfully carry out their duties or meet expected deadlines, or if the quality, completeness or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical trial protocols or for other reasons, our clinical studies or trials may be extended, delayed or terminated or may otherwise prove to be unsuccessful, and we may have to conduct additional studies, which would significantly increase our costs, in order to obtain the regulatory clearances or approvals that we need to commercialize our products.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our products are safe or effective for their intended uses; 58 • the disagreement of the FDA or the applicable foreign regulatory body with the design, conduct or implementation of our clinical trials or the analyses or interpretation of data from pre-clinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • an advisory committee, if convened by the applicable regulatory authority, may recommend against approval of our application or may recommend that the applicable regulatory authority require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions, or even if an advisory committee, if convened, makes a favorable recommendation, the respective regulatory authority may still not approve the product; • the applicable regulatory authority may identify significant deficiencies in our manufacturing processes, facilities or analytical methods or those of our third-party contract manufacturers; • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval; and • the FDA or foreign regulatory authorities may audit our clinical trial data and conclude that the data is not sufficiently reliable to support approval or clearance.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our products are safe or effective for their intended uses; • the disagreement of the FDA or the applicable foreign regulatory body with the design, conduct or implementation of our clinical trials or the analyses or interpretation of data from pre-clinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; 57 • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • an advisory committee, if convened by the applicable regulatory authority, may recommend against approval of our application or may recommend that the applicable regulatory authority require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions, or even if an advisory committee, if convened, makes a favorable recommendation, the respective regulatory authority may still not approve the product; • the applicable regulatory authority may identify significant deficiencies in our manufacturing processes, facilities or analytical methods or those of our third-party contract manufacturers; • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval; and • the FDA or foreign regulatory authorities may audit our clinical trial data and conclude that the data is not sufficiently reliable to support approval or clearance.
The following examples are illustrative: • others may be able to make a product that is similar to our current products and future products we intend to commercialize and that is not covered by the patents that we own or exclusively in-license and have the right to enforce; • we and any of our current or future licensors or collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own, license or may own or license in the future; • we or any of our current or future licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; 56 • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our intellectual property rights; • it is possible that our current or future owned or in-licensed patent applications will not lead to issued patents; • issued patents that we own or in-license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges, including as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
The following examples are illustrative: • others may be able to make a product that is similar to our current products and future products we intend to commercialize and that is not covered by the patents that we own or exclusively in-license and have the right to enforce; • we and any of our current or future licensors or collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own, license or may own or license in the future; • we or any of our current or future licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our intellectual property rights; • it is possible that our current or future owned or in-licensed patent applications will not lead to issued patents; • issued patents that we own or in-license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges, including as a result of legal challenges by our competitors; 55 • our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty; • any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation or our bylaws; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty; 77 • any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation or our bylaws; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (1) the data are applicable to the U.S. population and U.S. medical practice; (2) the trials are performed by clinical investigators of recognized competence and pursuant to current good clinical practices regulations; and (3) audits by regulatory authorities of the clinical data do not identify significant data integrity issues.
In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the 61 application on the basis of foreign data alone unless (1) the data are applicable to the U.S. population and U.S. medical practice; (2) the trials are performed by clinical investigators of recognized competence and pursuant to current good clinical practices regulations; and (3) audits by regulatory authorities of the clinical data do not identify significant data integrity issues.
We could be forced to expend significant financial and operational resources in responding to a security breach or incident, including investigating and remediating any information security vulnerabilities, defending against and resolving legal and regulatory claims and complying with notification obligations, all of which could divert resources and the attention of our management and key 82 personnel away from our business operations and adversely affect our business, financial condition and results of operations.
We could be forced to expend significant financial and operational resources in responding to a security breach or incident, including investigating and remediating any information security vulnerabilities, defending against and resolving legal and regulatory claims and complying with notification obligations, all of which could divert resources and the attention of our management and key personnel away from our business operations and adversely affect our business, financial condition and results of operations.
While we have taken measures to mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and 74 second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us.
While we have taken measures to mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us.
These parties may not adopt our products unless they are able to determine, based on experience, clinical data, medical society recommendations and other analyses, that our products are safe, effective and, with respect to providers, cost-effective, on a stand-alone basis and relative to competitors’ products. Patients and 32 doctors must believe that our products offer benefits over alternative treatment methods.
These parties may not adopt our products unless they are able to determine, based on experience, clinical data, medical society recommendations and other analyses, that our products are safe, effective and, with respect to providers, cost-effective, on a stand-alone basis and relative to competitors’ products. Patients and doctors must believe that our products offer benefits over alternative treatment methods.
We train our marketing and sales force against promoting our products for uses outside of the cleared or approved indications for use, known as “off-label uses.” However, doctors may use our products for off-label purposes and are allowed to do so when in the doctor’s independent professional medical judgment he or she deems it appropriate.
We train 59 our marketing and sales force against promoting our products for uses outside of the cleared or approved indications for use, known as “off-label uses.” However, doctors may use our products for off-label purposes and are allowed to do so when in the doctor’s independent professional medical judgment he or she deems it appropriate.
Failure to take timely and adequate corrective action in response to an adverse regulatory inspection could result in, among other things, a shutdown of our manufacturing or product distribution operations, significant fines, suspension of marketing clearances and 63 approvals, seizures or recalls of our device, operating restrictions and criminal prosecutions, any of which would cause our business to suffer.
Failure to take timely and adequate corrective action in response to an adverse regulatory inspection could result in, among other things, a shutdown of our manufacturing or product distribution operations, significant fines, suspension of marketing clearances and approvals, seizures or recalls of our device, operating restrictions and criminal prosecutions, any of which would cause our business to suffer.
If we are unable to successfully develop, license or acquire new products, enhance our existing products to meet customer requirements or otherwise gain market acceptance, our business, financial condition and results of operations would be harmed. The typical development cycle of new medical device products can be lengthy and complicated and may require complex technology and engineering.
If we are unable to successfully develop, license or acquire 37 new products, enhance our existing products to meet customer requirements or otherwise gain market acceptance, our business, financial condition and results of operations would be harmed. The typical development cycle of new medical device products can be lengthy and complicated and may require complex technology and engineering.
While we are currently in compliance with the MDR and in process of transferring certification from MDD to MDR, compliance with any new or changing regulations in the EU or other jurisdictions where we currently commercialize our products or intend to commercialize in the future is a time consuming process that may require comprehensive quality system audits and new conformity assessment certifications for our products.
While we are currently in compliance with the EU MDR and in process of transferring certification from MDD to EU MDR, compliance with any new or changing regulations in the EU or other jurisdictions where we currently commercialize our products or intend to commercialize in the 66 future is a time consuming process that may require comprehensive quality system audits and new conformity assessment certifications for our products.
Uncertainties resulting from the initiation and continuation of patent and other intellectual property litigation or other proceedings could have a material adverse effect on our business, financial condition and results of operations. 50 Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
Uncertainties resulting from the initiation and continuation of patent and other intellectual property litigation or other proceedings could have a material adverse effect on our business, financial condition and results of operations. Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and 69 commissions, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commissions, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
As an example, beginning in 2022, the Tax Act eliminates the option to immediately deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Section 174 of the Code, which may impact our effective tax rate and our cash tax liability in 2022 or in future years.
As an example, beginning in 2022, the Tax Act eliminates the option to immediately deduct research and development expenditures currently and requires taxpayers to 78 capitalize and amortize them over five or fifteen years pursuant to Section 174 of the Code, which may impact our effective tax rate and our cash tax liability in 2022 or in future years.
In addition, if any license we obtain is non-exclusive, we may not be able to prevent our competitors and other third parties from using the intellectual property or technology covered by such license to compete with us. If we do not obtain necessary 49 licenses, we may not be able to redesign our products to avoid infringement.
In addition, if any license we obtain is non-exclusive, we may not be able to prevent our competitors and other third parties from using the intellectual property or technology covered by such license to compete with us. If we do not obtain necessary licenses, we may not be able to redesign our products to avoid infringement.
Our success is dependent upon several factors, including functionality, competitive pricing, ease of use, the safety and efficacy of our products and our ability to identify, select and acquire the rights to products and technologies on terms that are acceptable to us. 37 The medical device industry is characterized by rapid technological change and innovation.
Our success is dependent upon several factors, including functionality, competitive pricing, ease of use, the safety and efficacy of our products and our ability to identify, select and acquire the rights to products and technologies on terms that are acceptable to us. The medical device industry is characterized by rapid technological change and innovation.
For example, we may be subject to a third-party submission of prior art to the USPTO, challenging the validity of one or more claims of our owned 44 or in-licensed issued patents. Such submissions may also be made prior to a patent’s issuance, precluding the granting of a patent based on one of our owned or in-licensed pending patent applications.
For example, we may be subject to a third-party submission of prior art to the USPTO, challenging the validity of one or more claims of our owned or in-licensed issued patents. Such submissions may also be made prior to a patent’s issuance, precluding the granting of a patent based on one of our owned or in-licensed pending patent applications.
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: • our ability to set a price that we believe is fair for our products; • our ability to generate revenue and achieve or maintain profitability; and • the availability of capital.
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: • our ability to set a price that we believe is fair for our products; 63 • our ability to generate revenue and achieve or maintain profitability; and • the availability of capital.
The expense associated with environmental regulation and remediation could harm our business, financial condition and results of operation. We face risks related to our collection and use of data, which could result in investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about our privacy and data protection practices.
The expense associated with environmental regulation and remediation could harm our business, financial condition and results of operation. We face risks related to our collection and use of data, which could result in investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about our privacy and data and security protection practices.
For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain 78 director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. We cannot accurately predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.
For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. We cannot accurately predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.
The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products and harm our business, 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.
The theft or unauthorized use or publication of our trade secrets and other confidential business information 53 could reduce the differentiation of our products and harm our business, 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.
We 42 can provide no assurance on the impact of current and future federal and state legislative, executive, and administrative actions, including measures implemented by state boards of examiners in optometry, as well as policies of malpractice insurance carriers and payors on us, our business operations, and the business of our customers.
We can provide no assurance on the impact of current and future federal and state legislative, executive, and administrative actions, including measures implemented by state boards of examiners in optometry, as well as policies of malpractice insurance carriers and payors on us, our business operations, and the business of our customers.
To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics and make forecasting our future operating results and financial metrics more difficult. 43 Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.
To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics and make forecasting our future operating results and financial metrics more difficult. Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.
With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors.
With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents in any particular jurisdiction or 44 whether the claims of any issued patents will provide sufficient protection from competitors.
If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our 45 competitors, and our competitors could market competing products and technology.
If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. 45 Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties.
If our licensors fail to prosecute, maintain, enforce and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our products that are subject of such licensed rights could be adversely affected.
If our potential licensors fail to prosecute, maintain, enforce and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our products that are subject of such licensed rights could be adversely affected.
Our licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-license. This could materially and adversely affect our business, financial condition and results of operations.
Our potential licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents we in-license. This could materially and adversely affect our business, financial condition and results of operations.
Our predecessors or licensors may retain certain rights under their agreements with us, including the right to use the underlying 52 technology for noncommercial academic and research use, to publish general scientific findings from research related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology.
Our predecessors or licensors may retain certain rights under their agreements with us, including the right to use the underlying technology for noncommercial academic and research use, to publish general scientific findings from research related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology.
In some cases, we or our licensors may not be able to obtain patent protection for certain technology outside the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
In some cases, we or our licensors may not be able to obtain patent protection for certain technology outside the United States. In addition, the laws of some foreign countries do not protect intellectual 54 property rights to the same extent as federal and state laws in the United States.
In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security and have prioritized privacy and information security violations for enforcement actions.
In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws, regulations or rules concerning personal information and data security and have prioritized privacy and security violations for enforcement actions.
If we fail to successfully promote, maintain and protect our brand, we may fail to attract or retain the doctor acceptance 27 necessary to realize a sufficient return on our brand building efforts, or to achieve the level of brand awareness that is critical for broad adoption of our products.
If we fail to successfully promote, maintain and protect our brand, we may fail to attract or retain the doctor acceptance necessary to realize a sufficient return on our brand building efforts, or to achieve the level of brand awareness that is critical for broad adoption of our products.
The risk of our being found in violation of these or 66 other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.
The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.
A third party could, without authorization, copy or otherwise obtain and use our products or technology, or develop similar technology. Our competitors could purchase our products and attempt to replicate some or 54 all of the competitive advantages we derive from our development efforts or design around our protected technology.
A third party could, without authorization, copy or otherwise obtain and use our products or technology, or develop similar technology. Our competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts or design around our protected technology.
Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our products and cause our revenue to decline. The FDA has broad post-market and regulatory enforcement powers.
Furthermore, our key component suppliers may not currently be or may not continue to be in compliance 62 with applicable regulatory requirements, which may result in manufacturing delays for our products and cause our revenue to decline. The FDA has broad post-market and regulatory enforcement powers.
Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly, which will increase our operating expenses.
Our management and other personnel will need to devote a substantial amount of time and effort to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly, which will increase our operating expenses.
Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to, existing or potential customers with international 41 operations.
Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to, existing or potential customers with international operations.
Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA and foreign regulatory agencies. Our manufacturer, component, and sub-component suppliers are also required to meet certain standards applicable to their manufacturing processes.
Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA and foreign regulatory agencies. 72 Our manufacturer, component, and sub-component suppliers are also required to meet certain standards applicable to their manufacturing processes.
As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such United States patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent.
As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such United States patent claim, there is no 48 assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent.
We cannot assure you that the ACA, as currently enacted or 64 as amended in the future, will not harm our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
We cannot assure you that the ACA, as currently enacted or as amended in the future, will not harm our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
We also face risks inherent in handling large volumes of data and in protecting the security of such data. We could be subject to attacks on our 70 systems by outside parties or fraudulent or inappropriate behavior by our service providers or employees.
We also face risks inherent in handling large volumes of data and in protecting the security of such data. We could be subject to attacks on our systems by outside parties or fraudulent or inappropriate behavior by our service providers or employees.
Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline. 75 Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 55 We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and 49 developed intellectual property portfolios.
This can be expensive 57 and time-consuming. In addition, there could be potential trademark or service mark infringement claims brought by owners of other registered trademarks, service marks, or trademarks or service marks that incorporate variations of our registered or unregistered trademarks or service marks.
This can be expensive and time-consuming. In addition, there could be potential trademark or service mark infringement claims brought by owners of other registered trademarks, service marks, or trademarks or service marks that incorporate variations of our registered or unregistered trademarks or service marks.
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as executive officers.
The impact of these requirements could also make it more difficult for us to attract and retain qualified employees and persons to serve on our Board of Directors, our board committees or as executive officers.
The 68 circumstances giving rise to recalls are unpredictable, and any recalls of existing or future products could have a material adverse effect on our business, financial condition and results of operations.
The circumstances giving rise to recalls are unpredictable, and any recalls of existing or future products could have a material adverse effect on our business, financial condition and results of operations.
Any of the foregoing consequences could seriously harm our business and our financial results. Achieving and sustaining compliance with applicable federal and state anti-fraud and abuse laws may prove costly.
Any of the foregoing consequences could seriously harm our business and our financial results. 65 Achieving and sustaining compliance with applicable federal and state anti-fraud and abuse laws may prove costly.
The techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, may take many forms (including phishing, social engineering, denial or degradation of service attacks, ransomware, malware or other malicious code), change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.
The techniques and sophistication used to conduct cyber-attacks and security breaches or other incidents, including of information technology systems, as well as the sources and targets of these attacks, may take many forms (including phishing, social engineering, denial or degradation of service attacks, ransomware, malware or other malicious code), change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.
If this trend continues or worsens, our customers may discontinue using our 40 products and potential customers may opt against purchasing our products due to the cost or inability to procure insurance coverage.
If this trend continues or worsens, our customers may discontinue using our products and potential customers may opt against purchasing our products due to the cost or inability to procure insurance coverage.
Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such products 46 might expire before or shortly after such products are commercialized.
Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such products might expire before or shortly after such products are commercialized.
We could in the 81 future have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts.
We could in the future have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts.
In addition, the ability to charge patients directly for premium IOLs and associated services also varies widely across different countries and could become more restricted.
In addition, the ability to charge patients directly for premium IOLs and associated services also varies widely across different countries and could 42 become more restricted.
With the transition from the Medical Devices Directive (“MDD”), to the MDR, notified bodies are required to seek designation to operate as conformity assessment authorities under the new law.
With the transition from the Medical Devices Directive (“MDD”), to the EU MDR, notified bodies are required to seek designation to operate as conformity assessment authorities under the new law.
We may experience numerous unforeseen events during, or because of, the clinical trial process that could delay or prevent us from receiving regulatory clearance or approval for new products, modifications of existing products, or new indications for existing products, including: • successful and timely completion of nonclinical studies or clinical development of our products, as well as the associated costs, including any unforeseen costs we may incur as a result of clinical trial delays due to the COVID-19 pandemic or other causes; • enrollment in our clinical trials may be slower than we anticipate, or we may experience high screen failure rates in our clinical trials, resulting in significant delays; • our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing which may be expensive and time-consuming; • trial results may not meet the level of statistical significance required by the FDA or other regulatory authorities; • the FDA or similar foreign regulatory authorities may find that one or more of our products is not sufficiently safe for investigational use in humans; • the FDA or similar foreign regulatory authorities may interpret data from preclinical testing and clinical trials in different ways than we do; • there may be delays or failure in obtaining approval of our clinical trial protocols from the FDA or other regulatory authorities; • there may be delays in obtaining institutional review board approvals or governmental approvals to conduct clinical trials at prospective sites; 36 • the FDA or similar foreign regulatory authorities may find our or our suppliers’ manufacturing processes or facilities unsatisfactory; • the FDA or similar foreign regulatory authorities may change their review policies or adopt new regulations that may negatively affect or delay our ability to bring a product to market or receive approvals or clearances to treat new indications; • we may have trouble in managing multiple clinical sites; • we may have trouble finding patients to enroll in our trials; • we may experience delays in agreeing on acceptable terms with third-party research organizations and trial sites that may help us conduct the clinical trials; and • we, or regulators, may suspend or terminate our clinical trials because the participating patients are being exposed to unacceptable health risks.
We may experience numerous unforeseen events during, or because of, the clinical trial process that could delay or prevent us from receiving regulatory clearance or approval for new products, modifications of existing products, or new indications for existing products, including: • successful and timely completion of nonclinical studies or clinical development of our products, as well as the associated costs, including any unforeseen costs we may incur as a result of clinical trial delays; • enrollment in our clinical trials may be slower than we anticipate, or we may experience high screen failure rates in our clinical trials, resulting in significant delays; • our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing which may be expensive and time-consuming; • trial results may not meet the level of statistical significance required by the FDA or other regulatory authorities; • the FDA or similar foreign regulatory authorities may find that one or more of our products is not sufficiently safe for investigational use in humans; • the FDA or similar foreign regulatory authorities may interpret data from preclinical testing and clinical trials in different ways than we do; • there may be delays or failure in obtaining approval of our clinical trial protocols from the FDA or other regulatory authorities; 35 • there may be delays in obtaining institutional review board approvals or governmental approvals to conduct clinical trials at prospective sites; • the FDA or similar foreign regulatory authorities may find our or our suppliers’ manufacturing processes or facilities unsatisfactory; • the FDA or similar foreign regulatory authorities may change their review policies or adopt new regulations that may negatively affect or delay our ability to bring a product to market or receive approvals or clearances to treat new indications; • we may have trouble in managing multiple clinical sites; • we may have trouble finding patients to enroll in our trials; • we may experience delays in agreeing on acceptable terms with third-party research organizations and trial sites that may help us conduct the clinical trials; and • we, or regulators, may suspend or terminate our clinical trials because the participating patients are being exposed to unacceptable health risks.
Clinical trials conducted in one country may not be accepted by other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country.
Clinical trials conducted in one country may not be 41 accepted by other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country.
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.
Additionally, 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.
If the FDA or FTC determines that any of our advertising or promotional claims are misleading, 59 not substantiated or not permissible, we may be subject to enforcement actions, including adverse publicity and warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions. The FDA and state authorities have broad enforcement powers.
If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including adverse publicity and warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions. 58 The FDA and state authorities have broad enforcement powers.
Data breaches could result in a violation of applicable United States and international privacy, data protection and other laws, and subject us to individual or consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil and/or criminal liability.
Data breaches or other incidents could result in a violation of applicable United States and international privacy, data protection, security and other laws, and subject us to individual or consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil and/or criminal liability.
Our failure or inability to devote adequate research and development resources or compete effectively with the research and development programs of our current or future competitors could have a material adverse effect on our business, financial condition and results of operations. 35 We have limited data and experience regarding the safety and efficacy of our RxSight system.
Our failure or inability to devote adequate research and development resources or compete effectively with the research and development programs of 34 our current or future competitors could have a material adverse effect on our business, financial condition and results of operations. We have limited data and experience regarding the safety and efficacy of our RxSight system.
In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. While the FDA has largely caught up with domestic preapproval inspections, it continues to work through its backlog of foreign inspections.
During 2020 and 2021 a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. While the FDA has largely caught up with domestic preapproval inspections, it continues to work through its backlog of foreign inspections.
As such, we may not promote our products 60 for indications or uses for which they do not have clearance or approval.
As such, we may not promote our products for indications or uses for which they do not have clearance or approval.
Because the interpretation and application of laws, regulations, standards and other obligations relating to data privacy and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted and applied in a manner that is inconsistent with our data processing practices and policies.
Because the interpretation and application of laws, regulations, standards and other obligations relating to privacy, data protection and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted and applied in a manner that is inconsistent with our practices and policies.
Any concerns about our data privacy and security practices, even if unfounded, could damage the reputation of our businesses and discourage potential users from our products and services. Any of the foregoing could have an adverse effect on our business, financial condition, results of operations and prospects.
Any concerns about our privacy, data protection or security practices, even if unfounded, could damage the reputation of our businesses and discourage potential users from our products and services. Any of the foregoing could have an adverse effect on our business, financial condition, results of operations and prospects.
Major changes include: • reclassification of some products; • greater emphasis on clinical data; • data transparency, including publication of clinical trial data and safety summaries; • defined content and structure for technical files to support registration; • unique device identification system; • greater burden on post-market surveillance and clinical follow-up; • reduction of adverse event reporting time from 30 to 15 days after the event; and • more power to notified bodies.
Major changes include: • reclassification of some products; • greater emphasis on clinical data; • data transparency, including publication of clinical trial data and safety summaries; • defined content and structure for technical files to support registration; • unique device identification system; • greater burden on post-market surveillance and clinical follow-up; • reduction of adverse event reporting time from 30 to 15 days after the event; • delayed review times; and • more power to notified bodies.
Furthermore, the current leases on our four facilities expire, respectively, on (i) September 30, 2024, with one option to extend for five years; (ii) January 31, 2026, with three options to extend for five years each; (iii) March 31, 2023 with two options to extend for five years each, and (iv) August 31, 2024, with one option to extend for five years.
Furthermore, the current leases on our four facilities expire, respectively, on (i) September 30, 2024, with one option to extend for five years; (ii) January 31, 2026, with three options to extend for five years each; (iii) March 31, 2025 with two options to extend for five years each, and (iv) August 31, 2024, with one option to extend for five years.
Deterioration in the economic conditions globally resulting in instability in global financial markets, including the following, may pose a risk to our business: inflation and rising interest rates, large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets’ jurisdictions, levels of non-performing loans on the balance sheets of European banks, the effect of the United Kingdom leaving the European Union, instability in the capital markets and the COVID-19 pandemic.
Deterioration in the economic conditions globally resulting in instability in global financial markets, including the following, may pose a risk to our business: inflation and rising interest rates, large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets’ jurisdictions, levels of non-performing loans on the balance sheets of European banks, the effect of the United Kingdom leaving the European Union, and instability in the capital markets.
We are subject to numerous, and sometimes conflicting, legal regimes in the countries in which we operate, including on matters as diverse as health and safety standards, marketing and promotional activities, anticorruption, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data privacy and labor relations.
We are subject to numerous, and sometimes conflicting, legal regimes in the countries in 71 which we operate, including on matters as diverse as health and safety standards, marketing and promotional activities, anticorruption, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data protection privacy, security and labor relations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We currently lease four facilities housing our headquarters, manufacturing, research and development and administrative offices in Aliso Viejo, California. The facility leases are for approximately 121,000 square feet in the aggregate.
Biggest changeItem 2. Properties. We currently lease four facilities which includes our headquarters, manufacturing, research and development and administrative offices in Aliso Viejo, California. The facility leases are for approximately 121,000 square feet in the aggregate.
The leases terminate, respectively, on (i) September 30, 2024, with one option to extend for five years; (ii) January 31, 2026, with three options to extend for five years each; (iii) March 31, 2023 with two options to extend for five years each; and (iv) August 31, 2024, with one option to extend for five years.
The leases terminate, respectively, on (i) September 30, 2024, with one option to extend for five years; (ii) January 31, 2026, with three options to extend for five years each; (iii) March 31, 2025 with two options to extend for five years each; and (iv) August 31, 2024, with one option to extend for five years.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePayment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of then-existing debt instruments and other factors our Board of Directors deems relevant. Unregistered sales of equity securities None.
Biggest changePayment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of then-existing debt instruments, if any, and other factors our Board of Directors deems relevant. Unregistered sales of equity securities None.
Item 4. Mine Safety Disclosures. None 85 PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market information and holders Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “RXST” since July 30, 2021.
Item 4. Mine Safety Disclosures. None 83 PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market information and holders Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “RXST” since July 30, 2021.
Prior to that time, there was no public market for our common stock. Stockholders As of February 15, 2023, there were approximately 221 registered stockholders of record of our common stock.
Prior to that time, there was no public market for our common stock. Stockholders As of February 15, 2024, there were approximately 150 registered stockholders of record of our common stock.
Issuer purchases of equity securities None. Item 6. [ Reserved] 86
Issuer purchases of equity securities None. Item 6. [ Reserved] 84
Removed
Our Amended Term Loan restricts our ability to pay dividends. In addition, future debt instruments we issue may materially restrict our ability to pay dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of operations Comparison of the years ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021, together with the dollar increase or decrease and percentage change in those items: Year-Ended December 31, Change (in thousands, except percentages) 2022 2021 ($) (%) Sales $ 49,005 $ 22,593 $ 26,412 116.9 % Cost of sales 27,677 18,076 9,601 53.1 Gross profit $ 21,328 $ 4,517 $ 16,811 372.2 % Operating expenses: Selling, general and administrative 58,665 32,805 25,860 78.8 Research and development 25,981 24,499 1,482 6.0 Total operating expenses 84,646 57,304 27,342 47.7 Loss from operations $ (63,318 ) $ (52,787 ) $ (10,531 ) 19.9 % Other income (expense), net: Change in fair value of warrants — 2,717 (2,717 ) (100.0 ) Expiration of warrant — 5,018 (5,018 ) (100.0 ) Interest expense (4,946 ) (3,682 ) (1,264 ) 34.3 Interest and other income 1,517 54 1,463 2,725.4 Total other (expense) income , net: (3,429 ) 4,107 (7,536 ) (183.5 )% Loss before income taxes (66,747 ) (48,680 ) (18,067 ) 37.1 Income tax expense 9 8 1 19.1 Net loss $ (66,756 ) $ (48,688 ) $ (18,068 ) 37.1 % Other comprehensive loss Unrealized loss on short-term investments (66 ) (7 ) (59 ) 829.9 Foreign currency translation loss (9 ) (10 ) 1 (5.3 ) Total other comprehensive loss (75 ) (17 ) (58 ) 347.5 Comprehensive loss $ (66,831 ) $ (48,705 ) $ (18,126 ) 37.2 % 91 Sales Sales increased by $26.4 million, or 116.9%, to $49.0 million for the year ended December 31, 2022 from $22.6 million for the year ended December 31, 2021.
Biggest changeComprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on short-term investments and foreign currency translation adjustments. 88 Results of operations Comparison of the years ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022, together with the dollar increase or decrease and percentage change in those items: Year Ended December 31, Change (in thousands, except percentages) 2023 2022 ($) (%) Sales $ 89,077 $ 49,005 $ 40,072 81.8 % Cost of sales 35,312 27,677 7,635 27.6 Gross profit $ 53,765 $ 21,328 $ 32,437 152.1 % Operating expenses: Selling, general and administrative 74,799 58,665 16,134 27.5 Research and development 29,051 25,981 3,070 11.8 Total operating expenses 103,850 84,646 19,204 22.7 Loss from operations $ (50,085 ) $ (63,318 ) 13,233 (20.9 )% Other income (expense), net: Interest expense (3,308 ) (4,946 ) 1,638 (33.1 ) Interest and other income 6,574 1,517 5,057 333.4 Loss on extinguishment of term loan (1,769 ) — (1,769 ) — Total other income (expense), net: 1,497 (3,429 ) 4,926 (143.7 )% Loss before income taxes (48,588 ) (66,747 ) 18,159 (27.2 ) Income tax expense 20 9 11 121.0 Net loss $ (48,608 ) $ (66,756 ) $ 18,148 (27.2 )% Other comprehensive loss Unrealized gain (loss) on short-term investments 83 (66 ) 149 (226.3 ) Foreign currency translation gain (loss) 7 (9 ) 16 (176.5 ) Total other comprehensive income (loss) 90 (75 ) 165 (220.2 ) Comprehensive loss $ (48,518 ) $ (66,831 ) $ 18,313 (27.4 )% Sales Sales increased by $40.1 million, or 81.8%, to $89.1 million for the year ended December 31, 2023 from $49.0 million for the year ended December 31, 2022.
Although, based on our current planned operations, we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations, as the same may be disclosed in the Company’s future Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q filed with the SEC, we may be required to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities or by entering into partnerships or a combination of one or more of these funding sources in order to meet our liquidity requirements.
Although, based on our current planned operations, we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations, as the same may be disclosed in the Company’s future Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q filed with the SEC, we may be required to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities or by entering into partnerships or a combination of one or 91 more of these funding sources in order to meet our liquidity requirements.
Cash from financing activities Net cash from financing activities for the year ended December 31, 2022 was $6.3 million, consisting primarily of net proceeds from our at-the-market offering of $6.0 million and proceeds from stock options exercised and issuance of common stock under the employee stock purchase plan of $1.8 million which were partially offset by payments of employee taxes of $0.6 million and payments for offering costs of $0.6 million in connection with the filing of our shelf registration statement.
Net cash provided by financing activities for the year ended December 31, 2022 was $6.3 million, consisting primarily of net proceeds from our at-the-market offering of $6.0 million and proceeds from stock options exercised and issuance of common stock under the employee stock purchase plan of $1.8 million which were partially offset by payments of employee taxes of $0.6 million and payments for offering costs of $0.6 million in connection with the filing of our shelf registration statement.
While we have taken measures to 88 mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us.
While we have taken measures to mitigate business continuity risk, including increasing standard lead times, payment of expedite fees, issuance of a limited number of non-cancelable purchase orders, advance delivery of critical components ahead of normal delivery dates and second sourcing, our suppliers may cease producing the components we purchase from them or otherwise decide to cease doing business with us.
We believe our RxSight system provides doctors and patients increased confidence and peace of mind by eliminating the high-stakes preoperative guesswork common to competitive premium IOLs and allowing patients to iterate their final vision characteristics with customized post-surgical adjustments. We compete in the IOL market in the U.S.
We believe our RxSight system provides doctors and patients increased confidence and peace of mind by eliminating the high-stakes preoperative guesswork common to competitive premium IOLs and allowing patients to iterate their final vision characteristics with customized post-surgical adjustments. We compete primarily in the IOL market in the U.S.
New approvals may also be sought in large cataract markets with more complex regulatory processes such as Asia. We are a Delaware corporation headquartered in Aliso Viejo, California with one wholly owned subsidiary located in Amsterdam, Netherlands. The wholly owned subsidiary has a registered branch in the United Kingdom and a wholly owned subsidiary located in Germany.
New approvals may also be sought in large foreign cataract markets with more complex regulatory processes such as Asia. We are a Delaware corporation headquartered in Aliso Viejo, California with one wholly owned subsidiary located in Amsterdam, Netherlands. The wholly owned subsidiary has a registered branch in the United Kingdom and a wholly owned subsidiary located in Germany.
We expect revenue to increase in absolute dollars as we expand our sales organization and sales territories, add customers, expand the base of doctors that are trained to use our products, and expand awareness of our products with new and existing customers and as doctors perform more procedures using our products. LALs are held at customer sites on consignment.
We expect revenue to increase in absolute dollars as we expand our sales organization and sales territories, add customers, 86 expand the base of doctors that are trained to use our products, and expand awareness of our products with new and existing customers and as doctors perform more procedures using our products. LALs are held at customer sites on consignment.
We expect SG&A expenses to continue to increase in absolute dollars as we expand our sales and marketing organization and infrastructure to both drive and support the anticipated growth in revenue and due to additional legal, accounting audit and tax fees, insurance and other expenses associated with being a public company.
We expect SG&A expenses to continue to increase in absolute dollars as we expand our sales and marketing organization and 87 infrastructure to both drive and support the anticipated growth in revenue and due to additional legal, accounting audit and tax fees, insurance and other expenses associated with being a public company.
Research and development expenses are expensed as incurred. We expect research and development 90 expenses as a percentage of revenue to vary over time depending on the level and timing of our new product development efforts, as well as our clinical development, clinical trials and registries and other related activities.
Research and development expenses are expensed as incurred. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of our new product development efforts, as well as our clinical development, clinical trials and registries and other related activities.
Our RxSight system is approved in Mexico and Canada for improving uncorrected visual acuity by adjusting the LAL power to correct residual postoperative refractive error. We may selectively pursue commercial expansion in these or other geographies that accept these approvals in the future, with a priority on markets where we see significant potential opportunity.
Our RxSight system is approved in Mexico and Canada for improving uncorrected visual acuity by adjusting the LAL power to correct residual postoperative refractive error. We may selectively pursue commercial expansion in these or other geographies that accept these approvals in the future, with a priority on markets where we see significant potential future opportunities.
Our United States commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 3,000 U.S. cataract surgeons that perform 70%-80% of all premium IOL procedures.
Our United States commercial organization includes a direct sales team of LDD sales personnel and LAL account managers, as well as clinical specialists, field service engineers and marketing personnel. Our sales efforts are concentrated on the roughly 4,000 U.S. cataract surgeons that perform 70%-80% of all premium IOL procedures.
Components of results of operations Sales Our sales consists of the sale of LALs used in cataract surgeries, the LDDs for delivering light to the LALs to adjust the lens post-surgery, as needed, and service and accessories. Revenue is derived from sales of products primarily in the United States.
Components of results of operations Sales Our sales consist of the sale of LALs used in cataract surgeries, the LDDs for delivering light to the LALs to adjust the lens post-surgery, as needed, and service and accessories. Revenue is derived from sales of products primarily in the United States.
The Public Offering closed on February 10, 2023. The underwriters' option was exercised in full on February 10, 2023 and closed on February 14, 2023. We received net proceeds of approximately $53.7 million from the Public Offering, after deducting underwriters' discounts and commissions of $3.5 million and offering expenses of $0.3 million.
The underwriters' option was exercised in full on February 10, 2023 and closed on February 14, 2023. We received net proceeds of approximately $53.6 million from the public offering, after deducting underwriters' discounts and commissions of $3.5 million and offering expenses of $0.5 million.
Uncertain macroeconomic conditions including recent inflationary pressures and the rise in interest rates have created significant uncertainty in the U.S. economy and capital markets, which is expected to continue in 2023 and beyond and could negatively impact our financial results and liquidity.
Uncertain macroeconomic conditions including recent inflationary pressures and the rise in interest rates have created significant uncertainty in the U.S. economy and capital markets, which is expected to continue through 2024 and beyond and could negatively impact our financial results and liquidity.
The single performance obligation is satisfied, and revenue is recognized for LALs upon customer notification that the LALs have been implanted in a patient. Our LDD contracts contain multiple performance obligations bundled into one transaction price, with all obligations generally satisfied within one year.
Revenue is recognized for LALs upon customer notification that the LALs have been implanted in a patient. Our LDD contracts contain multiple performance obligations bundled into one transaction price, with all obligations generally satisfied within one year.
We plan to grow our business primarily by expanding the size of our LDD installed base and driving increased 87 utilization of our LAL through heightened awareness of the superior clinical outcomes our RxSight system provides patients.
We plan to grow our business primarily by expanding the size of our LDD installed base and driving increased 85 utilization of our LAL through heightened awareness of the superior clinical outcomes that our RxSight system provides patients.
Cost of sales Cost of sales consists of materials, labor and manufacturing overhead internally to produce the Company’s products as well as the cost of shipping and handling. Overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management and stock-based compensation.
Cost of sales Cost of sales consist of materials, labor and manufacturing overhead internally to produce our products as well as the cost of shipping and handling. Overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management and stock-based compensation.
Operating expenses Selling, general and administrative expenses Selling, general and administrative, or SG&A, expenses consist primarily of personnel-related expenses, including wages, incentive bonuses, stock-based compensation and benefits related to administrative, selling and marketing functions, education programs for doctors, commercial operations and analytics, finance, information technology and human resource functions.
Operating expenses Selling, general and administrative expenses Selling, general and administrative (“SG&A”), expenses consist primarily of personnel-related expenses, including wages, incentive bonuses, stock-based compensation and benefits related to administrative, selling and marketing functions, education programs for doctors, commercial operations and analytics, finance, information technology and human resource functions.
As of December 31, 2022, we had established an installed base of 400 LDDs in ophthalmology practices and, since our inception though December 31, 2022, surgeons have implanted over 42,000 LALs. We believe this business model provides an attractive and concentrated market opportunity addressable with a focused sales force.
As of December 31, 2023, we had established an installed base of 666 LDDs in ophthalmology practices and, since our inception though December 31, 2023, surgeons have implanted over 96,000 LALs. We believe this business model provides an attractive and concentrated market opportunity addressable with a focused sales force.
Funding requirements Our future liquidity and capital funding requirements will depend on numerous factors, including: • our sales growth; • our research and development efforts; • our sales and marketing activities; • working capital investments, primarily in inventories and accounts receivable; • debt service and debt covenant requirements; • our ability to raise additional funds or borrow on our credit facility to finance our operations; 93 • the outcome, costs and timing of any clinical trial results for our current or future products; • the emergence and effect of competing or complementary products; • our ability to maintain, expand, enforce and defend our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or other intellectual property rights; • our ability to retain our current employees and the need and ability to hire additional management, sales, research and development, scientific and customer support personnel; • the terms and timing of any collaborative, licensing or other arrangements that we have or may establish; • operating and finance lease payments for our facilities; • the extent to which we acquire or invest in businesses, products or technologies; and • the impact of the COVID-19 pandemic.
Funding requirements Our future liquidity and capital funding requirements will depend on numerous factors, including: • our sales growth; • our research and development efforts; • our sales and marketing activities; • our success in leveraging future strategic partnerships; • working capital investments, primarily in inventories and accounts receivable; • our ability to borrow or raise additional funds through future debt or equity offerings to finance our operations; • the outcome, costs and timing of any clinical trial results for our current or future products; • the emergence and effect of competing or complementary products; • our ability to maintain, expand, enforce and defend our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or other intellectual property rights; • our ability to retain our current employees and the need and ability to hire additional management, sales, research and development, scientific and customer support personnel; • the terms and timing of any collaborative, licensing or other arrangements that we have or may establish; • operating and finance lease payments for our facilities; and • the extent to which we acquire or invest in businesses, products or technologies.
Cash provided by (used in) investing activities Net cash provided by investing activities for the year ended December 31, 2022 was $40.0 million, consisting of net maturity of short-term investments of $42.3 million and purchases of property and equipment of $2.4 million.
Net cash provided by investing activities for the year ended December 31, 2022 was $40.0 million, consisting of net maturity of short-term investments of $42.3 million which was partially offset by purchases of property and equipment of $2.4 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this report.
While we depend on our suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements, since the start of the COVID-19 pandemic and resultant supply chain constraints, vendors will miss delivery dates, extend delivery dates or in some circumstances cancel purchase orders because these suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand.
While we depend on our suppliers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements, vendors will miss delivery dates, extend delivery dates or in some circumstances cancel purchase orders because these suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand.
We believe the number of LDDs installed, LALs implanted and the number of doctors performing surgery with our products are indicators of our ability to drive adoption and generate revenue. We believe these are important metrics for our business.
We believe the number of LDDs installed and, LALs implanted are indicators of our ability to drive adoption and generate revenue. We believe these are important metrics for our business.
The Amended Term Loan increased the loan and security agreement to $60.0 million, of which $40.0 million was fully funded as of May 3, 2022 from the original term loan.
The May 2022 LSA increased the loan and security agreement to $60.0 million, of which $40.0 million was fully drawn upon as of May 3, 2022 from the original term loan.
Other SG&A expenses include sales commissions, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, training for doctors, professional services fees such as legal, patent registration costs, accounting, audit and tax fees, board of directors’ expenses, insurance costs, general corporate expenses and facilities-related expenses.
Other SG&A expenses include sales commissions, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, training for doctors, professional services fees such as legal, patent registration costs, accounting, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), tax fees, board of directors’ expenses, insurance costs, general corporate expenses and facilities-related expenses.
Cost of sales Cost of sales increased by $9.6 million, or 53.1%, to $27.7 million for the year ended December 31, 2022 from $18.1 million for the year ended December 31, 2021, primarily due to the increase in the number of LALs and LDDs sold during the period.
Cost of sales Cost of sales increased by $7.6 million, or 27.6%, to $35.3 million for the year ended December 31, 2023 from $27.7 million for the year ended December 31, 2022, primarily due to the increase in the number of LALs and LDDs sold during the period.
Interest expense Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with our indebtedness. Interest and other income, net Interest and other income, net consists primarily of interest income earned on our cash and cash equivalents.
Interest expense Interest expense consist primarily of interest incurred on indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with indebtedness and interest on leases. Interest and other income, net Interest and other income, net consist primarily of interest income earned on our short-term investments and cash equivalents.
On February 7, 2023, we entered into an underwriting agreement with BofA Securities, Inc., which the we agreed to issue and sell 4,000,000 shares of our common stock in a Public Offering, pursuant to our shelf registration statement, which was declared effective on August 12, 2022.
On February 7, 2023, we entered into an underwriting agreement with BofA Securities, Inc., pursuant to which we agreed to issue and sell 4,000,000 shares of our common stock in a public offering, pursuant to the shelf registration statement. The shares of common stock were sold at a price to the public of $12.50 per share.
Summary statement of cash flows The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below: For the Year Ended December 31, 2022 2021 Net cash (used in) provided by: Operating activities $ (58,850 ) $ (44,708 ) Investing activities 39,950 (81,907 ) Financing activities 6,332 137,342 Effect of foreign exchange rate on cash, cash equivalents and restricted cash (9 ) (10 ) Net (decrease) increase in cash, cash equivalents and restricted cash $ (12,577 ) $ 10,717 Cash used in operating activities Net cash used in operating activities for the year ended December 31, 2022 was $58.8 million, consisting primarily of a net loss of $66.8 million, a change in operating assets and liabilities of $7.4 million, partially offset by non-cash stock-based compensation of $11.4 million, and depreciation and amortization of $3.9 million.
Summary statement of cash flows The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below: For the Year Ended December 31, 2023 2022 Net cash (used in) provided by: Operating activities $ (41,593 ) $ (58,850 ) Investing activities (22,129 ) 39,950 Financing activities 61,524 6,332 Effect of foreign exchange rate on cash, cash equivalents and restricted cash 6 (9 ) Net (decrease) in cash, cash equivalents and restricted cash $ (2,192 ) $ (12,577 ) Cash used in operating activities Net cash used in operating activities for the year ended December 31, 2023 was $41.6 million consisting primarily of a net loss of $48.6 million, a change in operating assets and liabilities of $9.1 million, partially offset by non-cash stock-based compensation of $15.7 million, and depreciation and amortization of $4.1 million.
We believe the number of LALs sold (reported as implanted in a patient) in each quarter is an important metric indicative of adoption and utilization of our RxSight system. 2022 2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 LALs Sold 4,166 5,400 6,595 9,123 1,567 1,825 1,977 2,959 During 2022, we had increased LDD sales of 81 and increased LAL sales of 16,956 when compared to 2021 from strong adoption of our RxSight system by practices and doctors combined with an increased LDD installed base.
We believe the number of LALs sold (reported as implanted in a patient) in each quarter is an important metric indicative of adoption and utilization of our RxSight system. 2023 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 LALs Sold 10,523 12,622 13,657 18,071 4,166 5,400 6,595 9,123 During 2023, we had increased LDD sales of 71 and increased LAL sales of 29,589 when compared to 2022 from strong adoption of our RxSight technology by practices and doctors combined with an increased LDD installed base.
The shares of common stock were sold at a price to the public of $12.50 per share. Under the terms of the underwriting agreement, we also granted the underwriters an option exercisable for 30 days from the date of the underwriting agreement to purchase up to an additional 600,000 shares of common stock on the same terms and conditions.
Under the terms of the underwriting agreement, we also granted the underwriters an option exercisable for 30 days from the date of the underwriting agreement to purchase up to an additional 600,000 shares of common stock on the same terms and conditions. The public offering closed on February 10, 2023.
Selling, general and administrative expenses Selling, general and administrative expenses increased by $25.9 million, or 78.8%, to $58.7 million for the year ended December 31, 2022, from $32.8 million for the year ended December 31, 2021.
Selling, general and administrative expenses Selling, general and administrative expenses increased by $16.1 million, or 27.5%, to $74.8 million for the year ended December 31, 2023, from $58.7 million for the year ended December 31, 2022.
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in Part I, Item 1A and elsewhere in this report.
As a public company, we will incur costs that we have not previously incurred or have previously incurred at lower rates, including increased costs for employee-related expenses, director and officer insurance premiums, audit and legal fees, investor relations fees, fees to members of our Board of Directors and expenses for compliance with public-company reporting requirements.
Additionally, as a public company, we have incurred and expect to continue to incur increased costs for employee-related expenses, director and officer insurance premiums, audit fees, (including costs for compliance with Section 404(b) of the Sarbanes-Oxley Act), legal fees, investor relations fees and fees to members of our Board and expenses for compliance with public-company reporting requirements.
The expansion of global lead times, particularly in Europe and Asia, related to the COVID-19 pandemic, and COVID related shutdowns again in China and the more recently the military conflict in Ukraine, has resulted in the lack of availability of raw materials, including semiconductors, computers, monitors electronic parts, metals, packaging, adhesives, chemicals, resins and subcontract painted components.
The expansion of global lead times has resulted in the lack of availability of raw materials, including semiconductors, computers, monitors electronic parts, metals, packaging, adhesives, chemicals, resins and subcontract painted components.
Critical accounting policies, significant judgments and estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S.
The aggregate amount of the letter of credit was $0.2 million and $0.3 million as of December 31, 2023 and 2022, respectively. 92 Critical accounting policies, significant judgments and use of estimates Our management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
Standby letter of credit We also have a standby letter of credit, expiring September 30, 2024, issued by a financial institution as a required security for one operating lease. The aggregate amount of the letter of credit was $0.3 million as of December 31, 2022 and 2021, respectively.
Contractual obligations and commitments Standby letter of credit We also have a standby letter of credit, expiring September 30, 2024, issued by a financial institution as a required security for one operating lease.
Liquidity and capital resources Sources of liquidity We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses in the future.
Liquidity and capital resources Sources of liquidity We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses in the future. As of December 31, 2023, we had cash and cash equivalents of $9.7 million, short-term investments of $117.5 million, and accumulated deficit of $594.6 million.
We generated sales of $49.0 million and had a net loss of $66.8 million for the year ended December 31, 2022, compared to sales of $22.6 million and net income of $48.7 million for the year ended December 31, 2021.
For the years ended December 31, 2023 and 2022, our net losses from operations were $50.1 and $63.3 million, respectively. We generated sales of $89.1 million and had a net loss of $48.6 million for the year ended December 31, 2023, compared to sales of $49.0 million and net loss of $66.8 million for the year ended December 31, 2022.
Net cash used in investing activities for the year ended December 31, 2021 was $81.9 million, consisting of net purchases of short-term investments of $160.0 million and purchases of property and equipment of $1.9 million which were partially offset by maturities of short-term investments of $80.0 million.
Cash (used in) provided by investing activities Net cash used in investing activities for the year ended December 31, 2023 was $22.1 million, consisting of net purchases of short-term investments of $17.3 million and purchases of property and equipment of $4.8 million.
General and administrative expenses increased by $4.9 million primarily due to an additional $3.6 million from increased personnel costs and increased stock-based compensation as well as $1.7 million of increased costs related to operating as a public company.
General and administrative expenses increased by $3.7 million primarily due to an additional $2.5 million from increased personnel costs and increased stock-based compensation as well as $1.7 million of increased legal, audit and audit related costs related to operating as a public company. 89 Research and development expenses Research and development expenses increased by $3.1 million to $29.1 million for the year ended December 31, 2023 from $26.0 million for the year ended December 31, 2022, an increase of 11.4%.
Key business metrics We regularly review several operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions.
Because of these and other factors, we expect to continue to incur net losses and negative cash flows from operations in the near future. Key business metrics We regularly review several operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions.
We expect that our current cash, cash equivalents and short-term investments and additional capital raised, through the date of filing of this Form 10-K will be sufficient to fund our operations for at least the next 12 months.
As of December 31, 2023, we had cash and cash equivalents of $9.7 million, short-term investments of $117.5 million, and an accumulated deficit of $594.6 million. We believe that our current cash, cash equivalents and short-term investments through the date of filing of this report will be sufficient to fund our operations for at least the next 12 months.
We believe the number of LDDs sold in each quarter and our LDD installed base at the end of each period are important metrics as they represent an installed base into which we can sell our LALs. 2022 2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 LDDs Sold 40 49 49 57 13 25 31 45 Installed Base at End of Period 246 294 * 343 400 105 130 161 206 * Reduced by one LDD taken out of installed base in Q2 2022.
We believe the number of LDDs sold in each quarter and our LDD installed base at the end of each period are important metrics as they represent an installed base into which we can sell our LALs.
Net cash used in operating activities for the year ended December 31, 2021 was $44.7 million, consisting primarily of loss from operations of $48.7 million, a non-cash gain on expiration of an unexercised warrant of $5.0 million, an increase in 94 operating assets and liabilities of $2.7 million, offset by non-cash stock-based compensation of $7.6 million, depreciation and amortization of $4.0 million and the provision for obsolete and excess inventory of $2.4 million.
Net cash used in operating activities for the year ended December 31, 2022 was $58.8 million, consisting primarily of a net loss of $66.8 million, a change in operating assets and liabilities of $7.4 million, partially offset by non-cash stock-based compensation of $11.4 million, and depreciation and amortization of $3.9 million.
This increase was primarily attributable to an increase in selling and marketing personnel costs of $15.1 million due mainly to additional headcount, $2.4 million in post market study costs as well as increased travel costs of $2.3 million, due to increased LDD sales, and increased trade show costs of $1.1 million when compared to the year ended December 31, 2021.
This increase was primarily attributable to an increase in selling and marketing personnel costs of $12.5 million due mainly to additional headcount of 29, increased sales commissions, incentive bonuses and employee benefits of $7.5 million, $2.0 million of increased stock-based compensation expense, $0.9 million in additional post market study costs, and new customer acquisition costs, in each case when compared to the year ended December 31, 2022.
The shelf registration statement was intended to provide us with flexibility to access additional capital when market conditions are appropriate. Included in the $200.0 million shelf registration statement, we also filed a prospectus supplement to sell up to an aggregate value of $50.0 million dollars of our common stock through an ATM offering.
At the time of filing the shelf registration statement, we also filed a prospectus supplement to sell up to an aggregate value of $50.0 million dollars of our common stock through an ATM offering, through BofA Securities, Inc. as sales agent (the “ATM Facility”).
While our significant accounting policies are described in more detail in the “S ummary of Accounting Polices ” in Note 2 in the Notes to Consolidated Financial Statements included in Part II - Item 8 in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. 95 Revenue recognition Our revenues from sales are generated from the sale of light adjustable intraocular lenses, the LAL, used in cataract surgery along with a specifically designed machine for delivering light to the eye, the Light Delivery Device (“LDD”), to adjust the lens post-surgery, as needed.
While our significant accounting policies are described in more detail in the “Summary of Accounting Polices” in Note 2 in the Notes to Consolidated Financial Statements included in Part II - Item 8 in this report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Emerging growth company and smaller reporting company status We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
As a result, as of December 31, 2023, we are considered a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act, and have ceased to be an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act.
Other income (expense) Other income, net, decreased by $7.5 million to expense of $3.4 million for the year ended December 31, 2022 from income of $4.1 million for the year ended December 31, 2021, due primarily to a favorable change in fair value of warrant liabilities of $2.7 million, gain on expiration of warrant of $5.0 million for the year ended December 31, 2021 and increased interest expense of $1.3 million in 2022, primarily due to rising interest rates on our amended term loan.
This increase was primarily attributable to $2.9 million in increased personnel costs which includes stock-based compensation and $0.4 million in increased clinical study costs. Other income (expense), net Other income (expense), net decreased by $4.9 million to income of $1.5 million for the year ended December 31, 2023 from expense of $3.4 million for the year ended December 31, 2022.
The increase in sales was due to sales in 2022 of 81 more LDDs and 16,956 more LALs as compared to 2021, from the growth in our installed base of LDDs and increased adoption of our LAL by doctors and patients.
The increase was due to incremental sales of 29,589 LALs primarily due to an increased LDD installed base of 266 and incremental sales of 71 LDDs from strong adoption of our RxSight technology by practices and doctors.
Revenue from sales is recognized from products sold in the U.S. and Europe. Customers are primarily comprised of ambulatory surgery centers, hospitals, and physician private practices.
Revenue recognition Our revenue is generated from the sale of LALs used in cataract surgery along with a specifically designed machine for delivering light to the eye, the LDD, to adjust the lens post-surgery. Revenue is recognized from sales of products in the U.S. Canada and Europe to ambulatory surgery centers, hospitals, and physician private practices.
The increase in other expense was partially offset by an increase in interest income of $1.5 million in 2022 from higher interest rates on our short-term investments.
This change was primarily due to increased interest income of $5.1 million from higher interest rates earned on higher short-term investment balances and decreased interest expense of $1.6 million on the Oxford term loan, which were offset by an increase of $1.8 million loss from extinguishment of term loan due to the repayment of the Oxford debt.
Comprehensive Loss All components of comprehensive loss, including net loss, are reported in the consolidated financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on short-term investments and foreign currency translation adjustments.
Loss on extinguishment of term loan Loss on extinguishment of term loan consist of the loss from extinguishment of term loan due to repayment of the Oxford debt. Comprehensive Loss All components of comprehensive loss, including net loss, are reported in the consolidated financial statements in the period in which they are recognized.
As of the date of this Annual Report on Form 10-K, a total of 1,355,216 shares of common stock, for total net proceeds of $17.1 million, have been issued and sold through the ATM offering, of which 879,341 shares of common stock, for net proceeds of $11.1 million, were sold in January 2023.
As of the date of this report, a total of 2,617,964 shares of our common stock, for total gross proceeds of $50.0 million (net proceeds of $47.5 million), representing the full authorized amount under the ATM Facility, have been issued and sold.
Revenue for such service agreements will be recognized over the term of each contract. 89 For the year ended December 31, 2022 and 2021, contract liabilities from service agreements with customers consisted of the following: Year Ended December 31, 2022 2021 Balance at beginning of period $ 540 $ 345 Additions during the period 2,052 793 Revenue recognized during the period (1,405 ) (598 ) Balance at end of period $ 1,187 $ 540 For the year ended December 31, 2022 and 2021 we had no customers who individually accounted for more than 10% of revenue.
For the year ended December 31, 2023 and 2022, revenue from contracts with customers consisted of the following (in thousands): Year Ended December 31, 2023 2022 LDD (including training) $ 32,091 $ 22,515 LAL 54,092 24,965 Service warranty, service contracts, and accessories 2,894 1,525 $ 89,077 $ 49,005 For the year ended December 31, 2023 and 2022 we had no customers who individually accounted for more than 10% of revenue.
Net cash from financing activities for the year ended December 31, 2021 was $137.3 million, consisting primarily of net proceeds from the IPO of $119.6 million, a draw on the Company’s term loan of $15.0 million and proceeds from stock options exercised of $1.6 million.
Cash provided by financing activities Net cash provided by financing activities for the year ended December 31, 2023 was $61.5 million, consisting primarily of proceeds from issuances of common stock from our public offering of $54.1 million, proceeds from issuance of common stock for at-the-market offerings of $42.4 million and proceeds from issuance of common stock of $9.5 million partially offset by a net paydown of the June 2023 LSA of $40.0 million.
Gross margin increased to 43.5% in the year ended December 31, 2022 from 20.0% in 2021 due to the increased revenue from higher margin LALs from 34% of sales in 2021 to 56% of sales in 2022 and by the recording of a $2.4 million reserve primarily for excess LAL inventory as a result of the introduction of an updated LAL with ActivShield technology for the year ended December 31, 2021.
Gross margin increased to 60.4% in the year ended December 31, 2023 from 43.5% in 2022 primarily due to improved operating leverage, favorable product mix from a greater percentage of revenue from LAL sales and increased margins on our LDD due to lower material costs from the introduction of our compact LDD during the third quarter of 2023.
See Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K for additional risks associated with our substantial capital requirements and Note 12 - Leases and Note 15 - Subsequent Events in the Notes to Consolidated Financial Statements included in Part II - Item 8 in this Annual Report on Form 10-K for additional information.
If we raise additional funds by issuing equity securities, our stockholders may experience dilution. See Part I, Item 1A (Risk Factors) of this report for additional risks associated with our substantial capital requirements.
Removed
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
Added
Our fourth quarter of 2023 was consistent with the typical seasonality patterns for cataract surgery volumes, which tend to be stronger in the fourth quarter. 2023 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 LDDs Sold 56 67 66 77 40 49 49 57 Installed Base at End of Period 456 523 589 666 246 294 * 343 400 * Reduced by one LDD taken out of installed base in Q2 2022.
Removed
Because of these and other factors, we expect to continue to incur net losses and negative cash flows from operations in the future.
Added
Revenue for such service agreements will be recognized over the term of each contract.
Removed
We believe that our existing cash and cash equivalents and short-term investments, will enable us to fund our operating expenses and capital expenditure and meet our term loan covenant requirements for at least the next 12 months from the date of filing of this Annual Report on Form 10-K.
Added
The shelf registration statement was intended to provide us with flexibility to access additional capital when market conditions are appropriate.
Removed
Although we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations, as the same may be disclosed in the Company’s future Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q filed with the SEC, we may be required to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities or by entering into partnerships or a combination of one or more of these funding sources in order to meet our liquidity requirements.
Added
Refinancing and Payoff of Oxford Debt On October 29, 2020, we and Oxford Finance LLC (“Oxford”), as collateral agent, and certain lenders (“Lenders”) entered into that certain Loan and Security Agreement, as amended by that certain Consent and First Amendment to Loan and Security Agreement, dated as of July 6, 2021, and that certain Second Amendment to Loan and Security Agreement, dated as of May 3, 2022 (the “May 2022 LSA”), pursuant to which the Lenders provided to us certain loans in accordance with the terms and conditions of the May 2022 LSA (such loans collectively, the “May 2022 Term Loan”).
Removed
We may also opportunistically access our at-the-market (“ATM”) facility under advantageous circumstances. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Supply chain constraints, inflation and COVID-19 pandemic We rely on third parties, including single and sole source suppliers, to manufacture certain components and subcomponents of our products.
Added
On June 30, 2023, we entered into a new Loan and Security Agreement (the “June 2023 LSA”) with Oxford as collateral agent and the lenders party thereto, pursuant to which we borrowed $20.0 million in aggregate Term A Loans (the “Term A Loans”).
Removed
On January 31, 2023, the FDA approved our premarket approval supplement to our lower cost LDD for various modifications that are intended to reduce the cost to manufacture the device.
Added
On that same date, we prepaid the May 2022 Term Loan in full which included approximately $1.2 million in final payment and other fees using a combination of cash, primarily comprised of $19.4 million of net cash raised under the ATM Facility during the quarter ended June 30, 2023, $20.0 million in Term A 90 Loans and $1.7 million in cash reserves.
Removed
However, we have deferred the introduction of our lower cost-to-manufacture LDD to the market until the second half of 2023, as it is less difficult to procure components and subcomponents for our existing LDD than the lower cost-to-manufacture LDD. Currently, we are procuring materials for both LDD's, which have the same functionality.
Added
On August 4, 2023, we prepaid the Term A Loans in full, including accrued interest and fees, using $11.9 million of cash, net, raised under the ATM Facility and $9.3 million in cash reserves. The paydown in full of our debt is expected to reduce anticipated interest expense in 2024 by approximately $2.3 million.
Removed
Management’s expectation is that our gross margin will be impacted by the decision to continue to produce both LDD's, which it is necessary to mitigate potential supply chain issues.
Added
If we determine that we need to raise additional funds, we may do so through equity or debt financings, which may not be available to us when needed or on terms that we deem to be favorable.
Removed
Change in fair value of warrants Change in fair value of warrants consists of gains and losses resulting from the remeasurement of the fair value of our preferred stock warrant liabilities at each balance sheet date.
Added
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders.
Removed
We continued to record adjustments to the estimated fair value of the preferred stock warrants until the conversion of the underlying convertible preferred stock into common stock which occurred immediately prior to the completion of our IPO in July 2021.
Added
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

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