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What changed in NeuroPace Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NeuroPace Inc's 2023 and 2024 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 2024 report.

+482 added−570 removedSource: 10-K (2025-03-04) vs 10-K (2024-03-05)

Top changes in NeuroPace Inc's 2024 10-K

482 paragraphs added · 570 removed · 398 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

145 edited+30 added−129 removed271 unchanged
Biggest changeIn addition, we plan to increase awareness of our RNS System amongst clinicians who treat epilepsy patients early in their care, including general neurologists and epileptologists who practice outside of Level 4 CECs, through targeted education and outreach designed to not only drive care in the community, but also to drive patient referrals to Level 4 CECs. ◦ Improved visibility into patient pipeline : In August 2022, we entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical USA Corp., or DIXI Medical, pursuant to which we became the exclusive U.S. distributor of DIXI Medical’s product line beginning in October 2022.
Biggest changeCollaborations and Partnerships DIXI Medical Distribution Agreement In August 2022, we entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical, pursuant to which we became the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography, or Stereo EEG, product line beginning in October 2022.
Resective or ablative surgery that removes or destroys the brain tissue at the source of the seizure onset has historically been considered the best treatment option for drug-resistant focal epilepsy. However, resective or ablative surgery carries risk, including neurological risk, and only approximately half of resective or ablative surgery patients are seizure free two years after surgery.
Resective or ablative surgery that removes or destroys brain tissue at the source of the seizure onset has historically been considered the best treatment option for drug-resistant focal epilepsy. However, resective or ablative surgery carries risk, including neurological risk, and only approximately half of resective or ablative surgery patients are seizure free two years after surgery.
The ILAE guidelines state that DRE patients who may not appear to be appropriate candidates for resective or ablative epilepsy surgery should still be referred to a tertiary epilepsy center to evaluate potential other interventions.
The ILAE guidelines state that DRE patients who may not appear to be appropriate candidates for resective or ablative epilepsy surgery should still be referred to a tertiary epilepsy center to evaluate other potential interventions.
RNS System Overview Our RNS System includes our RNS neurostimulator, our cortical strip leads and depth leads, our Patient Remote Monitor, as well as other implantable and non-implantable accessories.
Overview Our RNS System includes our RNS neurostimulator, our cortical strip leads and depth leads, and our Patient Remote Monitor, as well as other implantable and non-implantable accessories.
By contrast, data from a published series of 707 patients across our clinical studies and post-market experience indicated that our RNS System was associated with a lower rate of dying from SUDEP of 2.0 per 1,000 patient years relative to other treatment-resistant epilepsy groups.
By contrast, data from a published series of 707 patients across our clinical studies and post-market experience indicated that our RNS System was associated with a lower rate of dying from SUDEP, 2.0 per 1,000 patient years, relative to other treatment-resistant epilepsy groups.
Long-Term Treatment Study The LTT study was a seven-year prospective, open-label study that followed patients originally treated in either the Feasibility or Pivotal Study. In total, this provided approximately nine years of prospective data on the safety and efficacy of our RNS System.
Long-Term Treatment (LTT) Study The LTT study was a seven-year prospective, open-label study that followed patients originally treated in either the Feasibility or Pivotal Study. In total, this provided approximately nine years of prospective data on the safety and efficacy of our RNS System.
Our failure, or the failure of our suppliers, to maintain acceptable quality requirements could result in substantial fines, the shutdown of our manufacturing operations or the recall of our components of our RNS System, which would harm our business.
Our failure, or the failure of our suppliers, to maintain acceptable quality requirements could result in substantial fines, the shutdown of our manufacturing operations or the recall of components of our RNS System, which would harm our business.
These include: • Annual Reports: As is required for our RNS System, continued FDA approval may be contingent upon the submission of periodic reports, required under 21 CFR 814.84, at intervals of one year (unless otherwise specified) from the date of approval of the original PMA; • Post-Approval Study Report: As is required for our RNS System, continued FDA approval may also be contingent upon the submission of Post-Approval Study data, as requested by the FDA; • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers and contract manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of investigational products, or “off-label” uses of cleared or approved products; • requirements related to promotional activities; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; 37 • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • Annual Reports: As is required for our RNS System, continued FDA approval may be contingent upon the submission of periodic reports, required under 21 CFR 814.84, at intervals of one year (unless otherwise specified) from the date of approval of the original PMA; • Post-Approval Study Report: As is required for our RNS System, continued FDA approval may also be contingent upon the submission of Post-Approval Study data, as requested by the FDA; • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers and contract manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of investigational products, or “off-label” uses of cleared or approved products; • requirements related to promotional activities; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; 30 • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
While we are presently focused on this significant market opportunity, we have investigational device exemption, or IDE, approval for clinical trials to evaluate use of the RNS System to treat drug-resistant idiopathic generalized epilepsy and patients between ages 12 and 17 and we may later seek regulatory approval in markets outside the United States.
While we are presently focused on this significant market opportunity, we have investigational device exemption, or IDE, approval for clinical trials to evaluate use of the RNS System to treat drug-resistant idiopathic generalized epilepsy, or IGE, and patients between ages 12 and 17 and we may later seek regulatory approval in markets outside the United States.
As employees of NeuroPace, we each uphold the following core values that drive our culture and define the way we do business: • Innovation: We develop world class technology • Integrity: We do what’s right • Leadership: We are becoming the standard of care 44 • Patient Focus: We transform lives • Science: We enable fundamental discoveries It is our philosophy to foster open communication.
As employees of NeuroPace, we each uphold the following core values that drive our culture and define the way we do business: • Innovation: We develop world class technology • Integrity: We do what’s right • Leadership: We are becoming the standard of care • Patient Focus: We transform lives • Science: We enable fundamental discoveries It is our philosophy to foster open communication.
We believe our brain-responsive RNS System is a platform that can drive a better standard of care for patients living with drug-resistant epilepsy, and can also offer a more personalized solution and improved outcomes to the large population of patients living with other brain disorders. Our research and development activities encompass basic research, clinical research and product development.
We believe our brain-responsive RNS System is a platform that can drive a better standard of care for patients living with drug-resistant epilepsy and can also offer a more personalized solution and improved outcomes to the large population of patients living with other brain disorders. 20 Our research and development activities encompass basic research, clinical research and product development.
Our Solution Our RNS System, which is a compilation of several of our products, is a paradigm-shifting approach to treating epilepsy that combines the power of continuous iEEG monitoring with responsive neuromodulation. With our RNS System, we offer a personalized treatment option that delivers a safe and effective therapy for focal onset seizures originating anywhere in the brain.
Our RNS System Our RNS System, which is a compilation of several of our products, is a paradigm-shifting approach to treating epilepsy that combines the power of continuous iEEG monitoring with responsive neuromodulation. With our RNS System, we offer a personalized treatment option that delivers a safe and effective therapy for focal onset seizures originating anywhere in the brain.
The Affordable Care Act also provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
The Affordable Care Act also provided incentives to programs that increase the federal government’s comparative effectiveness research, and it implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • unanticipated expenditures to address or defend such actions; • customer notifications for repair, replacement, refunds; • recall, detention or seizure of our RNS System or any future products; • operating restrictions or partial suspension or total shutdown of production; • refusal of or delay in granting our requests for 510(k) clearance or PMA approval of new products or modified products; • operating restrictions; 38 • withdrawing 510(k) clearance or PMA approvals that are already granted; • refusal to grant export approval for our RNS System or any future products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • unanticipated expenditures to address or defend such actions; • customer notifications for repair, replacement, refunds; • recall, detention or seizure of our RNS System or any future products; • operating restrictions or partial suspension or total shutdown of production; • refusal of or delay in granting our requests for 510(k) clearance or PMA approval of new products or modified products; • operating restrictions; 31 • withdrawing 510(k) clearance or PMA approvals that are already granted; • refusal to grant export approval for our RNS System or any future products; or • criminal prosecution.
The key efficacy and safety benefits of our RNS System are demonstrated by four multi-center FDA approved prospective clinical studies that collectively include approximately 600 patients with up to nine years of follow-up, 8 as well as multiple retrospective studies reporting real-world outcomes.
The key efficacy and safety benefits of our RNS System are demonstrated by four multi-center FDA approved prospective clinical studies that collectively include approximately 600 patients with up to nine years of follow-up, as well as multiple retrospective studies reporting real-world outcomes.
Patent Strategy Our patent strategy is to seek patent protection for our inventions and to preserve our options to file additional applications pursuing claims covering specific commercial embodiments of the inventions, assuming these are strategically valuable. We also file patent applications covering innovations and developments to prevent third parties from developing competing products.
Patent Strategy Our patent strategy is to seek patent protection for our inventions and to preserve our options to file additional, continuation applications pursuing claims covering specific commercial embodiments of the inventions, assuming these are strategically valuable. We also file patent applications covering innovations and developments to prevent third parties from developing competing products.
Research and Development We focus our research and development efforts on advancing the treatment of patients living with disabling neurological disorders. These efforts are enhanced by the strong relationships that we have developed with 27 epileptologists and neurosurgeons, as well as other neuroscientists and experts, through our clinical and commercial activities.
Research and Development We focus our research and development efforts on advancing the treatment of patients living with disabling neurological disorders. These efforts are enhanced by the strong relationships that we have developed with epileptologists and neurosurgeons, as well as other neuroscientists and experts, through our clinical and commercial activities.
Our RNS System has an estimated average battery life of nearly 11 years, an increase from the previous model of the device. The sale of replacement neuromodulation devices provides a recurring revenue stream that is additive to the annual market opportunity for initial implants.
Our RNS System has an estimated average battery life of nearly 11 years, an increase from the previous model of the device. The sale of replacement neuromodulation devices provides a recurring revenue stream that is additive to the market opportunity for initial implants.
There was no difference in stimulation-related side effects between active and sham patients in the blinded period and no adverse effects of responsive stimulation on cognitive function or mood. In fact, there were statistically significant improvements in a number of areas of cognitive function, including executive function, language, and memory.
There was no difference in stimulation-related side effects between active and sham patients in the blinded period and no adverse effects of responsive stimulation on cognitive function or mood. In fact, there were statistically significant improvements in a number of areas of cognitive function, including 16 executive function, language, and memory.
During the follow-up visit, the epileptologist will make programming adjustments to the device’s detection parameters in order to optimize for early detection. Once the patient-specific detection parameters are established, the epileptologist will turn on the stimulation feature, activating the closed-loop treatment of our RNS System.
During the follow-up visit, the epileptologist will make 12 programming adjustments to the device’s detection parameters in order to optimize for early detection. Once the patient-specific detection parameters are established, the epileptologist will turn on the stimulation feature, activating the closed-loop treatment of our RNS System.
As part of the initial implant procedure, the number and configuration of leads implanted as well as the implantable and non-implantable accessories used in the procedure are determined by the clinicians depending on individual patient need and clinician preference and a Patient Remote Monitor is typically included.
As part of the initial implant procedure, the number and configuration of leads implanted as well as the implantable and non-implantable accessories used in the procedure are determined by the clinician depending on individual patient need and clinician preference and a Patient Remote Monitor is typically included.
In addition to data breach notification laws, some states have 43 enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
Clinical Data The safety, effectiveness. and clinical benefits of our RNS System are supported by data from four multi-center, FDA approved prospective clinical studies representing nearly 600 patients and multiple retrospective studies reporting real-world outcomes.
Clinical Data Supporting Our RNS System The safety, effectiveness. and clinical benefits of our RNS System are supported by data from four multi-center, FDA approved prospective clinical studies representing nearly 600 patients and multiple retrospective studies reporting real-world outcomes.
We believe that we are able to continue to learn and innovate by leveraging this database and our data analytics capabilities, thereby improving and enhancing our products and creating actionable insights for clinicians that improve clinical outcomes for patients.
We believe that we are able to continue to learn and innovate by leveraging this database and our monitoring and data analytics capabilities, thereby improving and enhancing our products and creating actionable insights for clinicians that improve clinical outcomes for patients.
Our Therapy Consultants are highly skilled and technically trained with substantial experience launching new disruptive therapies, particularly in neuromodulation, and establishing them as a standard of care by increasing clinician adoption and utilization.
Our Therapy Consultants are highly skilled and technically trained with substantial experience launching new disruptive therapies, particularly in neuromodulation, and establishing them as a standard of care by increasing clinician 19 adoption and utilization.
Our breach of any license agreements or failure to obtain a license necessary to our business may have a material adverse impact on us. 31 On July 27, 2005, we entered into a cross-license agreement, or the Cross-License, with Medtronic, Inc., or Medtronic, directed to patent families in a field of use that is generally aligned with our business interests, including direct electrical stimulation or monitoring of the brain via electrodes attached to or implanted in the head for the treatment or diagnosis of epilepsy and other disorders, or the Field.
Our breach of any license agreements or failure to obtain a license necessary to our business may have a material adverse impact on us. 24 On July 27, 2005, we entered into a cross-license agreement, or the Cross-License, with Medtronic, Inc., or Medtronic, directed to patent families in a field of use that is generally aligned with our business interests, including direct electrical stimulation or monitoring of the brain via electrodes attached to or implanted in the head for the treatment or diagnosis of epilepsy and other disorders, or the Field.
Memory improvements were most evident in patients with seizure onsets 24 in memory regions and verbal fluency improvements were most significant in those with seizure onsets in language areas. Patients also experienced modest improvements in mood and a decrease in seizure worry at two years of treatment.
Memory improvements were most evident in patients with seizure onsets in memory regions and verbal fluency improvements were most significant in those with seizure onsets in language areas. Patients also experienced modest improvements in mood and a decrease in seizure worry at two years of treatment.
We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed by the Biden administration or what the impact of such changes on our business, if any, may be.
We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed by the current administration or what the impact of such changes on our business, if any, may be.
Class I devices include those with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to the FDA’s “general controls” for medical devices, which include compliance with the applicable portions of the QSR, facility registration and product listing, reporting of adverse 33 medical events and malfunctions through the submission of Medical Device Reports, or MDRs, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials.
Class I devices include those with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to the FDA’s “general controls” for medical devices, which include compliance with the applicable portions of the QSR, facility registration and product listing, reporting of adverse 26 medical events and malfunctions through the submission of Medical Device Reports, or MDRs, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Similar to the federal Anti- 32 Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
As indicated in the figure below, the median percent reduction in seizure frequency improved from 44% after one year to 75% at nine years. We believe the substantial improvement in seizure reduction that was observed over time 25 is due, in part, to the brain-responsive nature of our RNS System and the personalized, data-driven, and iterative therapy that it enables.
As indicated in the figure below, the median percent reduction in seizure frequency improved from 44% after one year to 75% at nine years. We believe the substantial improvement in seizure reduction that was observed over time 17 is due, in part, to the brain-responsive nature of our RNS System and the personalized, data-driven, and iterative therapy that it enables.
While these MS-DRG and CPT codes are generally employed by both private insurers and government payors, the payment rates typically differ substantially, with private insurers generally providing reimbursement at higher rates than Medicare or Medicaid. 28 Hospitals code for implantation of our RNS System neurostimulator and implantation of the leads using separate ICD-10 procedure codes.
While these MS-DRG and CPT codes are generally employed by both private insurers and government payors, the payment rates typically differ substantially, with private insurers generally providing reimbursement at higher rates than Medicare or Medicaid. 21 Hospitals code for implantation of our RNS System neurostimulator and implantation of the leads using separate ICD-10 procedure codes.
We currently do not believe we will need to modify our RNS System for potential use in patients under the age of 18 or in generalized epilepsy; however, we will need to complete our clinical studies and obtain FDA approval prior to marketing the RNS Systems for these indications. • Continue building and using our unique data asset and our monitoring and analysis capabilities.
We do not believe we will need to modify our RNS System for potential use in patients under the age of 18 or in generalized epilepsy; however, we will need to complete our clinical studies and obtain FDA approval prior to marketing the RNS System for these indications. • Continue building and using our unique data asset and our monitoring and analysis capabilities.
As of December 31, 2023, commercial insurance companies that address over 200 million covered lives in the United States have positive written coverage policies for responsive neuromodulation for drug-resistant focal epilepsy, which includes our RNS System. Medicare and Medicaid also routinely provide coverage for implantation of our RNS System and follow-up care.
As of December 31, 2024, commercial insurance companies that address over 200 million covered lives in the United States have positive written coverage policies for responsive neuromodulation for drug-resistant focal epilepsy, which includes our RNS System. Medicare and Medicaid also routinely provide coverage for implantation of our RNS System and follow-up care.
We also believe that our RNS System may be effective in treating other brain disorders including depression, impulse control disorders, memory disorders, and post-traumatic stress disorder. We will need to conduct additional studies to determine if any modifications to the RNS System are necessary to address these other brain disorders and to obtain FDA approval for any new indications.
We also believe that our RNS System may be effective in treating other brain disorders including depression, memory disorders, and post-traumatic stress disorder. We will need to conduct additional studies to determine if any modifications to the RNS System are necessary to address these other brain disorders and to obtain FDA approval for any new indications.
In addition, we believe our RNS System is superior in tolerability and efficacy to other neuromodulation approaches. We anticipate that the accruing evidence 22 base from our ongoing Post-Approval Study and commercial experience with our RNS System will continue to demonstrate strong and improving clinical outcomes over time, which will support continued adoption.
In addition, we believe our RNS System is 14 superior in tolerability and efficacy to other neuromodulation approaches. We anticipate that the accruing evidence base from our ongoing Post-Approval Study and commercial experience with our RNS System will continue to demonstrate strong and improving clinical outcomes over time, which will support continued adoption.
Available to individuals age 65 or over, and certain other individuals, the Medicare program provides, among other things, healthcare benefits that cover, within prescribed limits, the major costs of most medically necessary care for such individuals, subject to certain deductibles and copayments. CMS has established guidelines for the coverage and reimbursement of certain products and procedures by Medicare.
Available to individuals aged 65 or over, and certain other individuals, the Medicare program provides, among other things, healthcare benefits that cover, within prescribed limits, the major costs of most medically necessary care for such individuals, subject to certain deductibles and copayments. CMS has established guidelines for the coverage and reimbursement of certain products and procedures by Medicare.
We believe that most DBS procedures for epilepsy map into MS-DRG 024 and we expect the Medicare average payment rate at these accounts will be approximately $37,400. We believe that VNS implantation procedures take place in a single outpatient procedure and map to Ambulatory Payment Classification, or APC, 5465.
We believe that most DBS procedures for epilepsy map into MS-DRG 024 and we expect the Medicare average payment rate at these accounts will be approximately $38,400. We believe that VNS implantation procedures take place in a single outpatient procedure and map to Ambulatory Payment Classification, or APC, 5465.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic 34 reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic 27 reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
We make available on our website at www.neuropace.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. All SEC filings are also available at the SEC’s website at www.sec.gov. 46
We make available on our website at www.neuropace.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. All SEC filings are also available at the SEC’s website at www.sec.gov. 38
Our near-term product development pipeline includes enhanced offerings that leverage our extensive brain activity database and our advanced data analysis, machine learning and artificial intelligence capabilities. We are also pursuing studies to support label expansion for our RNS System in additional epilepsy populations.
Our near-term product development pipeline includes enhanced offerings that leverage our extensive brain activity database and our advanced data analysis, machine learning and artificial intelligence, or AI, capabilities. We are also pursuing studies to support label expansion for our RNS System in additional epilepsy populations.
Given the relatively young average age of our patient population, our payor mix has historically been more heavily weighted towards commercial payors. As of December 31, 2023, commercial payors have written positive coverage policies that address over 200 million covered lives in the United States.
Given the relatively young average age of our patient population, our payor mix has historically been more heavily weighted towards commercial payors. As of December 31, 2024, commercial payors have written positive coverage policies that address over 200 million covered lives in the United States.
Data from the two-year Feasibility Study supported IDE approval for our two-year Pivotal Study, a double blinded, randomized, sham-stimulation controlled multi-center study that was initiated in 2005 and provided Class I 23 evidence of the safety and effectiveness of our RNS System. Data from the Pivotal Study supported FDA PMA approval of our RNS System.
Data from the two-year Feasibility Study supported IDE approval for our two-year 15 Pivotal Study, a double blinded, randomized, sham-stimulation controlled multi-center study that was initiated in 2005 and provided Class I evidence of the safety and effectiveness of our RNS System. Data from the Pivotal Study supported FDA PMA approval of our RNS System.
For more information regarding the risks related to our intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.” Manufacturing and Supply We currently manufacture our RNS System at and distribute all of the components of our RNS System from our approximately 53,000 square foot facility in Mountain View, California.
For more information regarding the risks related to our intellectual property, please see “Risk Factors—Risks related to our intellectual property.” Manufacturing and Supply We currently manufacture our RNS System at and distribute all of our products from our approximately 53,000 square foot facility in Mountain View, California.
These competitors are larger, well-capitalized companies with significant resources, which may include: • established sales and marketing programs and networks, including internationally; • broad product portfolios; 29 • long operating histories; • established relationships with healthcare professionals; • established manufacturing scale and supplier networks; • financial resources for product development; and • name recognition.
These competitors are larger, well-capitalized companies with significant resources, which may include: • established sales and marketing programs and networks, including internationally; • broad product portfolios; 22 • long operating histories; • established relationships with healthcare professionals; • established manufacturing scale and supplier networks; • financial resources for product development; and • name recognition.
When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs. In addition, various states have enacted false claim laws analogous to the federal False Claims Act.
When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines, award treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs. In addition, various states have enacted false claim laws analogous to the federal False Claims Act.
We currently do not believe we will need to modify our RNS System for potential use in generalized epilepsy or in patients under the age of 18; however, we will need to complete clinical studies and obtain FDA approval prior to marketing the RNS Systems for these indications.
We do not believe we will need to modify our RNS System for potential use in generalized epilepsy or in patients under the age of 18; however, we will need to complete clinical studies and obtain FDA approval prior to marketing the RNS System for these indications.
As of December 31, 2023, we own 26 trademark registrations, four of which are U.S. trademark registrations and the rest in various other countries or regions. We own trademark registrations for “NeuroPace,” the “NeuroPace” logo, and “RNS” in the United States and various other countries, and “WINDOW TO THE BRAIN” in the U.S.
As of December 31, 2024, we own 26 trademark registrations, four of which are U.S. trademark registrations and the rest in various other countries or regions. We own trademark registrations for “NeuroPace,” the “NeuroPace” logo, and “RNS” in the United States and various other countries, and “WINDOW TO THE BRAIN” in the U.S.
We moved to our current Mountain View, California facility in March 2012. 32 The FDA conducted a PMA pre-approval inspection of our manufacturing facility in Mountain View, California prior to our PMA approval, as well as an establishment inspection in September 2014 which resulted in no 483 observations.
We moved to our current Mountain View, California facility in March 2012. 25 The FDA conducted a PMA pre-approval inspection of our manufacturing facility in Mountain View, California prior to our PMA approval, as well as an establishment inspection in September 2014 which resulted in no 483 observations.
Acceptance of an IDE application for review does not guarantee that the FDA will approve the IDE and, if it is 36 approved, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials.
Acceptance of an IDE application for review does not guarantee that the FDA will approve the IDE and, if it is 29 approved, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials.
Our robust and growing body of clinical evidence, which includes nine-year follow-up with over 3,200 years of patient data, provides the largest and longest published prospective clinical data set in the field of neuromodulation devices for epilepsy.
Our robust and growing body of clinical evidence, which includes nine-year follow-up with over 3,400 years of patient data, provides the largest and longest published prospective clinical data set in the field of neuromodulation devices for epilepsy.
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) 35 marketing clearance or, depending on the modification, PMA approval.
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) 28 marketing clearance or, depending on the modification, PMA approval.
It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
It is unclear how any such challenges and the healthcare reform measures of the current administration will impact the Affordable Care Act. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
Health and Wellness We offer a comprehensive benefits package including: 401(k) plan, medical, dental, and vision insurance, life and long-term disability insurance, health care and child care spending accounts, Section 529 college savings plan, three weeks paid vacation for most employees at start, 12 paid holidays, and PTO for sick time and family emergencies.
Health and Wellness We offer a comprehensive benefits package including: 401(k) plan, medical, dental, and vision insurance, life and long-term disability insurance, health care and childcare spending accounts, Section 529 college savings plan, three weeks paid vacation for most employees at start, 12 paid holidays, and PTO for sick time and family 37 emergencies.
Our near-term development pipeline includes enhancements that leverage our extensive database of iEEG data and our advanced data analysis, machine learning and artificial intelligence capabilities, which provide clinicians with additional information that they can use to enhance their clinical assessment and establish appropriate program settings for each patient.
Our near-term development pipeline includes enhancements that leverage our extensive database of iEEG data and our advanced data analysis, machine learning and AI capabilities, which provide clinicians with additional information that they can use to enhance their clinical assessment and establish appropriate program settings for each patient.
The patients from the Pivotal Study, all of whom received implants prior to 2010, were followed in a LTT in which outcomes reached a 75% median reduction in seizure frequency at nine years. 28% of these patients, who had previously experienced disabling seizures for an average of 20 years, had at least 6 months of seizure freedom and approximately 20% achieved one year or more of seizure freedom.
The patients from the Pivotal Study, all of whom received implants prior to 2010, were followed in a Long-term Treatment Trial, or LTT, in which outcomes reached a 75% median reduction in seizure frequency at nine years. 28% of these patients, who had previously experienced disabling seizures for an average of 20 years, had at least 6 months of seizure freedom and approximately 20% achieved one year or more of seizure freedom.
The Health Insurance Portability and Accountability Act, or HIPAA, also created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The Health Insurance Portability and Accountability Act, or HIPAA (18 U.S.C. § 1347), also created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
We believe physician services for the VNS implantation procedure are reimbursed under CPT code 64568 which is associated with a 2024 Medicare national average payment rate of approximately $595. After implantation of our RNS System, the patient’s ongoing care, including device programming and data review, is typically managed by an epileptologist or other qualified clinician.
We believe physician services for the VNS implantation procedure are reimbursed under CPT code 64568 which is associated with a 2025 Medicare national average payment rate of approximately $590. After implantation of our RNS System, the patient’s ongoing care, including device programming and data review, is typically managed by an epileptologist or other qualified clinician.
We were accepted into the FDA Voluntary Improvement Program in 2018 and we are in our sixth year of participation in the program. The FDA Voluntary Improvement Program is part of the FDA’s Case for Quality Program.
We were accepted into the FDA Voluntary Improvement Program in 2018, and we are in our seventh year of participation in the program. The FDA Voluntary Improvement Program is part of the FDA’s Case for Quality Program.
Our patents have claims that cover our current RNS System or related products, such as the system itself and methods of using it, as well as the brain leads, lead connector, neurostimulator tray or ferrule, and elements used in the manufacture of the same.
Our patents have claims that cover our current RNS System or related products, such as the system itself and methods of using it, including detection and stimulation methods, as well as the brain leads, lead connector, neurostimulator tray or ferrule, and elements used in the manufacture of the same.
Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. We continue to evaluate the full impact that the Affordable Care Act will have on our business. The Biden Administration and the U.S.
Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. We continue to evaluate the full impact that the Affordable Care Act will have on our business.
Quality of life, cognition, and mood improvement. Reduced quality of life and cognitive function, as well as mental health-related comorbidities, are a significant burden for many patients with drug-resistant focal epilepsy. Improvements in these areas are critically important clinical outcomes for patients.
Reduced quality of life and cognitive function, as well as mental health-related comorbidities, are a significant burden for many patients with drug-resistant focal epilepsy. Improvements in these areas are critically important clinical outcomes for patients.
We believe our unique data, as well as our data analysis, machine learning, and artificial intelligence capabilities, provide a window into the brain and may be useful to other third parties doing work in or treating patients with epilepsy.
We believe our unique data, as well as our data analysis, machine learning, and AI capabilities, provide a window into the brain and may be useful to other third parties doing work in or treating patients with epilepsy.
We believe our versatile, closed-loop, brain-responsive neuromodulation platform has potential applications in other brain disorders including depression, impulse control disorders, memory disorders, and post-traumatic stress disorder. For each of these four conditions, we are collaborating with academic investigators in early IDE feasibility studies using our RNS System in patients.
We believe our versatile, closed-loop, brain-responsive neuromodulation platform has potential applications in other brain disorders including depression, memory disorders, and post-traumatic stress disorder. For each of these conditions, we are collaborating with 10 academic investigators in early IDE feasibility studies using our RNS System in patients.
We market and sell our RNS System in the United States through a direct sales organization that consists of sales representatives, known as Therapy Consultants, and clinical and programming support specialists, known as Field Clinical Engineers.
We market and sell our RNS System in the United States through a direct sales organization that consists of sales representatives, known as Therapy Consultants, and clinical and programming support specialists, known as Field Clinical Engineers. Substantially all of our sales of the RNS System are in the United States.
Accordingly, physician reimbursement for device programming and ECoG review during a typical RNS System follow-up visit could range from $150 to $192. We believe physicians submit claims for VNS device programming using code 95976 or 95977, depending on the number of device parameters changed.
Accordingly, physician reimbursement for device programming and ECoG review during a typical RNS System follow-up visit could range from $148 to $189. We believe physicians submit claims for VNS device programming using code 95976 or 95977, depending on the number of device parameters changed.
Based on Medicare national average payment rates, payment under these codes is expected to range from $38 to $51. Competition Our industry is competitive and has been evolving rapidly with the introduction of new products and technologies as well as the market activities of industry participants.
Based on Medicare national average payment rates, payment under these codes is expected to range from $36 to $48. Competition Our industry is competitive and has been evolving rapidly with the introduction of new products and technologies as well as the market activities of industry participants.
We are focused on developing high quality products that address critical patient needs and maintaining a work environment where employees are respected and encouraged to excel. As of December 31, 2023, we had 171 employees, all of which are based in the United States.
We are focused on developing high quality products that address critical patient needs and maintaining a work environment where employees are respected and encouraged to excel. As of December 31, 2024, we had 184 employees, all of which are based in the United States.
By focusing on individual performance, as well as teamwork and collaboration, we believe that we foster an environment that helps employees excel as individuals and as team members. Seventy-seven employees, or 45% of our workforce, have been at NeuroPace for at least five years.
By focusing on individual performance, as well as teamwork and collaboration, we believe that we foster an environment that helps employees excel as individuals and as team members. Eighty-three employees, or 45% of our workforce, have been at NeuroPace for at least five years.
We believe the therapeutic advantages of our RNS System, combined with the insights obtained from our extensive brain data set, offer a significant leap forward in epilepsy treatment. As of December 31, 2023, over 5,000 patients have received our RNS System.
We believe the therapeutic advantages of our RNS System, combined with the insights obtained from our extensive brain data set, offer a significant leap forward in epilepsy treatment. As of December 31, 2024, over 6,000 patients have received our RNS System.
Supported by a growing body of evidence published in peer-reviewed journals, we believe that our current RNS System may be able to effectively treat these expanded patient populations without significant modifications to our existing product and we are pursuing clinical studies to support label expansion for these indications.
Supported by a growing body of evidence published in peer-reviewed journals, we believe that our current RNS System may be able to effectively treat these expanded patient populations, and we are pursuing clinical studies to support label expansion for these indications.
The collaboration evaluates biomarker changes in currently implanted RNS System patients that have enrolled in Rapport’s clinical trial of its product candidate. Pursuant to this agreement, we will provide information to Rapport that will help evaluate the impact of their product candidate on certain biomarkers of patients with focal onset seizures.
The collaboration evaluates biomarker changes in currently implanted RNS System patients that enroll in Rapport’s Phase 2a clinical trial of its product candidate. Pursuant to this agreement, we provide information to Rapport that will help evaluate the impact of their product candidate on certain biomarkers of patients with focal onset seizures.
Our first prospective clinical trial, the Feasibility Study, was initiated to assess the safety and performance of our RNS System and to provide preliminary evidence of effectiveness for patients living with drug-resistant focal epilepsy.
Our first prospective clinical trial, which we refer to as the Feasibility Study, was initiated to assess the safety and performance of our RNS System and to provide preliminary evidence of effectiveness for patients living with drug-resistant focal epilepsy.
When combined with an ICD-10 diagnosis code for epilepsy, the codes map into MS-DRG 023 for payment to the hospital. In federal fiscal year 2024, which runs from October 2023 through September 2024, we expect the Medicare average payment rate for MS-DRG 023 at our customer accounts to be approximately $55,300.
When combined with an ICD-10 diagnosis code for epilepsy, the codes map into MS-DRG 023 for payment to the hospital. In federal fiscal year 2025, which runs from October 2024 through September 2025, we expect the Medicare average payment rate for MS-DRG 023 at our customer accounts to be approximately $56,900.
In addition, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025.
For example, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025.
All patients had previously tried multiple AEDs, 32% of patients had previously been treated with VNS, and 34% had previously undergone resective or ablative surgery.
All patients had previously tried multiple anti-epilepsy drugs, or AEDs, 32% of patients had previously been treated with VNS, and 34% had previously undergone resective or ablative surgery.
We believe the following strategies will contribute to growth in initial patient implants and 11 advance our mission to dramatically improve clinical outcomes and quality of life for patients living with epilepsy and other disabling brain disorders: • Drive adoption of our RNS System .
We believe the following strategies will contribute to growth in initial patient implants and advance our mission to dramatically improve clinical outcomes and quality of life for patients living with epilepsy and other disabling brain disorders: • Drive adoption and utilization of our RNS System within Level 4 CECs .
We expect the Medicare average payment rate in 2024 will be approximately $31,520. The neurosurgeons who implant our RNS System may seek reimbursement for their services using a variety of Category I CPT codes, depending on the type of leads implanted.
We expect the Medicare average payment rate in 2025 will be approximately $32,500. The neurosurgeons who implant our RNS System may seek reimbursement for their services using a variety of Category I CPT codes, depending on the type of leads implanted.
This PMA-S approval allows us to expand our commercial efforts to target and be able to qualify the approximately 1,800 additional epileptologists outside of Level 4 CECs and the entire population of functional neurosurgeons, empowering them to provide the RNS System as a much-needed treatment option for their patients and expanding our current annual core market opportunity to all 575,000 adults in the United States with drug-resistant focal epilepsy, representing approximately $27 billion for initial RNS System implants.
This 7 supplemental approval allows us to expand our commercial efforts to target and be able to qualify the approximately 1,800 additional epileptologists outside of Level 4 CECs and the entire population of functional neurosurgeons, empowering them to provide the RNS System as a much-needed treatment option for their patients and expanding our current market opportunity to all 575,000 adults in the United States with drug-resistant focal epilepsy.
Bernardo Avenue, Mountain View, California 94043, and our telephone number is (650) 237-2700. Our website address is www.neuropace.com. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.
Bernardo Avenue, Mountain View, California 94043, and our telephone number is (650) 237-2700. Our website address is www.neuropace.com. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. We file electronically with the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations. 66 Disruptions in our information technology systems or data or those of third parties upon which we rely, whether through breaches or failures of our systems, ransomware, unauthorized access or otherwise, may result in both an adverse impact to our products, as well as the unauthorized use, disclosure, modification or misappropriation of patient or other personal or sensitive information, the occurrence of fraudulent activity, or other information security-related incidents, all of which could result in adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, which could have a material and adverse impact on our business, financial condition and results of operations.
Biggest changeDisruptions in our information technology systems or data or those of third parties with whom we work, whether through breaches or failures of our systems, ransomware, unauthorized access or otherwise, may result in both an adverse impact to our products, as well as the unauthorized use, disclosure, modification or misappropriation of patient or other personal or sensitive information, the occurrence of fraudulent activity, or other information security-related incidents, all of which could result in adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, which could have a material and adverse impact on our business, financial condition and results of operations.
In addition, there can be no guarantee that we will receive approval to sell our RNS System in every international market we target, nor can there be any guarantee that any sales would result even if such approval is received. Approval in the United States, or in any other jurisdiction, does not ensure approval in other jurisdictions.
In addition, there can be no guarantee that we will receive approval to sell our RNS System in every international market we target, nor can there be any guarantee that any sales would result even if any such approval is received. Approval in the United States, or in any other jurisdiction, does not ensure approval in other jurisdictions.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial negative impact on our common stock price.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial negative impact on our common stock price.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Our estimates of the annual total addressable markets for our RNS System are based on a number of internal and third-party estimates and assumptions, including, without limitation, our assumptions relative to the number of adults with drug-resistant focal epilepsy in the United States who are treated at CECs and outside of CECs each year; the number of neuromodulation procedures annually in the United States; the number and growth in number of CECs, epileptologists, and neurosurgeons, in the CECs and in the community setting; the growth in number of patients referred to CECs; the patients receiving neuromodulation therapy outside in the community setting; and the potential growth of our market opportunity with the expansion of treatment to patients in the community setting, as well as those suffering from generalized epilepsy or are under age 18.
Our estimates of the annual total addressable markets for our RNS System are based on a number of internal and third-party estimates and assumptions, including, without limitation, our assumptions relative to the number of adults with drug-resistant focal epilepsy in the United States who are treated at CECs and outside of CECs each year; the number of neuromodulation procedures annually in the United States; the number and growth in number of CECs, epileptologists, and neurosurgeons in the CECs and in the community setting; the growth in number of patients referred to CECs; the patients receiving neuromodulation therapy outside in the community setting; and the potential growth of our market opportunity with the expansion of treatment to patients in the community setting, as well as to those suffering from generalized epilepsy or who are under age 18.
An active or liquid market in our common stock may not be sustainable and the market price of our common stock may continue to be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including: • actual or anticipated fluctuations in our financial condition and results of operations; • variance in our financial performance from expectations of securities analysts or investors; • changes in the coverage decisions, reimbursement or pricing of our products; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our products; • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • publicity associated with issues related to our products; 94 • our involvement in regulatory investigations or litigation; • future sales of our common stock or other securities, by us or our stockholders, as well as the anticipation of lock-up releases; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; • general economic, regulatory, and market conditions, including economic recessions or slowdowns; • changes in the structure of healthcare payment systems; and • developments or disputes concerning our intellectual property or other proprietary rights.
An active or liquid market in our common stock may not be sustainable and the market price of our common stock may continue to be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including: • actual or anticipated fluctuations in our financial condition and results of operations; • variance in our financial performance from expectations of securities analysts or investors; • changes in the coverage decisions, reimbursement or pricing of our products; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our products; • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • publicity associated with issues related to our products; • our involvement in regulatory investigations or litigation; • future sales of our common stock or other securities, by us or our stockholders, as well as the anticipation of lock-up releases; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; • general economic, regulatory, and market conditions, including economic recessions or slowdowns; • changes in the structure of healthcare payment systems; and • developments or disputes concerning our intellectual property or other proprietary rights.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • provide for a classified board of directors whose members serve staggered terms; • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated convertible preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; 91 • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least 66 2/3% of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of common stock entitled to vote at an election of directors to adopt, to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • provide for a classified board of directors whose members serve staggered terms; • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated convertible preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least 66 2/3% of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of common stock entitled to vote at an election of directors to adopt, to amend our bylaws and certain provisions of our certificate of incorporation.
For example: • others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; • our intellectual property strategy may be limited, we may not seek protection for intellectual property that may ultimately become relevant to our business or our invention disclosure process may prove insufficient to encourage inventors to come forward with protectable intellectual property; • we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • we, or our current or future licensors or collaborators, may fail to meet our obligations to the U.S. government regarding any future patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • it is possible that there are prior public disclosures that could invalidate our patents, or parts of our patents; • it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours; • it is possible that our patents or patent applications omit individuals that should be listed as inventors or include individuals that should not be listed as inventors, which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • the claims of our patents or patent applications, if and when issued, may not cover our products or technologies; • the laws of foreign countries may not protect our proprietary rights or the rights of current or future licensors or collaborators to the same extent as the laws of the United States; • the inventors of our patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; 82 • our competitors or other third parties might conduct research and development activities 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 have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; or • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: • others may be able to make products that are similar to our products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our products that is in the public domain; • our intellectual property strategy may be limited, we may not seek protection for intellectual property that may ultimately become relevant to our business or our invention disclosure process may prove insufficient to encourage inventors to come forward with protectable intellectual property; • we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • we, or our current or future licensors or collaborators, may fail to meet our obligations to the U.S. government regarding any future patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights; 75 • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • it is possible that there are prior public disclosures that could invalidate our patents, or parts of our patents; • it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours; • it is possible that our patents or patent applications omit individuals that should be listed as inventors or include individuals that should not be listed as inventors, which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • the claims of our patents or patent applications, if and when issued, may not cover our products or technologies; • the laws of foreign countries may not protect our proprietary rights or the rights of current or future licensors or collaborators to the same extent as the laws of the United States; • the inventors of our patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; • our competitors or other third parties might conduct research and development activities 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 have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; or • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
The commercial success of our RNS System will continue to depend on a number of factors, including the following: • the degree to which drug-resistant epilepsy remains a chronic and debilitating condition; • the actual and perceived effectiveness, safety and reliability, and clinical benefit, of our RNS System, especially relative to alternative neuromodulation devices such as VNS or DBS; • the prevalence and severity of any adverse patient events involving our RNS System; • our ability to provide earlier awareness of and education about our RNS System to patients and clinicians, including through our partnership with DIXI Medical; • the degree to which clinicians, patients and hospital facilities, including at CECs and outside of CECs, in the community setting, adopt our RNS System; • the availability, relative cost and perceived advantages and disadvantages of alternative technologies or treatment methods for epilepsy; • the results of additional clinical and other studies relating to the health, safety, economic or other benefits of our RNS System; 47 • whether key thought leaders in the medical community accept that our clinical efficacy and safety results are sufficiently meaningful to influence their decision to adopt our RNS System over other neuromodulation therapies; • the extent to which we are successful in educating clinicians, patients, and hospital facilities about the benefits of our RNS System, including as a result of the extended battery life of the neurostimulator; • our reputation among clinicians, patients and hospital facilities; • our ability to predict product performance; • the strength of our marketing and distribution infrastructure, including our ability to drive adoption and utilization of our RNS System, our ability to expand referral pathways to CECs and beyond, and our ability to grow the market outside of Level 4 CECs, in the community; • our ability to obtain, maintain, protect, enforce and defend our intellectual property rights, including in and to our RNS System; • our ability to maintain compliance with all legal and regulatory requirements, including those applicable to our RNS System; • our ability to continue to maintain a commercially viable manufacturing process at our manufacturing facility that is compliant with current Good Manufacturing Practices, or cGMP, and Quality Systems Regulations, or QSR; • our ability to maintain our contractual relationships with our vendors and component suppliers, including single-source vendors and suppliers, through which we obtain critical components for our RNS System; • the continued coverage of and adequate payment for the implantation procedure and for clinicians to provide ongoing care for patients implanted with our RNS System by third-party payors, including both private and government payors; and • our ability to continue to attract and retain key talent.
The commercial success of our RNS System will continue to depend on a number of factors, including the following: • the degree to which drug-resistant epilepsy remains a chronic and debilitating condition; • the actual and perceived effectiveness, safety and reliability, and clinical benefit, of our RNS System, especially relative to alternative neuromodulation devices such as VNS or DBS; • the prevalence and severity of any adverse patient events involving our RNS System; • our ability to provide earlier awareness of and education about our RNS System to patients and clinicians, including through our partnership with DIXI Medical; • the degree to which clinicians, patients and hospital facilities, including at CECs and outside of CECs, in the community setting, adopt our RNS System; • the availability, relative cost and perceived advantages and disadvantages of alternative technologies or treatment methods for epilepsy; • the results of additional clinical and other studies relating to the health, safety, economic or other benefits of our RNS System; 39 • whether key thought leaders in the medical community accept that our clinical efficacy and safety results are sufficiently meaningful to influence their decision to adopt our RNS System over other neuromodulation therapies; • the extent to which we are successful in educating clinicians, patients, and hospital facilities about the benefits of our RNS System, including as a result of the extended battery life of the neurostimulator; • our reputation among clinicians, patients and hospital facilities; • our ability to predict product performance; • the strength of our marketing and distribution infrastructure, including our ability to drive adoption and utilization of our RNS System, our ability to expand referral pathways to CECs and beyond, and our ability to grow the market outside of Level 4 CECs, in the community; • our ability to obtain, maintain, protect, enforce and defend our intellectual property rights, including in and to our RNS System; • our ability to maintain compliance with all legal and regulatory requirements, including those applicable to our RNS System; • our ability to continue to maintain a commercially viable manufacturing process at our manufacturing facility that is compliant with current Good Manufacturing Practices, or cGMP, and Quality Systems Regulations, or QSR; • our ability to maintain our contractual relationships with our vendors and component suppliers, including single-source vendors and suppliers, through which we obtain critical components for our RNS System; • the continued coverage of and adequate payment for the implantation procedure and for clinicians to provide ongoing care for patients implanted with our RNS System by third-party payors, including both private and government payors; and • our ability to continue to attract and retain key talent.
The laws that may affect our ability to operate include, among others: • the Anti-Kickback Statute, which prohibits, among other things, knowingly and willingly soliciting, offering, receiving or paying remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual, or the purchase, order or recommendation of, items or services for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs; • federal civil and criminal false claims laws, including the FCA, and civil monetary penalties laws, which prohibits, among other things, persons or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds and knowingly making, using or causing to be made or used, a false record or statement to get a false claim paid or to avoid, decrease or conceal an obligation to pay money to the federal government; • the Health Insurance Portability & Accountability Act of 1996, or HIPAA, which applies to our customers and some of their downstream vendors and contractors, imposes criminal and civil liability for, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making a materially false, fictitious or fraudulent statement or 58 representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services; and • the federal Physician Payments Sunshine Act, also known as Open Payments, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually, with certain exceptions to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other “transfers of value” made to physicians, as defined by such law, other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
The laws that may affect our ability to operate include, among others: • the Anti-Kickback Statute, which prohibits, among other things, knowingly and willingly soliciting, offering, receiving or paying remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual, or the purchase, order or recommendation of, items or services for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs; 50 • federal civil and criminal false claims laws, including the FCA, and civil monetary penalties laws, which prohibits, among other things, persons or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds and knowingly making, using or causing to be made or used, a false record or statement to get a false claim paid or to avoid, decrease or conceal an obligation to pay money to the federal government; • the Health Insurance Portability & Accountability Act of 1996, or HIPAA, which applies to our customers and some of their downstream vendors and contractors, imposes criminal and civil liability for, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making a materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services; and • the federal Physician Payments Sunshine Act, also known as Open Payments, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually, with certain exceptions to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other “transfers of value” made to physicians, as defined by such law, other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
Additional risks related to operating in foreign countries include: • differing regulatory requirements in foreign countries, including with respect to data privacy and security; • differing reimbursement regimes in foreign countries, including price controls; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • 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 or reduced revenue; • 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 U.S.
Additional risks related to operating in foreign countries include: • differing regulatory requirements in foreign countries, including with respect to data privacy and security; • differing reimbursement regimes in foreign countries, including price controls; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • 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 or reduced revenue; 49 • 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 U.S.
Our continued success depends on, among other things, our ability to: • continue to demonstrate safety and efficacy in our Post-Approval Study and in ongoing commercial use; • expand our referral pathways; • expand the number of CECs implanting our RNS System and increase utilization across existing clinicians using the RNS System and adoption across new clinicians within these CECs; • increase the utilization and adoption of our RNS System outside of Level 4 CECs, in the community setting; • drive awareness to increase the number of drug-resistant epilepsy patients referred to CECs and treated outside of CECs, in the community setting; • maintain adequate reimbursement for implant procedures and for clinicians to provide ongoing care of patients treated with our RNS System; • attract and retain skilled research, development, sales, marketing and clinical personnel; • continue to innovate in order to improve therapy effectiveness and enhance the patient and provider experience; • adequately predict product performance; • obtain and maintain regulatory clearances and approvals, including for expanded indications; • cost-effectively manufacture, market and sell our RNS System; • obtain, maintain, protect, enforce and defend our intellectual property rights and operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others; • acquire products or technologies complementary to or necessary for our business; and • source materials, components, and sub-assemblies from suppliers on a cost-effective and timely basis. 53 Adoption of our RNS System depends on positive clinical data as well as clinician acceptance of the data and our products, and negative clinical data or perceptions among these clinicians would harm our sales, business, financial condition, and results of operations.
Our continued success depends on, among other things, our ability to: • continue to demonstrate safety and efficacy in our Post-Approval Study and in ongoing commercial use; • expand our referral pathways; • expand the number of CECs implanting our RNS System and increase utilization across existing clinicians using the RNS System and adoption across new clinicians within these CECs; • increase the utilization and adoption of our RNS System outside of Level 4 CECs, in the community setting; • drive awareness to increase the number of drug-resistant epilepsy patients referred to CECs and treated outside of CECs, in the community setting; • maintain adequate reimbursement for implant procedures and for clinicians to provide ongoing care of patients treated with our RNS System; • attract and retain skilled research, development, sales, marketing and clinical personnel; • continue to innovate in order to improve therapy effectiveness and enhance the patient and provider experience; • adequately predict product performance; • obtain and maintain regulatory clearances and approvals, including for expanded indications; • cost-effectively manufacture, market and sell our RNS System; • obtain, maintain, protect, enforce and defend our intellectual property rights and operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others; • acquire products or technologies complementary to or necessary for our business; and • source materials, components, and sub-assemblies from suppliers on a cost-effective and timely basis. 45 Adoption of our RNS System depends on positive clinical data as well as clinician acceptance of the data and our products, and negative clinical data or perceptions among these clinicians would harm our sales, business, financial condition, and results of operations.
We are an emerging growth company, as defined in the JOBS Act, and we expect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements.
We are an emerging growth company, as defined in the JOBS Act, and we expect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements 86 of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and extended adoption period for accounting pronouncements.
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 study protocols or for other reasons, our clinical studies or trials may need to 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.
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 study protocols or for 56 other reasons, our clinical studies or trials may need to 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.
Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (ii) manufacturing standards; (iii) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or (iv) laws that require the true, complete and accurate 59 reporting of financial information or data.
Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (ii) manufacturing standards; (iii) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or (iv) laws that require the true, complete and accurate reporting of financial information or data.
Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights as well as intellectual property theft or compulsory licensing, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; and 57 • business interruptions resulting from geopolitical actions, including tariffs, war and terrorism.
Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights as well as intellectual property theft or compulsory licensing, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; and • business interruptions resulting from geopolitical actions, including tariffs, war and terrorism.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following actions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • removal from FDA’s Voluntary Improvement Program pilot; • unanticipated expenditures to address or defend such actions; • form 483s, or other compliance or enforcement notices, communications or correspondence, including customer notifications for repair, replacement or refunds; • recall, detention or seizure of our RNS System; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or PMA of new products or modified products; • operating restrictions; • seizure or detention of products; 61 • withdrawing 510(k) clearances or PMAs that have already been granted; • refusal to grant export approval for our RNS System; • criminal prosecution; or • civil penalties.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following actions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • removal from FDA’s Voluntary Improvement Program pilot; • unanticipated expenditures to address or defend such actions; 53 • form 483s, or other compliance or enforcement notices, communications or correspondence, including customer notifications for repair, replacement or refunds; • recall, detention or seizure of our RNS System; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or PMA of new products or modified products; • operating restrictions; • seizure or detention of products; • withdrawing 510(k) clearances or PMAs that have already been granted; • refusal to grant export approval for our RNS System; • criminal prosecution; or • civil penalties.
Claims related to our use of open source software could also result in litigation, require us to purchase costly licenses or require us to devote additional research and development resources to change the software underlying our technology, any of which would have a negative effect on our business, financial condition and operating results and may not be possible in a timely manner.
Claims related to our use of open-source software could also result in litigation, require us to purchase costly licenses or require us to devote additional research and development resources to change the software underlying our technology, any of which 77 would have a negative effect on our business, financial condition and operating results and may not be possible in a timely manner.
Before a new medical device or a new intended use for an existing medical device can be marketed in the United States, we must first submit and receive either 510(k) clearance pursuant to Section 510(k) of the Food, Drug and Cosmetic Act, or the FDCA, or approval of a PMA application from the FDA, unless an exemption applies.
Before a new medical device or a new intended use for an existing medical device can be marketed in the United States, we must first submit and receive either 510(k) clearance pursuant to Section 510(k) of the Food, Drug and Cosmetic Act, or the FDCA, or approval of a PMA application or PMA-S from the FDA, unless an exemption applies.
Our ability to obtain components 93 for our products could be disrupted if the operations of our suppliers were affected by a man-made or natural disaster or other business interruption. In addition, our corporate headquarters and manufacturing facility is located in Mountain View, California, near major earthquake faults and fire zones.
Our ability to obtain components for our products could be disrupted if the operations of our suppliers were affected by a man-made or natural disaster or other business interruption. In addition, our corporate headquarters and manufacturing facility is located in Mountain View, California, near major earthquake faults and fire zones.
Such proceedings also may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us. 73 In addition, if we initiate legal proceedings against a third party to enforce a patent covering our products, the defendant could counterclaim that such patent is invalid or unenforceable.
Such proceedings also may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us. In addition, if we initiate legal proceedings against a third party to enforce a patent covering our products, the defendant could counterclaim that such patent is invalid or unenforceable.
As the number of competitors in our market grows and the number of patents issued in this area increases, the possibility of patent infringement claims against us escalates. Moreover, we may face claims from non-practicing entities, or NPEs, which have no relevant product revenue and against whom our own patent 79 portfolio may have no deterrent effect.
As the number of competitors in our market grows and the number of patents issued in this area increases, the possibility of patent infringement claims against us escalates. Moreover, we may face claims from non-practicing entities, or NPEs, which have no relevant product revenue and against whom our own patent portfolio may have no deterrent effect.
The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. 72 Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing the infringing products and/or have to pay substantial damages for use of the asserted intellectual property, including treble damages and attorneys’ fees were we found to willfully infringe such intellectual property.
In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing the infringing products and/or have to pay substantial damages for use of the asserted intellectual property, including treble damages and attorneys’ fees were we found to willfully infringe such 73 intellectual property.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised. We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised. We expend resources or may have to modify our business activities (including our clinical trial activities) to try to protect against security incidents.
Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Additionally, certain data privacy and security obligations require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
We could be forced, including by court order, to cease commercializing the infringing product. In addition, we could be found liable for monetary damages, which may be significant. If we are found to have willfully infringed a third-party patent, we could be required to pay treble damages and attorneys’ fees.
We could be 67 forced, including by court order, to cease commercializing the infringing product. In addition, we could be found liable for monetary damages, which may be significant. If we are found to have willfully infringed a third-party patent, we could be required to pay treble damages and attorneys’ fees.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or 77 government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
We are required pursuant to Section 404 of the Sarbanes-Oxley Act to include in our annual reports a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal 95 control over financial reporting.
We are required pursuant to Section 404 of the Sarbanes-Oxley Act to include in our annual reports a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
We publish privacy policies, marketing materials, and other statements regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
We publish privacy policies, marketing materials, and other statements regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
We could also encounter delays if a clinical study is suspended or terminated by us, by the IRBs or the Ethics Committees of institutions at which such studies are being conducted, by the Data Safety Monitoring Board for such 70 trial or by the FDA or other regulatory authorities.
We could also encounter delays if a clinical study is suspended or terminated by us, by the IRBs or the Ethics Committees of institutions at which such studies are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities.
Even if we are successful in defending against intellectual property claims, litigation or other legal proceedings relating to such claims may cause us to incur significant expenses, cause reputational harm, and could distract our 74 technical and management personnel from their normal responsibilities.
Even if we are successful in defending against intellectual property claims, litigation or other legal proceedings relating to such claims may cause us to incur significant expenses, cause reputational harm, and could distract our technical and management personnel from their normal responsibilities.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names or other intellectual property may be ineffective, could result in 81 substantial costs, diversion of resources, or adverse impact to our brand and could harm our business, financial condition and results of operations.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names or other intellectual property may be ineffective, could result in substantial costs, diversion of resources, or adverse impact to our brand and could harm our business, financial condition and results of operations.
Despite our efforts to retain valuable employees, members of our management and other key personnel may terminate their employment with us on short notice. Our employment arrangements with our employees provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice.
Despite our efforts to retain valuable employees, members of our management and other key personnel may terminate their employment with us on short notice. Our employment arrangements with our employees provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without 47 notice.
We cannot be certain that violations of these laws and regulations, or releases of or exposure to hazardous substances, will not occur in the future or have not occurred in the past, including as a result of human error, accidents, equipment failure or other causes.
We cannot be certain that violations of these laws and regulations, or releases of or exposure to hazardous substances, will not occur in the future or have not occurred in the past, including as a result of human error, 57 accidents, equipment failure or other causes.
In addition, we may encounter delays if the FDA concludes that our financial relationships with investigators result in a perceived or actual conflict of interest that may have affected the interpretation of a study, the integrity of the data generated at the applicable clinical study site or the utility of the clinical study itself.
In addition, we may encounter delays if the FDA concludes that our financial relationships with investigators result in a perceived or actual conflict of interest that may have affected the interpretation of a study, the integrity of 58 the data generated at the applicable clinical study site or the utility of the clinical study itself.
We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public 90 company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
Our products may also contain hazardous substances, and they are subject laws and regulations relating to labeling requirements and to their sale, collection, recycling, treatment, storage and disposal. Compliance with these laws and regulations may be 69 expensive and noncompliance could result in substantial fines and penalties.
Our products may also contain hazardous substances, and they are subject laws and regulations relating to labeling requirements and to their sale, collection, recycling, treatment, storage and disposal. Compliance with these laws and regulations may be expensive and noncompliance could result in substantial fines and penalties.
A government mandated or voluntary product recall by us could occur because of, for example, component failures, device malfunctions or 63 other adverse events, such as serious injuries or deaths, or quality-related issues, such as manufacturing errors or design or labeling defects.
A government mandated or voluntary product recall by us could occur because of, for example, component failures, device malfunctions or other adverse events, such as serious injuries or deaths, or quality-related issues, such as manufacturing errors or design or labeling defects.
If the breadth or strength of protection provided by the patents we hold or pursue with respect to our products is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize, our products. Patents have a limited lifespan.
If the breadth or strength of protection provided by the patents we hold or 65 pursue with respect to our products is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize, our products. Patents have a limited lifespan.
We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. 80 In addition, our patents or the patents of our licensing partners also may become involved in inventorship, priority or validity disputes.
We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. In addition, our patents or the patents of our licensing partners also may become involved in inventorship, priority or validity disputes.
We will continue to incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. As a public company, we have and will continue to incur significant legal, accounting, and other expenses.
We will continue to incur significant costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. As a public company, we have and will continue to incur significant legal, accounting, and other expenses.
The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that are beyond our 55 control, and may at any time be insufficient to counteract more lucrative offers from other companies.
The value to employees of stock options that vest over time may be significantly affected by fluctuations in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future or 64 their full impact.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future or their full impact.
Additionally, if our projections regarding the revenue we anticipate receiving from our collaboration 87 with Rapport are inaccurate, we may not attain our revenue projections, which could harm our business, result in investors losing confidence in our financial reporting, and our stock price may decline.
Additionally, if our projections regarding the revenue we anticipate receiving from our collaboration with Rapport are inaccurate, we may not attain our revenue projections, which could harm our business, result in investors losing confidence in our financial reporting, and our stock price may decline.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are, or may become subject to such obligations in the future. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are or may become subject to such obligations in the future. 60 Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
There can be no assurance that such third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors.
There can be no assurance that such 76 third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors.
The covenants related to the Term Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.
The covenants related to 81 the Term Loan Agreement, as well as any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits 88 against us and our directors, officers and other employees.
Any failure to obtain, maintain, protect, enforce or defend patent and other intellectual property protection with respect to our RNS System or other aspects of our business could harm our business, competitive position, financial condition and results of operations.
Any failure to obtain, maintain, protect, enforce or defend patent and other intellectual property 64 protection with respect to our RNS System or other aspects of our business could harm our business, competitive position, financial condition and results of operations.
We expect our RNS System will continue to be purchased by hospital facilities who will then seek reimbursement from third-party payors for brain-responsive neuromodulation for drug resistant focal epilepsy. 54 While third-party payors currently cover and provide reimbursement for both implant procedures of our RNS System as well as for clinicians providing ongoing patient care, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement, or that current reimbursement levels for diagnostic, implant or replacement procedures as well as clinician-provided ongoing patient care will continue.
We expect our RNS System will continue to be purchased by hospital facilities who will then seek reimbursement from third-party payors for brain-responsive neuromodulation for drug resistant focal epilepsy. 46 While third-party payors currently cover and provide reimbursement for both implant procedures of our RNS System as well as for clinicians providing ongoing patient care, we can give no assurance that these third-party payors will continue to provide coverage and adequate reimbursement, or that current reimbursement levels for diagnostic, implant or replacement procedures as well as clinician-provided ongoing patient care will continue.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is 87 responsible for appointing the members of our management.
We have a compliance program, code of conduct and associated policies and procedures, but it is not always possible to identify and deter misconduct by our employees, contractors, and other third parties, including our customers, and the precautions we take to detect and prevent noncompliance may not be effective in protecting us from governmental investigations for failure to comply with applicable fraud and abuse or other healthcare laws and regulations.
We have a compliance program, code of conduct and associated policies, procedures, and ongoing training, but it is not always possible to identify and deter misconduct by our employees, contractors, and other third parties, including our customers, and the precautions we take to detect and prevent noncompliance may not be effective in protecting us from governmental investigations for failure to comply with applicable fraud and abuse or other healthcare laws and regulations.
If we are forced to lower or are unable to increase the price we charge for our RNS System, our gross margins will decrease, which will harm our ability to invest in and 56 grow our business.
If we are forced to lower or are unable to increase the price we charge for our RNS System, our gross margins will decrease, which will harm our ability to invest in and grow our business.
The occurrence of any of these issues could significantly harm our ability to manufacture our products and maintain sufficient quality standards, which would negatively impact our sales, business, financial condition, and results of operations. 50 We depend on a limited number of single-source suppliers and vendors in connection with the manufacture of our RNS System, which makes us vulnerable to supply shortages and price fluctuations that could harm our business, financial condition, and results of operations.
The occurrence of any of these issues could significantly harm our ability to manufacture our products and maintain sufficient quality standards, which would negatively impact our sales, business, financial condition, and results of operations. 42 We depend on a limited number of single-source suppliers and vendors in connection with the manufacture of our RNS System, which makes us vulnerable to supply shortages and price fluctuations that could harm our business, financial condition, and results of operations.
The 83 theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products, substantially and adversely impact our sales and commercial operations and harm our business.
The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products, substantially and adversely impact our sales and commercial operations and harm our business.
Our ability to accurately forecast demand for our products, including our distributed DIXI Medical products, could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, our inability to forecast the lifecycle of our products, an increase or decrease in customer demand for our products or for competitor products, our failure to accurately forecast customer adoption of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.
Our ability to accurately forecast demand for our products, including our sales of DIXI Medical products, could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, our inability to forecast the lifecycle of our products, an increase or decrease in customer demand for our products or for competitor products, our failure to accurately forecast customer adoption of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.
Our quarterly and annual operating results may fluctuate due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for our products and any future products, which may vary significantly from period to period; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; • the timing and cost of obtaining regulatory approvals or clearances to expand our indications and get future approvals of any future products or features; • pricing pressures; • our ability to expand the geographic reach of our commercial efforts; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • coverage and reimbursement policies with respect to our products, and potential future products that compete with our products; • the timing and success or failure of preclinical or clinical studies for expanding the indications of our RNS System or any future products we develop or competing products; • positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry; • the timing of customer orders or scheduling of implants using our products and the number of available selling days in any quarterly period, which can be impacted by holidays, vacations, the mix of products sold and the geographic mix of where products are sold, including any related foreign currency impact; • the impact of hospital accessibility and staffing shortages on procedure volume or otherwise; • the timing and cost of, and level of investment in, research, development, licenses, regulatory approval, commercialization activities, acquisitions and other strategic transactions, or other significant events relating to our products, which may change from time to time; 96 • the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers; and • future accounting pronouncements or changes in our accounting policies.
Our quarterly and annual operating results may fluctuate due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for our products and any future products, which may vary significantly from period to period; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; 79 • the timing and cost of obtaining regulatory approvals or clearances to expand our indications and get future approvals of any future products or features; • pricing pressures; • our ability to expand the geographic reach of our commercial efforts; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • coverage and reimbursement policies with respect to our products, and potential future products that compete with our products; • the timing and success or failure of preclinical or clinical studies for expanding the indications of our RNS System or any future products we develop or competing products; • positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry; • the timing of customer orders, scheduling or cancelling of implant procedures using our products and the number of available selling days in any quarterly period, which can be impacted by holidays, vacations, the mix of products sold and the geographic mix of where products are sold, including any related foreign currency impact; • the impact of hospital accessibility and staffing shortages on procedure volume or otherwise; • the timing and cost of, and level of investment in, research, development, licenses, regulatory approval, commercialization activities, acquisitions and other strategic transactions, or other significant events relating to our products, which may change from time to time; • the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers; and • future accounting pronouncements or changes in our accounting policies.
In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our 71 inventions and the prior art allow our inventions to be patentable over the prior art.
In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art.
The Term Loan contains customary affirmative and restrictive covenants, including with respect to our ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to our holders, make investments, merge or consolidate with any other person or engage in transactions with our affiliates, as well as financial maintenance covenants, including minimum liquidity and annual revenue covenants.
The Term Loan contains customary affirmative and restrictive covenants, including with respect to our ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to our holders, make investments, merge or consolidate with any other person or engage in transactions with our affiliates, as well as minimum liquidity and annual revenue covenants.
In addition, if we experience a significant increase in demand, 51 additional supplies of components, materials, or services, or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, which may negatively affect our business, financial condition, and results of operations.
In addition, if we experience a significant increase in demand, 43 additional supplies of components, materials, or services, or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, which may negatively affect our business, financial condition, and results of operations.
If we are unable to successfully achieve substantial market acceptance and 48 adoption of our RNS System by additional clinicians, patients, and hospital facilities, or to expand the clinicians’ perspective as to the types of patients that can benefit from our RNS System, patients may be reluctant to use our products over alternative neuromodulation therapies.
If we are unable to successfully achieve substantial market acceptance and 40 adoption of our RNS System by additional clinicians, patients, and hospital facilities, or to expand the clinicians’ perspective as to the types of patients that can benefit from our RNS System, patients may be reluctant to use our products over alternative neuromodulation therapies.
Consequently, a catastrophic event at our facility could harm our business, financial condition, and results of operations. Litigation and other legal proceedings may harm our business.
Consequently, a catastrophic event at our facility could harm our business, financial condition, and results of operations. 89 Litigation and other legal proceedings may harm our business.
If we are unable to conclude that our internal control over financial reporting is effective, or if we identify additional material weaknesses in our internal control over financial reporting, our reputation could be negatively impacted, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities and our access to the capital markets could be restricted in the future.
If we are unable to conclude that our internal control over financial reporting is effective, or if we identify additional material weaknesses in our internal control over financial reporting and are unable to successfully remediate them, our reputation could be negatively impacted, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities and our access to the capital markets could be restricted in the future.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
Some of our contracts do not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
Since we produce our products in one manufacturing facility, any contamination of the controlled environment, equipment malfunction, supply issues, personnel issues, including human error, or failure to strictly follow 49 procedures can significantly reduce our yield.
Since we produce our products in one manufacturing facility, any contamination of the controlled environment, equipment malfunction, supply issues, personnel issues, including human error, or failure to strictly follow 41 procedures can significantly reduce our yield.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal information; and orders to destroy or not use personal information.
If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal information; and orders to destroy or not use personal information.
We have adopted a code of conduct, employee handbook, and compliance policies, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
We have adopted a code of conduct, employee handbook, compliance policies, and compliance training programs for all employees, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, such as and without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
We rely on third parties and third-party technologies to operate critical business systems to process sensitive information in a variety of contexts, such as and without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
Additionally, our customers may be subject to additional federal and state privacy and security laws, rules, regulations and standards, including HIPAA, that they may require us to comply with through contractual obligations. This patchwork of legislation and 65 regulation may give rise to conflicts or differing views of personal privacy rights.
Additionally, our customers may be subject to additional federal and state privacy and security laws, rules, regulations and standards, including HIPAA, that they require us to comply with through contractual obligations. This patchwork of obligations may give rise to conflicts or differing views of personal privacy rights.
Our collection, use, storage, disclosure, transfer and other processing of sensitive and personal information may subject us to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
Risks related to privacy, information technology and cybersecurity Our collection, use, storage, disclosure, transfer and other processing of sensitive and personal information may subject us to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
We also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
We also rely on third parties to provide other products, services, parts, or otherwise to operate our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
Patients may also choose not to actively seek additional treatment for epilepsy or may 52 choose to try new therapeutic drugs that become available from time to time.
Patients may also choose not to actively seek additional treatment for epilepsy or may 44 choose to try new therapeutic drugs that become available from time to time.
Our operations are subject to pervasive and continuing FDA regulatory requirements, and failure to comply with these requirements could harm our business, financial condition and results of operations.
Our operations are subject to pervasive and continuing FDA regulatory requirements, and failure to comply with these requirements could harm our growth potential, and our business, financial condition and results of operations.
Using these third parties poses a number of risks, such as: • they may not perform to our standards or legal requirements; • they may not produce reliable results; • they may not perform in a timely manner; • they may not maintain confidentiality of our proprietary information; • disputes may arise with respect to ownership of rights to products developed with our partners; and • disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation or arbitration.
Using these third parties poses a number of risks, such as: • they may not extend or renew their agreement with us; • they may not perform to our standards or legal requirements; • they may not produce reliable results; • they may not perform in a timely manner; • they may not maintain confidentiality of our proprietary information; • disputes may arise with respect to ownership of rights to products developed with our partners; and • disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation or arbitration.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. 67 In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. In addition, our reliance on third parties could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and originate from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, cyber criminals, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
We or the third parties upon which we rely may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.
We or the third parties with whom we work may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations.
While the laws and regulations of other states also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties upon whom we rely.
While the laws and regulations of other states also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties with whom we work.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe board of directors’ audit committee is responsible for overseeing our cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats. 99 Our cybersecurity risk assessment and management processes are implemented and maintained by certain NeuroPace management, including our Privacy and Security Officer, who has more than 20 years of experience in healthcare privacy and security, in coordination with our Director of Information Technology, who has more than 30 years of experience with information technology operations and sixteen years as a corporate privacy and security officer, as well as our Vice President, Manufacturing and Commercial Operations and Information Technology.
Biggest changeOur cybersecurity risk assessment and management processes are implemented and maintained by certain NeuroPace management, including our Privacy and Security Officer, who has more than 20 years of experience in healthcare privacy and security, in coordination with our Director of Information Technology, who has more than 30 years of experience with information technology operations and seventeen years as a corporate privacy and security officer.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards, and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: incident detection and response, vulnerability management and disaster recovery policies, risk assessments, data encryption and data segregation of certain data, access controls and network security controls in certain environments, physical security controls, employee training, penetration testing, systems monitoring, cybersecurity insurance and asset and vendor management programs.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards, and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: incident detection and response, vulnerability management and disaster recovery policies, risk assessments, data encryption and data segregation of certain data, access controls and network security controls in certain environments, physical security controls, employee training, phishing simulation exercises, penetration testing, systems monitoring, cybersecurity insurance and asset and vendor management programs.
Our incident response and vulnerability management policies are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our Privacy and Security Officer, Director of Information Technology, Vice President, Manufacturing and Commercial Operations and Information Technology and other designated individuals.
Our incident response and vulnerability management policies are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our Privacy and Security Officer, Director of Information Technology, Chief of Operations and Development and other designated individuals.
The program includes security questionnaires for certain vendors, imposition of information security contractual obligations on certain vendors, verification of relevant industry standard security certifications for certain vendors, and other vendor management program elements.
The program includes security questionnaires and risk assessments for certain vendors, vulnerability scans for certain vendors, security assessment calls with certain vendor’s security personnel, imposition of information security contractual obligations on certain vendors, verification of relevant industry standard security certifications for certain vendors, and other vendor management program elements.
Our information security function is overseen by our Privacy and Security Officer and is supported by our Director of Information Technology and Vice President, Manufacturing and Commercial Operations and Information Technology. This function helps to identify, assess, and manage our cybersecurity threats and risks, including through the use of our risk register.
Our information security function is overseen by our Privacy and Security Officer and is supported by our Director of Information Technology and Chief of Operations and Development, as well as our engineering operations and third-party service providers. This function helps to identify, assess, and manage our cybersecurity threats and risks, including through the use of our risk register.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K. Governance Our board of directors addresses our cybersecurity risk management as part of its general oversight function.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under the section titled “ Risks related to privacy, information technology and cybersecurity” located in Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K.
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Governance 92 Our board of directors addresses our cybersecurity risk management as part of its general oversight function. The board of directors’ audit committee is responsible for overseeing our cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2023, approximately $75.3 million of the net proceeds had been used for general corporate purposes including cash used in operations and capital expenditures. Purchases of Equity Securities by the Issuer and Affiliated Purchases None. Item 6. [Reserved] 101
Biggest changeAs of December 31, 2024, approximately $92.7 million of the net proceeds had been used for general corporate purposes including cash used in operations and capital expenditures. Purchases of Equity Securities by the Issuer and Affiliated Purchases None. Item 6. [Reserved] 94
Holders of Common Stock As of February 29, 2024, there were approximately 186 stockholders of record of our common stock.
Holders of Common Stock As of February 28, 2025, there were approximately 145 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe change in operating assets and liabilities was due to an increase in accounts receivable of $0.4 million primarily due to slower payments by our customers, an increase in inventories of $2.1 million largely due to inventory purchased from DIXI Medical under the Distribution Agreement, an increase in prepaid expenses and other assets of $0.8 million, a decrease in operating lease liabilities of $2.1 million due to cash paid for rent, offset in part by an increase in accounts payable of $0.6 million.
Biggest changeThe change in operating assets and liabilities was due to an increase in inventories of $2.4 million largely due to an increase in work-in-process inventory and finished goods, a decrease in operating lease liabilities of $1.6 million, a decrease in accrued liabilities of $1.4 million largely due to accrued payroll and related expenses, an increase in accounts receivable of $0.5 million, and a decrease in deferred revenue of $0.5 million, offset in part by an increase in accounts payable of $0.7 million, and a decrease in prepaid expenses and other assets of $0.4 million.
Our revenue also has fluctuated and in the future will continue to fluctuate from quarter-to-quarter due to a variety of factors, including the success of our sales force in expanding adoption of our RNS System in new accounts and the number of physicians who are aware of and prescribe our RNS System.
Our revenue has also fluctuated and will continue to fluctuate in the future from quarter-to-quarter due to a variety of factors, including the success of our sales force in expanding adoption of our RNS System in new accounts and the number of physicians who are aware of and prescribe our RNS System.
In November 2022, we entered into a Sales Agreement with Leerink Partners LLC, or Leerink, to sell shares of our common stock, from time to time, through an at-the-market, or ATM, equity offering program under which Leerink will act as our sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to $50.0 million.
At-the-Market Equity Program In November 2022, we entered into a Sales Agreement with Leerink Partners LLC, or Leerink, to sell shares of our common stock, from time to time, through an at-the-market, or ATM, equity offering program under which Leerink will act as our sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to $50.0 million.
We will cease to be an emerging growth company on the date that is the earliest of (i) December 31, 2026, (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years, or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
We will cease to be an emerging growth company on the date that is the earliest of (i) December 31, 2026, (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years, or (iv) the 104 date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
Cash Flows Provided by Financing Activities Net cash provided by financing activities was $8.1 million for the year ended December 31, 2023, which primarily consisted of $7.9 million of net cash proceeds from our At-the-Market offering and proceeds from the issuance of common stock under employee plans of $0.8 million, partially offset by taxes withheld and paid related to net share settlement of equity awards of $0.3 million and payment of deferred offering costs of $0.3 million.
Net cash provided by financing activities was $8.1 million for the year ended December 31, 2023, which primarily consisted of $7.9 million of net cash proceeds from our At-the-Market offering and proceeds from the issuance of common stock under employee plans of $0.8 million, partially offset by taxes withheld and paid related to net share settlement of equity awards of $0.3 million and payment of deferred offering costs of $0.3 million.
Overhead costs include the cost of quality assurance, testing, material procurement, inventory control, operations supervision and management personnel, an allocation of facilities and information technology expenses, including rent and utilities, and 105 equipment depreciation. Cost of goods sold also includes certain direct costs such as those incurred for shipping our RNS System.
Overhead costs include the cost of quality assurance, testing, material procurement, inventory control, operations supervision and management personnel, an allocation of facilities and information technology expenses, including rent and utilities, and equipment depreciation. Cost of goods sold also includes certain direct costs such as those incurred for shipping our RNS System.
Factors Affecting Our Performance We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include: Clinician, Hospital and Patient Awareness and Acceptance of Our RNS System Our goal is to establish our RNS System as a standard of care for drug-resistant epilepsy.
Factors Affecting Our Performance We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include: 96 Clinician, Hospital and Patient Awareness and Acceptance of Our RNS System Our goal is to establish our RNS System as a standard of care for drug-resistant epilepsy.
In addition to competing for market share, we also compete against these companies for personnel, including qualified sales and other personnel that are necessary to grow our business. 104 Leveraging Our Manufacturing Capacity to Further Improve Our Gross Margin With our current operating model and infrastructure, we believe that we have the capacity to significantly increase our manufacturing production.
In addition to competing for market share, we also compete against these companies for personnel, including qualified sales and other personnel that are necessary to grow our business. Leveraging Our Manufacturing Capacity to Further Improve Our Gross Margin With our current operating model and infrastructure, we believe that we have the capacity to significantly increase our manufacturing production.
We also intend to continue supporting patient and referring clinician outreach efforts to help increase the number of appropriate patients with drug-resistant epilepsy being treated at CECs, including by way of our expansion into the community setting. These efforts require significant investment by our marketing and sales organization.
We also intend to continue supporting patient and referring clinician outreach efforts to help increase the number of appropriate patients with drug-resistant epilepsy being treated at CECs and outside of CECs, including by way of our expansion into the community setting. These efforts require significant investment by our marketing and sales organization.
As a result, our financial statements 111 may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.
As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.
Interest Expense and Income Interest expense consists primarily of interest expense related to our term loan facility, including amortization of debt discount and issuance costs. Interest income is predominantly derived from investing surplus cash in money market funds and short-term marketable securities. 106 Other Income (Expense), Net Other income (expense), net primarily consists of gain and loss from short-term investments.
Interest Expense and Income Interest expense consists primarily of interest expense related to our term loan facility, including amortization of debt discount and issuance costs. Interest income is predominantly derived from investing surplus cash in money market funds and short-term marketable securities. Other Income (Expense), Net Other income (expense), net primarily consists of gain and loss from short-term investments.
A change in product mix between sales of our RNS System and DIXI Medical products would cause variability in our gross margin. Components of Our Results of Operations Revenue We derive most of our revenue from sales of our RNS System to hospital facilities that implant our RNS System.
A change in product mix between sales of our RNS System and DIXI Medical products would cause variability in our gross margin. Components of Our Results of Operations Revenue We derive most of our revenue from sales of our RNS System to the hospital facilities that implant our RNS System.
Cash Flows Provided by Investing Activities Net cash provided by investing activities was $23.0 million for the year ended December 31, 2023, which primarily consisted of sales of short-term investments of $23.2 million, partially offset by purchases of property and equipment of $0.2 million.
Net cash provided by investing activities was $23.0 million for the year ended December 31, 2023, which primarily consisted of sales of short-term investments of $23.2 million, partially offset by purchases of property and equipment of $0.2 million.
Our future funding requirements will depend on many factors, including: • the costs of activities related to commercializing and marketing our RNS System in the United States and elsewhere, and manufacturing and distribution costs; • the research and development activities we intend to undertake, including product enhancements and clinical studies for indication expansions that we intend to pursue; • the cost of obtaining, maintaining, defending, enforcing, and protecting any patents and other intellectual property rights; • whether or not we pursue acquisitions or investments in businesses, products or technologies that are complementary to our current business; 109 • the degree and rate of increased market acceptance of our RNS System in the United States and market acceptance elsewhere; • our revenue and cost projections related to the DIXI Medical distribution agreement; • our need to implement additional infrastructure and internal systems; • our ability to hire additional personnel to support our operations as a public company; and • the emergence of competing technologies or other adverse market developments.
Our future funding requirements will depend on many factors, including: • the costs of activities related to commercializing and marketing our RNS System in the United States and elsewhere, and manufacturing and distribution costs; • our revenue and costs related to the DIXI Medical distribution agreement; • the research and development activities we intend to undertake, including product enhancements and clinical studies for indication expansions that we intend to pursue; • the cost of obtaining, maintaining, defending, enforcing, and protecting any patents and other intellectual property rights; • whether or not we pursue acquisitions or investments in businesses, products or technologies that are complementary to our current business; • the degree and rate of increased market acceptance of our RNS System in the United States and market acceptance elsewhere; • our need to implement additional infrastructure and internal systems; • our ability to hire additional personnel to support our operations as a public company; and 102 • the emergence of competing technologies or other adverse market developments.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
If our estimate of future demand is too high, we may have to write-down excess inventory for the product and record a charge to cost of goods sold, which could have a material adverse effect on our results of operations. Inventory write-downs were $0.2 million and $0.2 million for the years ended December 31, 2023 and December 31, 2022, respectively.
If our estimate of future demand is too high, we may have to write-down excess inventory for the product and record a charge to cost of goods sold, which could have a material adverse effect on our results of operations. Inventory write-downs were $0.3 million and $0.2 million for the years ended December 31, 2024 and December 31, 2023, respectively.
The collaboration evaluates biomarker changes in currently implanted RNS System patients that have enrolled in Rapport’s Phase 2a clinical trial of its product candidate. Pursuant to this agreement, we will provide information to Rapport that will help evaluate the impact of their product candidate on certain biomarkers of patients with focal onset seizures.
The collaboration evaluates biomarker changes in currently implanted RNS System patients that enroll in Rapport’s Phase 2a clinical trial of its product candidate. Pursuant to this agreement, we provide information to Rapport that will help evaluate the impact of their product candidate on certain biomarkers of patients with focal onset seizures.
Our research and development activities include clinical studies to demonstrate the safety and efficacy of our RNS System, including in expanded indications, and to obtain, as well as retain, FDA approval.
Our research and development activities include clinical studies to demonstrate the safety and effectiveness of our RNS System, including in expanded indications, and to obtain, as well as retain, FDA approval.
Collaborations and Partnerships DIXI Distribution Agreement In August 2022, we entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical USA Corp., or DIXI Medical, pursuant to which we became the exclusive U.S. distributor of DIXI Medical’s product line beginning in October 2022.
Collaborations and Partnerships DIXI Distribution Agreement In August 2022, we entered into an exclusive distribution agreement, or the Distribution Agreement, with DIXI Medical USA Corp., or DIXI Medical, pursuant to which we became the exclusive U.S. distributor of DIXI Medical’s stereo electroencephalography, or Stereo EEG, product line beginning in October 2022.
Based on our current planned operations, we expect that our cash, cash equivalents and short-term investments will enable us to fund our operating expenses for at least 12 months from the issuance of our financial statements as of and for the year ended December 31, 2023.
Based on our current planned operations, we expect that our cash, cash equivalents and short-term investments will enable us to fund our operating expenses for at least twelve months from the issuance of our financial statements as of and for the year ended December 31, 2024.
Beginning in the fourth quarter of 2022, we also derive revenue from sales of DIXI Medical products, primarily to our current customer base. Our revenue from the sale of DIXI Medical products will fluctuate in the future due to a variety of factors, including our ability to take market share from competitive Stereo EEG products.
We also derive revenue from sales of DIXI Medical products, primarily to our current customer base. Our revenue from the sale of DIXI Medical products will fluctuate in the future due to a variety of factors, including our ability to take market share from competitive Stereo EEG products.
Our gross margin increased from 71.4% for the year ended December 31, 2022 to 73.6% for the year ended December 31, 2023 primarily due to lower fixed costs per unit as a result of increased production volume of the RNS System, partially offset by the lower gross margin from distribution of DIXI Medical products.
Our gross margin increased from 73.6% for the year ended December 31, 2023 to 73.9% for the year ended December 31, 2024 primarily due to lower fixed costs per unit as a result of increased production volume of the RNS System, partially offset by the lower gross margin from distribution of DIXI Medical products.
Our RNS System is also the only commercially available device that records continuous brain activity data and allows clinicians to monitor patients not only in person, but also remotely, in order to make more informed treatment decisions, thus optimizing patient care.
Our RNS System is also the only commercially available device that records continuous brain activity data and allows clinicians to monitor patients not only in person, but also remotely, providing them the data they need to make more informed treatment decisions, thus optimizing patient care.
We record adjustments to our inventory valuation for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions. Beginning in the fourth quarter of 2022, cost of goods sold also includes costs of procuring DIXI Medical products.
We record adjustments to our inventory valuation for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions. Cost of goods sold also includes costs of procuring and shipping DIXI Medical products.
We intend to continue making significant investments in research and development, clinical studies and regulatory affairs to support ongoing and future regulatory submissions for retaining and expanding indications of our RNS System, including to patients with drug-resistant generalized epilepsy and adolescent patients, ages 12-17, support continuous improvements to our RNS System, and develop future products that address neurological disorders.
We intend to continue making significant investments in research and development, clinical studies and regulatory affairs to support ongoing and future regulatory submissions for retaining and expanding indications of our RNS System, including to patients with drug-resistant generalized epilepsy and patients under the age of 18, support continuous improvements to our RNS System, and develop future products that address neurological disorders.
Cash used in operating activities was primarily a result of the net loss of $33.0 million, adjusted for non-cash charges of $15.7 million and change in operating assets and liabilities of $2.5 million.
Net cash used in operating activities was $19.7 million for the year ended December 31, 2023. Cash used in operating activities was primarily a result of the net loss of $33.0 million, adjusted for non-cash charges of $15.7 million and change in operating assets and liabilities of $2.5 million.
Interest income increased by $1.5 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher interest yields in the year ended December 31, 2023, partially offset by a decrease in average balances of our money market funds and short-term marketable securities.
Interest income decreased by less than $0.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to a decrease in average balances of our money market funds and short-term marketable securities, partially offset by higher interest yields in the year ended December 31, 2024.
The revenue-based milestone was not met, and the remaining $10.0 million of the Term Loan expired without being drawn. 108 The Term Loan bears interest at a rate of 13.5% per year. Payments under the loan are made quarterly with payment dates fixed at the end of each calendar quarter.
The remaining $10.0 million expired without being drawn. The Term Loan currently bears interest at a rate of 13.5% per year. Payments under the loan are made quarterly with payment dates fixed at the end of each calendar quarter.
The change in operating assets and liabilities was due to an increase in accounts receivable of $4.9 million primarily due to an increase in sales of our products including our RNS System and DIXI Medical products, an increase in inventories of $1.7 million largely due to an increase in raw materials and finished goods partially offset by a reduction in work-in-process inventory, a decrease in operating lease liabilities of $1.4 million due to cash paid for rent net of the accretion of imputed interest, offset in part by a decrease in prepaid expenses and other assets of $0.4 million, an increase in accrued liabilities of $3.8 million primarily due to an increase in accrued employee bonuses and payroll related expenses, and an increase in deferred revenue of $1.1 million related to our collaboration agreement with Rapport Therapeutics.
The change in operating assets and liabilities was due to an increase in accounts receivable of $4.9 million primarily due to an increase in sales of our products, including our RNS System and DIXI Medical products, an increase in inventories of $1.7 million largely due to an increase in raw materials and finished goods, partially offset by a reduction in work-in-process inventory, a decrease in operating lease liabilities of $1.4 million due to cash paid for rent net of the accretion of imputed interest, offset in part by a decrease in prepaid expenses and other assets of $0.4 million, an increase in accrued liabilities of $3.8 million primarily due to an increase in accrued employee bonuses and payroll related expenses, and an increase in deferred revenue of $1.1 million related to our collaboration agreement with Rapport. 103 Cash Flows Provided by Investing Activities Net cash provided by investing activities was $9.0 million for the year ended December 31, 2024, which primarily consisted of sales of short-term investments of $9.3 million, partially offset by purchases of property and equipment of $0.3 million.
Operating Expenses Our operating expenses consist of research and development costs and selling, general and administrative costs. Research and Development Expenses Our research and development activities primarily consist of engineering and research programs associated with our products under development and clinical studies.
Research and Development Expenses Our research and development activities primarily consist of engineering and research programs associated with our products under development and clinical studies.
Beginning in the fourth quarter of 2023, we also derive revenue from services provided to Rapport pursuant to our collaboration agreement with Rapport.
Beginning in the fourth quarter of 2023, we also derive revenue from services provided to Rapport pursuant to our collaboration agreement with Rapport. Our revenue from this collaboration fluctuates due to the timing of services provided and other factors.
In addition, we intend to continue to make investments in clinical studies, development of new products, and other ongoing research and development programs. We may incur additional expenses to expand our commercial organization to support our continued growth.
Future Funding Requirements We expect to incur continued expenditures in the future in support of our commercialization efforts in the United States. In addition, we intend to continue to make investments in clinical studies, development of new products, and other ongoing research and development programs. We may incur additional expenses to expand our commercial organization to support our continued growth.
Summary Statements of Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below (in thousands): Year Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ (19,701) $ (36,869) Investing activities 23,027 23,797 Financing activities 8,127 490 Net increase (decrease) in cash and cash equivalents $ 11,453 $ (12,582) Cash Flows Used in Operating Activities Net cash used in operating activities was $19.7 million for the year ended December 31, 2023.
Summary Statements of Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below (in thousands): Year Ended December 31, 2024 2023 Net cash (used in) provided by: Operating activities $ (17,949) $ (19,701) Investing activities 8,994 23,027 Financing activities 4,327 8,127 Net (decrease) increase in cash and cash equivalents $ (4,628) $ 11,453 Cash Flows Used in Operating Activities Net cash used in operating activities was $17.9 million for the year ended December 31, 2024.
As of December 31, 2023, we had an accumulated deficit of $503.8 million, cash, cash equivalents and short-term investments of $66.5 million, and $57.0 million of outstanding term loans, net of debt discount and issuance costs. We have invested heavily and expect to continue to invest in research and development and commercial activities.
As of December 31, 2024, we had an 95 accumulated deficit of $531.0 million, cash, cash equivalents and short-term investments of $52.8 million, and $59.5 million of outstanding debt under a term loan, net of debt discount and issuance costs. We have invested heavily and expect to continue to invest in research and development and commercial activities.
Other Income (Expense), net Other income (expense), net increased by less than $0.1 million to ($0.3) million during the year ended December 31, 2023, compared to ($0.3) million during the year ended December 31, 2022, primarily due to a reduction in unrealized loss, net on short-term investments in the year ended December 31, 2023.
Other Income (Expense), net Other income (expense), net increased by 0.6 million to $0.3 million during the year ended December 31, 2024, compared to ($0.3) million during the year ended December 31, 2023, primarily due to unrealized gain, net on short-term investments in the year ended December 31, 2024.
Our gross margin may increase over the long term to the extent our production volume increases as our fixed manufacturing costs would be spread over a larger number of units, thereby reducing our per-unit manufacturing costs. We expect our gross margin will fluctuate from period to period, however, based upon the factors described above.
Our gross margin may increase over the long term to the extent our production volume increases as our fixed manufacturing costs would be spread over a larger number of units, thereby reducing our per-unit manufacturing costs.
Cost of Goods Sold and Gross Margin Cost of goods sold increased by $4.3 million, or 33%, to $17.3 million during the year ended December 31, 2023, compared to $13.0 million during the year ended December 31, 2022.
Cost of Goods Sold and Gross Margin Cost of goods sold increased by $3.5 million, or 20%, to $20.8 million during the year ended December 31, 2024, compared to $17.3 million during the year ended December 31, 2023.
From January 2021 through December 2022, we had the option to pay interest as follows: 7.5% per annum in cash and 5.0% per annum paid-in-kind, or PIK, by increasing the principal of the Term Loan.
From January 2023 through June 2025, we had the option to pay interest as follows: 8.5% per annum in cash and 5.0% per annum PIK by increasing the principal of the Term Loan.
This synergistic partnership leverages our field organization that is already calling on the same customers and supports our objective to engage earlier in the diagnostic and therapy selection process. DIXI Medical provides us with ongoing commercial support and supplies the DIXI Medical products we order.
This synergistic partnership leverages our field organization that is already calling on the same customers and supports our objective to engage earlier in the diagnostic and therapy selection process.
Research and Development Expenses Research and development expenses decreased by $1.2 million, or 5%, to $20.8 million during the year ended December 31, 2023, compared to $21.9 million during the year ended December 31, 2022.
Research and Development Expenses Research and development expenses increased by $2.9 million, or 14%, to $23.7 million during the year ended December 31, 2024, compared to $20.8 million during the year ended December 31, 2023.
In November 2023, we received net proceeds of approximately $7.6 million from the sale of shares of common stock pursuant to our ATM offering program, after deducting sales commission and offering expenses. As of December 31, 2023, we have $41.8 million remaining under our ATM program.
During the year ended December 31, 2023, we received net proceeds of approximately $7.6 million from the sale of shares of common stock pursuant to our ATM offering program, after deducting sales commission and offering expenses. During the year ended December 31, 2024, we received net proceeds of approximately $3.2 million after deducting sales commissions and offering expenses.
The non-cash charges primarily consisted of $8.3 million of stock-based compensation, $2.7 million of amortization of right-of-use assets, $1.9 million of interest 110 incurred but paid-in-kind, $0.9 million of non-cash interest expense related to our Term Loan and $0.4 million of realized loss from sale of short-term investments.
The non-cash charges primarily consisted of $10.3 million of stock-based compensation, $1.6 million of amortization of right-of-use assets, $1.4 million of interest incurred but paid-in-kind, $1.0 million of non-cash interest expense related to our Term Loan, and $0.3 million of inventory write-downs.
In addition to providing us with an incremental revenue stream, the DIXI Medical 103 partnership provides us with improved visibility of patients moving through the EMUs, many of whom may be candidates for our RNS System.
These products are used in the epilepsy monitoring units, or EMUs, of comprehensive epilepsy centers to determine where epileptic seizures originate. In addition to providing us with an incremental revenue stream, the DIXI Medical partnership provides us with improved visibility of patients moving through the EMUs, many of whom may be candidates for our RNS System.
We believe our existing cash, cash equivalents and short-term investments will allow us to continue our operations for at least the next 12 months.
Based on our current planned operations, we believe our existing cash, cash equivalents and short-term investments will allow us to continue our operations for at least the next 12 months. See “Liquidity and Capital Resources - Future Funding Requirements” for additional information.
Since our inception, we have generated significant losses. We have financed our operations primarily through sales of our products, issuance of equity securities, and debt financing.
We plan to address this opportunity in a targeted manner with incremental expansion of our sales force. Since our inception, we have generated significant losses. We have financed our operations primarily through sales of our products, issuance of equity securities, and debt financing.
This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections.
This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, which are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.
Net cash used in operating activities was $36.9 million for the year ended December 31, 2022. Cash used in operating activities was primarily a result of the net loss of $47.1 million, adjusted for non-cash charges of $15.0 million and change in operating assets and liabilities of $4.8 million.
Cash used in operating activities was primarily a result of the net loss of $27.1 million, adjusted for non-cash charges of $14.6 million and change in operating assets and liabilities of $5.4 million.
Interest Expense and Income Interest expense increased by $1.0 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, due to an increase in average balances of our Term Loan as a result of using the paid-in-kind option for interest whereby we added part of the interest due to the Term Loan's principal balance instead of paying it in cash for the payment dates from April 2022 through December 2023, and to an increase in the Term Loan interest rate from 12.5% to 13.5% during the year ended December 31, 2023.
Interest Expense and Income Interest expense increased by $0.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to an increase in the average balance of our Term Loan as a result of using the PIK interest option for the payment dates from January 2023 through June 2024.
The increase in selling, general and administrative expenses was primarily due to an increase of $4.9 million in personnel-related expenses driven by an increase in sales-based variable compensation as a result of the increase in revenue during the year ended December 31, 2023, compared to the year ended December 31, 2022, and stock-based compensation, an increase of $0.8 million in sales, field support and marketing costs including expenses for ongoing commercial support provided by DIXI Medical in connection with distributing their products, and an increase of $0.4 million in expenses related to commercial operations.
The increase in selling, general and administrative expenses was primarily due to an increase of $2.4 million in personnel-related expenses driven by an increase in our sales and field support personnel during the year ended December 31, 2024, compared to the year ended December 31, 2023, an increase of $0.3 million in sales, field support and marketing 100 costs, including travel, and an increase of $0.4 million in expenses related to commercial operations.
Net cash provided by financing activities was $0.5 million for the year ended December 31, 2022, which primarily relates to receipt of proceeds from the issuance of common stock under employee plans of $0.9 million, partially offset by payment of deferred offering costs of $0.4 million.
Cash Flows Provided by Financing Activities Net cash provided by financing activities was $4.3 million for the year ended December 31, 2024, which primarily consisted of $3.3 million of net cash proceeds from our At-the-Market offering and proceeds from the issuance of common stock under employee plans of $1.9 million, partially offset by taxes withheld and paid related to net share settlement of equity awards of $0.9 million.
Revenue from sales of our RNS System for replacement procedures represented approximately 5% of our total revenue for the year ended December 31, 2023, as compared to approximately 18% for the year ended December 31, 2022. Substantially all of our revenue, with the exception of less than $0.1 million, was generated from sales in the United States.
All of our revenue, with the exception of $0.2 million and less than $0.1 million for the years ended December 31, 2024 and 2023, was generated from sales in the United States.
The increase was primarily due to the increase in the number of units sold for initial implant procedures and the costs associated with distribution of DIXI Medical products.
The increase was primarily due to an increase in the number of RNS Systems sold and the costs of distributing DIXI Medical products.
Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part I, Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” under Part I, Item 1A of this report and elsewhere in this Annual Report on Form 10-K.
The decrease in research and development expenses was primarily due to a decrease of $0.9 million in outside services primarily for product development and clinical studies and an increase of $0.8 million in funds received under the NIH funding agreement 107 which are recognized as a reduction in research and development expenses.
The increases were offset in part by an increase of $0.5 million in grant funds received primarily under the NIH funding agreement which are recognized as a reduction in research and development expenses.
Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the periods indicated (in thousands): Years Ended December 31, 2023 2022 Change % Change Revenue $ 65,421 $ 45,520 $ 19,901 44 % Cost of goods sold 17,299 13,027 4,272 33 % Gross profit 48,122 32,493 15,629 48 % Operating expenses Research and development 20,778 21,946 (1,168) (5) % Selling, general and administrative 54,518 51,341 3,177 6 % Total operating expenses 75,296 73,287 2,009 3 % Loss from operations (27,174) (40,794) 13,620 (33) % Interest income 3,050 1,578 1,472 93 % Interest expense (8,517) (7,529) (988) 13 % Other income (expense), net (315) (337) 22 (7) % Net loss $ (32,956) $ (47,082) $ 14,126 (30) % Revenue Revenue increased by $19.9 million, or 44%, to $65.4 million during the year ended December 31, 2023, compared to $45.5 million during the year ended December 31, 2022.
Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 99 The following table summarizes our results of operations for the periods indicated (in thousands): Years Ended December 31, 2024 2023 Change % Change Revenue $ 79,906 $ 65,421 $ 14,485 22 % Cost of goods sold 20,821 17,299 3,522 20 % Gross profit 59,085 48,122 10,963 23 % Operating expenses Research and development 23,653 20,778 2,875 14 % Selling, general and administrative 57,103 54,518 2,585 5 % Total operating expenses 80,756 75,296 5,460 7 % Loss from operations (21,671) (27,174) 5,503 (20) % Interest income 3,024 3,050 (26) (1) % Interest expense (8,798) (8,517) (281) 3 % Other income (expense), net 304 (315) 619 (197) % Net loss $ (27,141) $ (32,956) $ 5,815 (18) % Revenue Revenue increased by $14.5 million, or 22%, to $79.9 million during the year ended December 31, 2024, compared to $65.4 million during the year ended December 31, 2023.
The increases were offset in part by a decrease of $3.1 million in general and administrative costs, primarily outside services and insurance.
The increases were partially offset by a decrease of $0.4 million in general and administrative expenses.
The loan agreement contains customary representations and warranties, covenants, events of default and termination provisions. The financial covenants require that we achieve minimum annual revenue thresholds commencing in 2021 and maintain a minimum balance of cash and cash equivalents. See Notes 1 and 6 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
The Term Loan is collateralized by substantially all of our assets. The loan agreement contains customary representations and warranties, covenants, events of default and termination provisions. The financial covenants require that we achieve minimum annual revenue thresholds and maintain a minimum balance of cash and cash equivalents.
The decreases were offset in part by an increase of $0.7 million in personnel-related expenses, including stock-based compensation. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $3.2 million, or 6%, to $54.5 million during the year ended December 31, 2023, compared to $51.3 million during the year ended December 31, 2022.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $2.6 million, or 5%, to $57.1 million during the year ended December 31, 2024, compared to $54.5 million during the year ended December 31, 2023.
The increase in revenue was primarily due to an increase in the number of units sold for initial implant procedures as well as an increase in pricing, and the addition of sales of DIXI Medical products which began in the fourth quarter of 2022, partially offset by a decrease in units sold for replacement implant procedures in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The increase in revenue was primarily due to an increase in the number of RNS System units sold and an increase in sales of DIXI Medical products. Revenue from sales of DIXI Medical products represented approximately 17% of our total revenue for the year ended December 31, 2024, as compared to approximately 15% for the year ended December 31, 2023.
While research and development and clinical studies are time consuming and costly, we believe that a pipeline of product enhancements and new products that improve efficacy, safety and ease of use is important for supporting increased adoption of our RNS System.
In addition, we are continuing to develop AI-enabled software tools, leveraging our extensive database of intracranial electroencephalogram, or iEEG, data and our advanced data analysis capabilities to equip clinicians with the data they need to establish optimal program settings for each patient. 97 While research and development and clinical studies are time consuming and costly, we believe that a pipeline of product enhancements and new products that improve effectiveness, safety and ease of use is important for supporting increased adoption of our RNS System.
Following the interest-only period, principal payment is due in one installment on September 30, 2025. The Term Loan includes a fee upon repayment of the loan equal to 10% of the aggregate principal amount being prepaid or repaid. The Term Loan is collateralized by substantially all of our assets.
In May 2024, we amended the Term Loan to extend the final maturity by one year to September 30, 2026 and eliminate the PIK interest option after June 30, 2024. The Term Loan includes a fee upon repayment of the loan equal to 10% of the aggregate principal amount being prepaid or repaid.
Term Loan In September 2020, we entered into the Term Loan with CRG Partners IV L.P. and its affiliates for total borrowings of up to $60 million and borrowed $50 million. The remaining $10.0 million was available to us for borrowing until March 31, 2022 if we achieved a revenue-based milestone in 2021.
On February 20, 2025, we terminated the Sales Agreement and closed the ATM program. On the date of termination, we had $38.3 million remaining under our ATM program. Term Loan In September 2020, we entered into the Term Loan with CRG Partners IV L.P. and its affiliates for total borrowings of up to $60 million and borrowed $50 million.
We may incur additional expenses to further enhance our research and development efforts and to pursue commercial opportunities outside of the United States. We lease our office and manufacturing facilities in Mountain View, California under a non-cancelable operating lease which expires in June 2030. Future minimum lease payments under non-cancelable operating leases were $20.2 million as of December 31, 2023.
In addition, we lease our office and manufacturing facilities in Mountain View, California under a non-cancelable operating lease which expires in June 2030. Future minimum lease payments under non-cancelable operating leases were $17.3 million as of December 31, 2024. See Note 5 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
This device has an average battery life of nearly eleven years, an increase from the previous model of the device. We expect that the percentage of our revenue from replacement procedures may continue to decrease over the next few years as a result of the extended replacement cycle of the newer device.
This device has an average battery life of nearly eleven years, an increase from the previous model of the device.
In addition, a change in procedure mix between initial and replacement procedures may have a negative impact on our gross margin. Beginning in the fourth quarter of 2022, we also began to derive revenue from sales of DIXI Medical products.
We have experienced and may continue to experience changes in the percentage of our revenue from replacement procedures over the next few years as a result of the extended replacement cycle of the newer device, which may cause variability in our gross margin. We also derive revenue from sales of DIXI Medical products.
See “Facility Lease” in Note 5 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information. As of December 31, 2023, we had cash, cash equivalents and short-term investments of $66.5 million.
See Notes 1 and 6 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information. Material Cash Requirements We have future minimum payments for the Term Loan totaling $75.0 million, with $7.7 million due within twelve months.
In 2023, we received FDA approval of a PMA-S, which updated the qualification criteria for centers and clinicians that may prescribe and implant the RNS System. This PMA-S allows us to expand our commercial efforts to target and be able to qualify approximately 1,800 additional epileptologists practicing outside of Level 4 CECs and the entire population of functional neurosurgeons.
In 2023, we received FDA approval of a Premarket Approval Supplement, or PMA-S, which updated the qualification criteria for centers and clinicians that may prescribe and implant the RNS System. We initiated a pilot program to begin our outreach to these centers and clinicians in 2024 and have commenced program expansion that will continue through 2025.
From January 2023 through June 2025, we have the option to pay interest as follows: 8.5% per annum in cash and 5.0% per annum PIK by increasing the principal of the Term Loan. For each payment date from April 2022 through December 2023, we elected the PIK option, increasing the principal of the Term Loan by $4.6 million.
For each payment date from January 2023 through June 2024, we elected the PIK option. 101 The Term Loan was interest-only through its original final maturity of September 30, 2025. Following the interest-only period, principal payment would have been due in one installment on September 30, 2025.
Removed
As of December 31, 2023, over 5,000 epilepsy patients have received our RNS System. We believe our compelling body of long-term clinical data, demonstrating continuous improvement in outcomes over time, will support the continued adoption of our RNS System among the approximately 575,000 adults in the United States with drug-resistant focal epilepsy.
Added
We recently announced our primary effectiveness endpoint data in our Post-approval Study in this patient population. The data showed that the RNS System efficacy improved over time, with a 62.5% median seizure reduction at six months after implant (n=314) and an 82.0% median seizure reduction at 36 months after implant (n=255).
Removed
We continue seeking indication expansion to, over time, more broadly reach the entire approximately 1.2 million drug-resistant epilepsy patients in the United States. In December 2023, we finished enrolling and implanting the requisite number of patients for FDA submission in our clinical trial to evaluate RNS System use in the generalized epilepsy population.
Added
Additionally, 42.5% of patients experienced a period of seizure-freedom for at least six months, and 22% of patients were seizure free for at least one year. Results will be presented at the American Academy of Neurology Annual Meeting, held April 5 through 9, 2025.
Removed
We may additionally seek to expand our operations to reach the approximately 16.5 million drug-resistant epilepsy patients globally. We received Premarket Approval, or PMA, from the FDA for our RNS System in late 2013 and began the commercial rollout of our RNS System in early 2014.
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We are conducting studies to expand our indication for use to patients with drug-resistant generalized epilepsy and patients with drug-resistant focal epilepsy under the age of 18.
Removed
We have historically marketed our RNS System in the United States through a direct sales organization primarily to the epileptologists and neurosurgeons who respectively prescribe and implant neuromodulation devices in the approximately 200 Level 4 CECs in the United States. We have established a significant account base at these CECs.
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In March 2024, we completed implanting patients in our NAUTILUS study for generalized epilepsy and expect that the last patient will complete one year of follow up in March 2025, with the data lock and subsequent commencement of data analyses expected to begin in the second quarter of 2025.
Removed
While most drug-resistant epilepsy patients begin their care at physician offices or community hospitals, we estimate that approximately 24,000 adult drug-resistant focal epilepsy patients are treated in Level 4 CECs in the United States each year.
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To support our RESPONSE study for label expansion in focal epilepsy patients under the age of 18, we recently announced our collaboration with the National Evaluation System for health Technology, or NEST, and the FDA to pursue the use of real-world data from the Pediatric Epilepsy Research Consortium, or PERC.
Removed
We estimate that this patient pool represents an annual core market opportunity of approximately $1.1 billion for initial RNS System implants, and we expect that it will continue to grow as the number of Level 4 CECs and epileptologists increase, and as more patients are referred to these CECs.
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We are planning to file the expanded label submissions to the FDA for both of these indications in the second half of 2025. Our commercial efforts have historically been focused on growing adoption and utilization across Level 4 comprehensive epilepsy centers, or CECs, in the United States that facilitate appropriate care for drug-resistant epilepsy patients.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2023, we had cash, cash equivalents and short-term investments of $66.5 million, compared to $77.4 million at December 31, 2022, consisting of interest-bearing money market funds and fixed income mutual funds for which the fair value would be affected by changes in the general level of U.S. interest rates.
Biggest changeAs of December 31, 2024, we had cash, cash equivalents and short-term investments of $52.8 million, compared to $66.5 million at December 31, 2023, consisting of interest-bearing money market funds and fixed income mutual funds for which the fair value would be affected by changes in the general level of U.S. interest rates.
We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein. 112
We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein. 105

Other NPCE 10-K year-over-year comparisons