ITEM 1A. RISK FACTORS
Investing in our securities carries a significant
degree of risk. You should carefully consider the risks described below, together with all of the other information in this Form 10-K,
including our consolidated financial statements and related notes included elsewhere in this Form 10-K, before deciding whether to invest
in our securities. If any or a combination of the following risks were to materialize, our results of operations, financial condition
and prospects could be materially adversely affected. If that were to be the case, the market price of our securities could decline, and
investors could lose all or part of their investment. The risks and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Risks Related to Our Financial Condition and
Capital Requirements
We have incurred significant losses since
our inception, do not currently generate any operating income, and expect to continue incurring losses as we work to obtain product approval,
and thus we may never achieve or maintain profitability.
Since our inception, we have engaged primarily
in development activities, including planning and implementing clinical trials to support commercialization and FDA clearance of our Symphony
platform. We have funded our operations primarily through debt and equity financings, and have incurred losses since inception, including
a net loss of approximately $6.8 million and approximately $7.7 million for the years ended December 31, 2025 and 2024, respectively,
and from our inception through December 31, 2024, we had an accumulated deficit of approximately $41.5 million.
We currently have no product revenue and we may
not be able to commercialize our Symphony technology platform or achieve significant revenues or profitability. Our ability to generate
revenue and achieve profitability depends upon our ability, alone or with others, to complete the development process of our product candidates,
including regulatory clearances, and thereafter achieve substantial acceptance in the marketplace for our products. We may be unable to
achieve any or all of these goals.
We expect to need to raise at least $20
million between the date of this filing and the end of the 2027 fiscal year, and failure to do so could require us to undertake a process
of liquidation under U.S. bankruptcy laws, which could cause holders of our common stock to recoup little, if any, value for their shares.
As of December 31, 2025, we possessed cash and
cash equivalents of approximately $5.2 million, while having current liabilities of approximately $1.1 million. Consistent with prior
years, we expect to incur a significant operating loss in 2026 and 2027 given that we do not currently generate any operating income.
To achieve our current strategic plan, which strives to be in position to submit a 510(k) regulatory application to the FDA in 2027 and
achieve FDA clearance thereafter, we expect to need to raise at least $20 million of further capital through the end of the 2027 fiscal
year, which we hope to do in various tranches. If we do not raise additional capital, we expect to run out of available cash resources
in the third quarter of 2026. There can be no assurance that such additional capital will be available on a timely basis or on terms that
will be acceptable to us. We currently do not have any contracts or commitments for additional financing. In addition, any additional
equity financing may involve substantial dilution to our existing stockholders, or provide that an equity or debt financing source obtains
rights to control the membership of our board of directors.
Our financial results and financial position,
and our expected forward-looking outlook of significant negative cash flow in the future, raise substantial doubt with respect to our
ability to continue as a going concern. We expect that we will not be in position to submit a 510(k) regulatory application to the FDA
for Symphony until 2027, at the earliest, if we are even able to generate sufficient clinical trial results to support such a submission.
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If we fail to obtain additional financing, we
likely will be forced to abandon operational activities entirely and file for bankruptcy protection, with the possible loss of properties
or assets (including the license to our core technology). Based on our explorations to date, we do not expect that any other strategic
alternatives, such as a potential sale of the Company or its assets or other restructuring efforts, will be available to us in the near-term.
As a result, any inability to obtain additional financing in the near-term, including a material amount of financing over the next 2 years,
would likely result in a material adverse effect on our business, results of operations, cash flow, financial condition and prospects
and cause our stockholders to receive little or no return on their shares of common stock.
Since the initial public offering of our
common stock in November 2021, the market price of our common stock has fallen by more than 99.9%, and we expect to need additional funding
amounts substantially greater than the current market capitalization of our common stock, which may result in future dilution that coincides
with further declines in the trading price of our common stock beyond the substantial declines that have occurred in recent years.
Since the initial public offering of our common
stock in November 2021, the market price of our common stock has fallen by more than 99.9%, including declines of greater than 80% per
year in each of 2025, 2024, 2023 and 2022. During such period of time, we have conducted several public offerings and private placements
of securities to raise additional capital, and in each case, the market price of our common stock has declined after the consummation
of such offerings. As described above, we expect to need to raise at least $20 million of funding over the next 2 years – an aggregate
amount several times the current market capitalization of our outstanding common stock, and we do not expect to be able to complete necessary
product re-development, troubleshooting and clinical trial work absent such material funding. This may cause new investors to demand terms
in future offerings that substantially dilute existing shareholders, such as the inclusion of warrants with Black Scholes protections
in the event of a sale transaction, which could cause our common stock to fall further from current levels on a per share basis.
The number of shares of common stock underlying
our outstanding warrants is several times greater than our currently outstanding common stock, which could have a negative effect on the
market price of our common stock and make it more difficult for us to raise funds through future equity offerings. In addition, in connection
with any merger, consolidation or sale of all or substantially all of our assets, holders of our outstanding warrants would be entitled
to receive the Black Scholes value of such warrants, which may reduce the consideration otherwise available for payment to holders of
our common stock.
As part of our public offerings and/or private
placements of securities in October 2025, April 2025, June 2024, January 2024 and August 2023, we issued warrants to purchase shares of
our common stock. As of the date of this filing, remaining warrants exercisable from these transactions included (i) Series F Warrants
issued in October 2025 to purchase up to 1,125,000 shares of common stock at an exercise price of $7.00 per share, (ii) October 2025 Placement
Agent Warrants to purchase up to 45,000 shares of common stock at an exercise price of $10.00 per share, (iii) Class E Warrants issued
in April 2025 to purchase up to 271,277 shares of common stock at an exercise price of $13.68 per share, (iv) Class C Warrants issued
in June 2024 to purchase 71,873 shares of common stock at an exercise price of $65.20 per share, (v) January 2024 Warrants to purchase
up to 1,682 shares of common stock at an exercise price of $2,080.00 per share, (vi) January 2024 Placement Agent Warrants to purchase
up to 117 shares of common stock at an exercise price of $2,600.00 per share, and (vii) warrants issued in August 2023 to purchase up
to an aggregate of 142 shares of common stock at exercise prices ranging from $11,584.00 to $14,736.00 per share. All of such warrants
expire either five or five and one-half years from the date of issuance (except for the October 2025 Prefunded Warrants, which do not
expire).
The warrants generally are only exercisable by
means of a cash exercise. In general, holders of these warrants may not exercise any portion of such warrants if such holder, together
with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding common stock
immediately after exercise. The warrants include certain rights upon a “fundamental transaction” (as defined in such warrants),
including the right of the holders thereof to receive from us or a successor entity cash or the same type or form of consideration (and
in the same proportion) that is being offered and paid to the holders of common stock in such fundamental transaction in the amount of
the Black Scholes value (as defined in such warrants) of the unexercised portion of the applicable warrants on the date of the consummation
of such fundamental transaction.
Although these warrants are subject to beneficial
ownership limitations, upon exercise in full of the warrants, the shares issuable upon exercise would represent a significant portion
of our outstanding common stock. As a result, the holders of these warrants may be able to exert substantial influence over our business.
The concentration of voting power resulting from the exercise of the warrants could delay, defer or prevent a change of control, or delay
or prevent a merger, consolidation, takeover or other business combination involving us on terms that other stockholders may desire. In
addition, conflicts of interest could arise in the future between us and the holders of these warrants concerning the issuance of additional
securities and other matters. In addition, sales of these shares could cause the market price of our common stock to decline.
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We have registered the issuance of shares upon
exercise of these warrants under registration statements. As a result, the shares issuable upon exercise of these warrants can be freely
sold in the public market upon issuance. Sales of these shares into the public market in the future could cause the market price of our
common stock to decline. Furthermore, if our stock price rises, the holders of these warrants may be more likely to exercise their warrants
and sell a large number of shares, particularly if the price of our common stock substantially exceeds the exercise price of such warrants.
Such exercises, particularly if followed up with subsequent sales by the holders receiving shares of common stock, could negatively impact
the market price of our common stock and reduce or eliminate any appreciation in our stock price that might otherwise occur.
Given the amount and terms of these warrants,
we may find it more difficult to raise additional equity capital on favorable terms or at all while these warrants are outstanding.
Our common stock currently is listed for
quotation on the Nasdaq Capital Market. We are required to meet specified financial requirements in order to maintain such listing, including
a requirement that the bid price for our common stock remain above $1.00, and that the market value of our publicly held securities be
at least $1 million. In addition, Nasdaq has recently proposed a new $5 million market value of listed securities requirement that we
would not currently satisfy and therefore could cause our common stock be delisted by Nasdaq on an imminent basis, if approved by the
SEC.
Nasdaq Listing Rule 5550(a)(2) requires listed
companies to maintain a minimum bid price of $1.00 for continued inclusion on the Nasdaq Capital Market. As of the close of business on
March 2, 2026, the most recent closing price of our common stock on the Nasdaq Capital Market. was $2.05 per share. If the trading
price were to fall below $1.00 per share, we would not be compliant this requirement. In such event, we would be subject to delisting,
and because we consummated a reverse stock split in January 2026, we would be ineligible for any compliance period under recently implemented
Nasdaq listing rules if this event occurred prior to the one-year anniversary of such reverse stock split. As a result, such a decline
in the price of our common stock, if it were to occur, would be expected to result in the prompt delisting of our common stock from the
Nasdaq Capital Market.
In addition, Nasdaq Listing Rules 5550(a)(5) and
5550(b)(1) require that the market value of our publicly held common stock (which is our only outstanding class of capital stock) to be
at least $1 million and that our stockholders’ equity as reported in our most recent quarterly balance sheet to be at least $2.5
million. As of the close of business on March 2, 2026, the market value of our publicly held common stock was approximately $2.0
million, and as of December 31, 2025, our stockholders’ equity was approximately $6.0 million. If the market value of our publicly
held common stock declines below $1 million or our stockholders’ equity falls below $2.5 million, we would also be subject to Nasdaq
delisting proceedings on that basis.
Nasdaq’s staff also maintains discretionary
authority under its listing rules to delist companies whose capital structure or public offerings raise public interest and investor protection
concerns, including as a result of highly dilutive issuances, and it is possible that Nasdaq could assert that past offerings that we
have consummated, or future offerings we may consummate, raise such concerns. In addition, to raise the significant amount of capital
that we expect to need to fund our strategic plan, potential investors may require us to accept terms (such as board representation rights
in excess of an investor’s beneficial ownership of our common stock) that could conflict with Nasdaq listing standards and result
in us being delisted.
In addition to the foregoing requirements, Nasdaq
has recently proposed a new listing requirement that would require each Nasdaq listed issuer to maintain a minimum market value of listed
securities of at least $5 million. Under this proposal, if the value of an issuer’s listed securities, as measured by each applicable
trading day’s closing price, continues to be less than $5 million for a period of 30 consecutive trading days, the issuer’s
securities would immediately be delisted, with no compliance or cure period. The proposed rule would also preclude an issuer’s ability
to seek stay of delisting during any appeals process, and would preclude Nasdaq hearings panels from reversing the delisting determination
to situations where there was an error and the company never actually failed to satisfy the requirement. The panel would also not be able
to consider any facts indicating that issuer subsequently regained compliance with the requirement or grant an issuer any additional time
to regain compliance. The proposed rule is subject to review and approval by the SEC, and it is unknown whether the SEC will approve the
proposal. If approved by the SEC, the rule could become effective on an imminent basis. Our common stock currently trades at levels that
are below the $5 million aggregate market value threshold proposed by Nasdaq. As such, if this proposal is approved by the SEC, our common
stock could be imminently delisted by Nasdaq on this basis.
If our common stock is delisted, we may seek to
have our common stock quoted on an over-the-counter marketplace, such as on the OTCQX. The OTCQX is not a stock exchange, and if our common
stock trades on the OTCQX rather than a securities exchange, there may be significantly less trading volume and analyst coverage of, and
significantly less investor interest in, our common stock, which may lead to lower trading prices for our common stock.
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Any potential delisting of our common stock from
the Nasdaq Capital Market may have materially adverse consequences to our stockholders, including:
● limited dissemination of the market price of our common stock;
● limited news coverage;
● limited interest by investors in our common stock;
● volatility of the prices of our common stock, due to low trading volume;
Our ability to raise additional capital via a registered public
offering on Form S-3 will be limited in the near-term as a result of the SEC’s “baby shelf” rules.
In June 2023 we filed a shelf registration statement on Form S-3, which
was declared effective by the SEC on June 20, 2023 (the “Shelf Registration Statement”). The Shelf Registration Statement
allows us to sell from time to time up to $25 million of common stock, preferred stock, debt securities, debentures, warrants, rights
or units comprised of any combination of these securities, for our own account in one or more offerings. In August 2023, we completed
a public offering under the Shelf Registration Statement pursuant to which we raised gross proceeds of approximately $1.6 million. Under
applicable SEC rules, smaller companies like us are only permitted to raise up to 1/3rd of their public float under Form S-3 over a 12-month
period. As a result, based on our current public float, we are only able to sell up to approximately $700,000 as of the date of this filing
pursuant to our Form S-3, assuming we continue the applicable eligibility requirements thereof. This limit on our use of Form S-3 in the
near-term may make it more difficult for us to raise equity capital in the public markets, as we expect to be required to conduct any
such fundraising via private placements, or sales on Form S-1, which sales of Form S-1 may be more difficult for us to execute in a timely
manner.
We may be obligated to current and/or prior financial advisors
under engagement letters that we enter into from time to time, and we are currently subject to such an obligation.
As part of our capital raising and financial planning measures, we
have entered into, and may in the future enter into, various engagement letters with financial advisors. Such engagement letters have
included, and may in the future include, rights of first offer or refusal and similar provisions that require us to offer such financial
advisors the right to serve as underwriter, placement agent or in similar roles in connection with certain future public or private financing
transactions, or that require us to pay prior financial advisors fees in connection with certain transactions consummated using other
financial advisors.
Risks Related to Our Business
To preserve cash resources, we downsized
our organization in 2025, which may reduce business continuity, affect our ability to apply for certain patents, and affect our product
development and timelines.
To preserve cash resources, we implemented a series
of cost savings measures in 2025 related to our product development operations. As of the date of this filing, we have reduced our overall
Company-wide full-time employee headcount to 6 persons. To the extent we obtain sufficient funding, we may hire appropriate personnel
in the future to expedite our commercialization efforts, but there is no assurance that we will be able to do so.
We are subject to the risks associated with
new businesses.
We are effectively a new business with a plan
to commercialize our licensed technology. Our limited operating history may not be adequate to enable you to fully assess our ability
to develop and market our Symphony platform and test cartridges, assuming we receive regulatory clearances, for which there is no assurance,
and respond to competition. Our efforts to date have related to the organization and formation of our Company, research and development
and performing clinical trials. We have no approved products, have not yet generated sustainable revenue, and we cannot guarantee we will
ever be able to generate future revenues. Therefore, we are, and expect for the foreseeable future to be, subject to all the risks and
uncertainties, inherent in a new business focused on the development and sale of new medical devices. As a result, we may be unable to
further develop, obtain regulatory clearance for, manufacture, market, sell and derive revenues from our Symphony platform and test cartridges
and the other product candidates in our pipeline, and our inability to do so would materially and adversely impact our viability. In addition,
we still must optimize many functions necessary to operate a business, including expanding our managerial, personnel and administrative
structure, continuing product research and development, and assessing and commencing our marketing activities.
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Accordingly, you should consider our prospects
in light of the costs, uncertainties, delays and difficulties frequently encountered by companies that have not yet commercialized their
products, particularly those in the medical device field. In particular, potential investors should consider that there is a significant
risk that we will not be able to:
● maintain our management team and Board of Directors;
● attract, enter into or maintain contracts with, and retain customers; and
In the event that we do not successfully address
these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
Our agreements with Toray, which relate
to the license of the core technology used in our Symphony cartridges and for Sanyoseiko to manufacture cartridges for Bluejay, are subject
to significant risks that may threaten our viability or otherwise have a material adverse effect on us and our business, assets and its
prospects.
We have an exclusive license with Toray for the
entire world, excluding Japan, to use their patents and know-how related to our Symphony test cartridges for the manufacturing, marketing
and sale of such products. We also have a nonexclusive license for manufacturing purposes in Japan. We have a right to sublicense these
Toray patents and know-how (upon either (a) obtaining consent from Toray prior to obtaining FDA clearance or (b) giving notice to Toray
after obtaining FDA clearance), and for the purpose of obtaining FDA clearance, we will need to exercise this sublicence to have the cartridges
manufactured for Bluejay by a Japanese manufacturer, Sanyoseiko, Inc. (“Sanyoseiko”). We have no contractual rights to the
intellectual property covered in the license agreement other than as expressly set forth therein. Our plans, business, prospects and viability
are substantially dependent on that intellectual property and subject to the limitations relating thereto as set forth in the license
agreement. Some of the risks this may give rise to are described below.
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In addition, see the risks in “Risks
Related to Our Intellectual Property” below. These risks are not the only risks inherent in the license agreement with Toray.
As an intermediate step to regulatory submission,
we need to demonstrate that our collected clinical samples do not degrade over time.
We are currently conducting testing to demonstrate
specimen stability of the samples collected from the SYMON-II clinical study, which is one of the integral aspects that we will have to
establish before we can proceed to FDA clearance. We plan to establish sample stability using standard plate ELISA technology that is
accepted by the FDA. If we fail to prove that IL-6 is stable over time, we might have to redesign our business plan.
There is a risk that validation of the primary
outcome measure of our SYMON-I study will not achieve statistical significance.
Although our SYMON-I study found promising results,
there is a risk that subsequent validation will not achieve statistical significance, which would render those results subject to scrutiny
and subject us to setbacks, including having to redesign our preliminary study at considerable expense and time delay.
There is a risk of our cartridges not passing
analytical validation, one of the key requirements of FDA clearance.
There is a risk that our cartridges, a core component
of our Symphony system, will not pass analytical validation due to failures in performance. We are working on plans in order to reduce
this risk, but we cannot be sure that our attempts will be successful until they have been tested and have successfully passed analytical
validation themselves.
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FDA requirements could change prior to submission
and lead to delays and additional costs.
The Symphony analyzer has previously passed all
safety validations required by the FDA. However, due to recent FDA requirement changes should other FDA standards change, we could need
to perform those tests as well, incurring additional expenses and delays that are impossible to predict due to the uncertain nature of
what standards the FDA might change in the future.
The FDA could request additional data or
testing after our application submission, requiring additional costs and delaying approval.
Although we have had a pre-submission meeting
with FDA and included FDA feedback into our plan, the FDA could decide to request additional data or testing after we have submitted our
FDA application. This could result in significant additional costs generated in the process of gathering whatever additional data or developing
and running the additional testing requested by the FDA. Furthermore, it can take several months to years to conduct testing and collect
data, and depending on the extent of the FDA’s additional request, the delay caused could be significant. During any such period
of delay, not only would we be incurring the additional expenses of the testing, but we would also continue to not generate any revenue.
We depend on, and are liable for, Sanyoseiko
as our Symphony analyzer and cartridge contract manufacturing organization (CMO), so its inability or failure to perform appropriately
in that capacity may threaten our viability or have a material adverse effect on us and our business, assets and its prospects.
We are dependent on Sanyoseiko to maintain compliance
with the FDA requirements, and continuously manufacture and supply us with our Symphony analyzers and cartridges. If Sanyoseiko is unable
to do so for any reason and we are unable to activate a new CMO to produce analyzers, we may be unable to obtain FDA clearance and commence
any commercial sales or unable to supply products to our customers in a timely manner or at all, either of which could threaten our viability.
We are also liable for Sanyoseiko’s performance
and actions as our CMO, and any breach by Sanyoseiko of our license and/or supply agreements with Toray may have a material adverse effect
on us and our business.
We have not yet launched any products and
the ability to do so will depend on the acceptance of our Symphony platform in the healthcare market.
We have not yet launched or received regulatory
clearances in any country or territory for our Symphony platform or test cartridges. Even if we receive regulatory clearances, we are
faced with the risk that our Symphony platform will not be accepted over competing products and that we will be unable to enter the marketplace
or compete effectively. We cannot assure you that our Symphony platform or test cartridges will gain market acceptance. If the market
for our future products fails to develop or develops more slowly than expected, or if any of the technology and standards supported by
us do not achieve or sustain market acceptance, our business and operating results would be materially and adversely affected.
We cannot accurately predict the volume
or timing of any sales, making the timing of any revenues difficult to predict.
We may be faced with lengthy and unpredictable
customer evaluation and approval processes associated with our Symphony platform. Consequently, we may incur substantial expenses and
devote significant management effort and expense in developing customer adoption of our Symphony platform, which may not result in revenue
generation. We must also obtain regulatory clearances or approvals of our Symphony platform and test cartridges in jurisdictions in which
we pursue approvals, which is subject to risk and potential delays. The same risks apply to other tests we may develop based on our Symphony
platform. As such, we cannot accurately predict the volume, if any, or timing of any future sales.
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If third-party payors do not provide coverage
and reimbursement for the use of our platform, our business and prospects may be negatively impacted.
Third-party payors, whether governmental or commercial,
are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in certain countries, no uniform policy
of coverage and reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement
for medical device products and services can differ significantly from payor to payor. In addition, payors continually review new technologies
for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination
process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our
products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.
Our Symphony platform, including its software
and systems, may contain undetected errors, which could limit our ability to provide our products and diminish the attractiveness of our
offerings.
Our Symphony platform may contain undetected errors,
defects, or bugs. As a result, our customers or end users may discover errors or defects in our products, software or systems, or our
products, software or systems may not operate as expected. We may discover significant errors or defects in the future that we may not
be able to fix. Our inability to fix any of those errors could limit our ability to provide our products and services, impair the reputation
of our brand and diminish the attractiveness of our product and service offerings to our customers.
In addition, we may utilize third party technology
or components in our products, and we rely on those third parties to provide support services to us. The existence of errors, defects,
or bugs in third party technology or components, or the failure of those third parties to provide necessary support services to us, could
materially adversely impact on our business.
We will rely on the proper function, security
and availability of our information technology systems and data to operate our business, and a breach, cyber-attack or other disruption
to these systems or data could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation,
or competitive position.
We will depend on sophisticated software and other
information technology systems to operate our business, including to process, transmit and store sensitive data, and our future products
and services may include information technology systems that collect data regarding patients. We could experience attempted or actual
interference with the integrity of, and interruptions in, our technology systems, as well as data breaches, such as cyber-attacks, malicious
intrusions, breakdowns, interference with the integrity of our products and data or other significant disruptions. Furthermore, we may
rely on third-party vendors to supply and/or support certain aspects of our information technology systems. These third-party systems
could also become vulnerable to cyber-attack, malicious intrusions, breakdowns, interference, or other significant disruptions, and may
contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security
of our own systems.
If in the future we pursue foreign jurisdictions,
such international operations will mean that we are subject to laws and regulations, including data protection and cybersecurity laws
and regulations, in many jurisdictions. Furthermore, there has been a developing trend of civil lawsuits and class actions relating to
breaches of consumer data held by large companies or incidents arising from other cyber-attacks. Any data security breaches, cyber-attacks,
malicious intrusions or significant disruptions could result in actions by regulatory bodies and/or civil litigation, any of which could
materially and adversely affect our business, results of operations, financial condition, cash flows, reputation, or competitive position.
In addition, our information technology systems
require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep
pace with continuing changes in information processing technology, evolving legal and regulatory standards, the increasing need to protect
patient and customer information, changes in the techniques used to obtain unauthorized access to data and information systems, and the
information technology needs associated any new products and services. There can be no assurance that our process of consolidating, protecting,
upgrading and expanding our systems and capabilities, continuing to build security into the design of our products, and developing new
systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues
will not arise in the future.
If our information technology systems, products
or services or sensitive data are compromised, patients or employees could be exposed to financial or medical identity theft or suffer
a loss of product functionality, and we could lose existing customers, have difficulty attracting new customers, have difficulty preventing,
detecting, and controlling fraud, be exposed to the loss or misuse of confidential information, have disputes with customers, physicians,
and other health care professionals, suffer regulatory sanctions or penalties, experience increases in operating expenses or an impairment
in our ability to conduct our operations, incur expenses or lose revenues as a result of a data privacy breach, product failure, information
technology outages or disruptions, or suffer other adverse consequences including lawsuits or other legal action and damage to our reputation.
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If we are not able to attract and retain
highly skilled managerial, scientific and technical personnel, we may not be able to implement our business model successfully, and our
limited cash resources could require us to make further cost reductions.
We believe that our management team must be able
to act decisively to apply and adapt our business model in the markets in which we will compete. Our future performance depends to a large
extent on the continued service of our President and Chief Executive Officer, Neil Dey, who is our sole executive officer. In addition,
we rely upon technical and scientific employees or third-party contractors to effectively establish, manage and grow our business. Consequently,
we believe that our future viability will depend largely on our ability to attract and retain highly skilled managerial, sales, scientific
and technical personnel.
In order to do so, we may need to pay higher compensation
or fees to our employees or consultants than we currently expect, and such higher compensation payments would have a negative effect on
our operating results. Competition for experienced, high-quality personnel is intense and we cannot assure that we will be able to recruit
and retain such personnel, or that we will possess the cash resources to do so. For example, our limited cash resources have caused us
to reduce our overall full-time employment headcount to 6 persons, and we could need to implement further personnel-related cost reductions
in the future. As such, we may not be able to hire or retain the necessary personnel to implement our business strategy. For example,
Mr. Dey is currently serving as our principal financial and accounting officer, in addition to serving as our principal executive officer.
Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business effectively. In
the event that we lose the continued services of such key personnel for any reason, this could have a material adverse effect on our business,
operations and prospects.
We do not have a meaningful amount of authorized
shares remaining under our equity compensation plans and therefore cannot incentivize our directors and employees with non-cash compensation,
and our cash compensation obligations for directors and officers are substantial relative to our market capitalization.
We have undergone a series of reverse stock splits
at a cumulative ratio of 1-for-32,000 since our equity incentive plans were adopted. As a result, the authorized shares in such plans
have been correspondingly reduced, and we only possess a de minimus amount of equity under these plans. As a result, we currently cannot
incentivize our directors and employees with non-cash compensation, and even if we possessed such available shares, the substantial declines
in the value of our common stock in each of the prior three years may substantially depress the desired incentive effects of using such
shares for compensatory purposes. We believe that stock incentive plans serve to closely align the interests of directors and officers
with the interests of the Company’s shareholders, and without this tool we are left paying all compensation in cash. Giving effect
to compensation increases approved by our board of directors (and its compensation committee) in the fourth quarter of 2025, our anticipated
cash compensation fees owed to non-employee directors in 2026 is expected to be $540,000 in the aggregate, and Mr. Dey receives annual
base cash compensation of $400,000. Given our lack of available equity incentives as a compensatory tool, we expect to continue incurring
significant cash compensation expense relative to our overall market capitalization. We currently expect to seek stockholder approval
at our 2026 annual meeting of stockholders to reload the shares available under our equity incentive plans, but there is no assurance
that such proposal will be approved by stockholders.
If we or our manufacturers fail to comply
with the regulatory quality system regulations or any applicable equivalent regulations, our proposed operations could be interrupted,
and our operating results would suffer.
We and any third-party manufacturers and suppliers
of ours will be required, to the extent of applicable regulation, to follow the quality system regulations of each jurisdiction we will
seek to penetrate and also will be subject to the regulations of these jurisdictions regarding the manufacturing processes. If we or any
third-party manufacturers or suppliers of ours are found to be in significant non-compliance or fail to take satisfactory corrective action
in response to adverse regulatory findings in this regard, regulatory agencies could take enforcement actions against us and such manufacturers
or suppliers, which could impair or prevent our ability to produce our products in a cost-effective and timely manner in order to meet
customers’ demands. Accordingly, our operating results would suffer.
Product liability suits, whether or not
meritorious, could be brought against us due to an alleged defective product or for the misuse of our Symphony platform or test cartridges.
These suits could result in expensive and time-consuming litigation, payment of substantial damages, and an increase in our insurance
rates.
If our Symphony platform or test cartridges, or
any future tests based on our Symphony platform, are defectively designed or manufactured, contain defective components or are misused,
or if someone claims any of the foregoing, whether or not meritorious, we may become subject to substantial and costly litigation. Misusing
our devices or failing to adhere to the operating guidelines or our devices producing inaccurate readings could cause significant harm
to patients. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. Product liability claims
could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us.
While we expect to maintain product liability insurance, we may not have sufficient insurance coverage for all future claims. Any product
liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing
continuing coverage, could harm our reputation in the industry and could reduce revenue. Product liability claims in excess of our insurance
coverage would be paid out of cash reserves harming our financial condition and adversely affecting our results of operations.
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If we are found to have violated laws protecting
the confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities
and harm our reputation or our business.
There are a number of laws around the world protecting
the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected
information. Privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving
individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health
information to the minimum amount reasonably necessary to accomplish the intended purpose. We may face difficulties in holding such information
in compliance with applicable law. If we are found to be in violation of the privacy rules, we could be subject to civil or criminal penalties,
which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and
results of operations.
Significant raw material shortages, supplier
capacity constraints, supplier disruptions, and sourcing issues may adversely impact or limit our products sales and or impact our product
margins.
Our key suppliers are limited- or sole-source
suppliers. Disruptions in deliveries, capacity constraints, production disruptions up- or down-stream, price increases, or decreased availability
of raw materials or commodities, including as a result of war, natural disasters (including the effects of climate change such as sea
level rise, drought, flooding, wildfires and more intense weather events), actual or threatened public health emergencies or other business
continuity events, adversely affect our operations and, depending on the length and severity of the disruption, can limit our ability
to meet our commitments to customers or significantly impact our operating profit or cash flows.
Specific raw materials used in the production
of Symphony IL-6 cartridges are being limited in supply and the process of finding a suitable substitute could be expensive, use important
resources, reduce the efficacy of the platform, or lead to other delays and setbacks.
Certain raw materials used in production of Symphony
IL-6 cartridges are being discontinued and we might need to be validate new materials to use as substitutes. These materials include hydrophobic
coating solution, side film plastic laminate, and antibody. Testing new raw materials might add extra expense and delay. We cannot currently
predict what substitute materials will be found to work for the discontinued ones, whether they will perform as well, their availability,
or their precise cost.
We might not be able to resolve certain
causes of a Symphony performance reproducibility issue, and if the issues persist we might have to take a different approach.
We continue to face a performance reproducibility
issue with the Symphony cartridges, and might not be able to resolve the issues in a timely manner, and might significantly delay the
FDA clearance process.
If there is a shift in customer demand for
the type of near-patient diagnostic test that we are working to develop, we would be left without a commercially marketable product in
the pipeline.
Our only viable product in development at this
time is a near-patient diagnostic test. If there is a shift in consumer demand away from such tests, for any reason, by or before the
time we are ready to reach the market, we might find ourselves without a viable product sales market. We cannot be certain that there
will be demand for our product by the time it is ready for commercial use or sale, and if there is not, we could be left without a revenue-generating
product, as we do not currently have any other products under development.
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Our relationships with customers, health
care professionals, and patients may be subject to applicable healthcare laws, which could expose us to penalties, including administrative,
civil or criminal penalties, damages, fines, imprisonment, exclusion from participation in federal healthcare programs such as Medicare
and Medicaid, reputational harm, the curtailment or restructuring of our operations and diminished future profits and earnings.
Healthcare professionals will play a primary role
in the recommendation and use of any product candidates for which we obtain marketing approval and commercialize. Our current and future
arrangements with customers, healthcare professionals, and patients may expose us to broadly applicable fraud and abuse and other healthcare
laws and regulations that may constrain the business or financial arrangements and relationships through which we conduct research, market,
sell and distribute any products for which we obtain marketing approval. Federal and state healthcare laws and regulations that may affect
our operations, directly or indirectly, include the following, among others:
Efforts to comply with applicable healthcare laws
and regulations will involve substantial costs. Interpretations of standards of compliance under these laws and regulations are rapidly
changing and subject to varying interpretations and it is possible that governmental authorities will conclude that our business practices
may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws
and regulations. If our operations are found to be in violation of any of these laws or any other laws that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs,
such as Medicare and Medicaid, reputational harm, imprisonment, additional reporting obligations and oversight (if we become subject to
a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws), and the curtailment or restructuring
of our operations, any of which could diminish our future profits or earnings. If any of the physicians or other providers or entities
with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs.
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Healthcare legislative reform measures could
have a material adverse effect on our business, future revenue, if any, and results of operations.
Our ability to commercialize any product candidates
successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare
and Medicaid, private health insurers, and other third-party payors provide coverage for and establish adequate reimbursement levels for
our product candidates. In the United States, there have been a number of legislative and regulatory initiatives and changes affecting
the healthcare system, including focused efforts on containing the cost of healthcare. Private health insurers and other third-party payors
often provide reimbursement for products and services based on the level at which the government provides reimbursement through the Medicare
or Medicaid programs for such products and services. Government authorities and third-party payors have attempted to control costs by
limiting coverage and the amount of payment for certain products and services. The cost containment measures that payors and providers
are instituting and the effect of any healthcare reform initiative implemented in the future could significantly reduce our future revenues
from the sale of our product candidates once they are approved and commercialized.
For example, the Patient Protection and Affordable
Care Act (the “ACA”) substantially changed the way healthcare is financed by both governmental and private insurers, and significantly
impacts the healthcare industry. The ACA is intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against healthcare fraud and abuse, and impose additional health policy reforms. Changes in healthcare policy,
including changes in the implementation or the repeal of the ACA, could increase our costs, decrease our future revenue, and impact future
sales of and reimbursement and coverage for our product candidates. Since its enactment, there have been judicial and Congressional challenges
to certain aspects of the ACA. For example, in June 2021 the U.S. Supreme Court held that Texas and other challengers had no legal standing
to challenge the ACA, dismissing the case on procedural grounds without specifically ruling on the constitutionality of the ACA. Thus,
the ACA will remain in effect in its current form. It is possible that the ACA will be subject to judicial or Congressional challenges
in the future. It is unclear how any such challenges or any healthcare measures promulgated will impact the ACA or our business.
Additionally, the increased emphasis on managed
healthcare in the United States may put additional pressure on product pricing, reimbursement, and utilization, which may adversely affect
our future product sales, if any, and results of operations. These pressures can arise from rules and practices of managed care groups,
competition from other products, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, and healthcare
reform, and pricing in general. Future sales of our product candidates will depend substantially on the extent to which the costs of our
products will be paid by health maintenance, managed care, and similar healthcare management organizations, or reimbursed by government
health administration authorities, such as Medicare and Medicaid, private health insurers, and other third-party payors. Adequate third-party
reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment.
Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our
products or exclusion of our products from coverage.
Further legislative and regulatory changes remain
possible. It is unknown what form any such changes or any law would take, and how or whether it may affect our business in the future.
We expect that changes or additions to the Medicare and Medicaid programs, and changes stemming from other healthcare reform measures,
especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect
on the healthcare industry. At the state level, legislatures have also increasingly passed legislation and implemented regulations designed
to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures. We expect that additional federal and state healthcare reform measures will be adopted
in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services,
which could result in limited coverage and reimbursement, additional pricing pressures, and reduced demand for our products once they
are approved and commercialized.
Risks Related to Product Development and Regulatory
Clearance
We adapted our clinical trial design in
2023 to obtain more patient data to reflect recent FDA feedback, and our regulatory pathway remains subject to further FDA review and
feedback and the results of ongoing and future clinical studies.
In the second quarter of 2024, we completed a
multicenter SYmphony IL-6 MONitoring Sepsis (“SYMON”) clinical study investigating the role of interleukin-6 (IL-6) in patients
diagnosed with sepsis and septic shock. This prospective study assessed the performance of IL-6 upon initial presentation to the intensive
care unit (ICU). A primary endpoint of the SYMON-I pilot clinical study (registered clinical trial number NCT06181604) suggested that
IL-6 levels within 24 hours of sepsis or septic shock diagnosis and admission to the ICU may predict patient mortality out to 28 days.
Furthermore, a secondary endpoint of the SYMON-I study suggested that IL-6 levels within 24 hours of sepsis or septic shock diagnosis
and admission to the ICU is a predictor of patient mortality during their hospitalization. Other secondary endpoints suggested that lactate
and Sequential Organ Failure Assessment (SOFA), standard clinical tests used for sepsis and septic shock patients, were not predictors
of patient mortality out to 28 days. We believe that the findings underscore the potential importance of IL-6 as a predictor and provide
new insights into the potential pathways for improving sepsis outcomes.
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Using the data analysis from the SYMON-I pilot
clinical study, we initiated the SYMON-II pivotal clinical study in the third quarter of 2024. The SYMON II clinical study has three components:
(1) collection, freezing, and biobanking of patient samples, (2) measuring IL-6 concentrations in the biobanked samples near the end of
patient enrollment or after the patient enrollment has completed, and (3) analysis of the IL-6 data with the patient outcomes to see if
the established IL-6 cutoff value has been validated for 28-day all-cause mortality. Patient enrollment started during the fourth quarter
of 2024. As of the date of this filing, we have enrolled approximately 583 hospital patients among a target of 750 patients, and we have
collected, frozen and biobanked blood samples from the enrolled patients, while also obtaining all patient related data regarding their
disease progression and outcomes. We expect to complete patient enrollment in the study in the summer of 2026. Our goal is to use the
Symphony IL-6 test to complete the testing in the SYMON-II clinical trial. We are not yet testing the samples because we are simultaneously
working with Sanyoseiko to manufacture the cartridges that will be used in the test, and these cartridges are still being manufactured
and verified to ensure that they meet FDA requirements for submission and commercial production. Our goal is to produce and verify these
cartridges during 2026.
Although we believe that we have a sound strategy
for obtaining FDA regulatory clearance, there can be no assurance that it will ultimately be obtained. Reasons that approval and clearance
might not be obtained, on our expected timeline or at all, include that we are unable to complete our planned studies (due to lack of
funding, delays or interruptions in the manufacturing of quality-sufficient cartridges needed to be used in the study, or otherwise),
that clinical results are not sufficient to demonstrate required efficacy, or that the FDA does not agree with our study design or aspects
of our submission. In addition, the FDA could also change its clearance and approval policies, adopt additional regulations, or revise
existing regulations, or take other actions which could prevent or delay approval or clearance. Any of these actions could have a
material adverse effect on our business, financial condition, and results of operations.
The regulatory clearance process which we
may be required to navigate may be expensive, time-consuming, and uncertain and may prevent us from obtaining clearance for our planned
products.
We intend to market our Symphony platform and
test cartridges following regulatory clearance. To date, we have not received regulatory clearance in any jurisdiction. The research,
design, testing, manufacturing, labeling, selling, marketing, and distribution of medical devices are subject to extensive regulation
by country-specific regulatory authorities, which regulations differ from country to country. There can be no assurance that, even after
such time and expenditures, we will be able to obtain necessary regulatory clearances for clinical testing or for the manufacturing or
marketing of any products. In addition, during the regulatory process, other companies may develop other technologies with the same intended
use as our products.
We also will be subject to numerous post-marketing
regulatory requirements, which may include labeling regulations and medical device reporting regulations, which may require us to report
to different regulatory agencies if our device causes or contributes to a death or serious injury, or malfunctions in a way that would
likely cause or contribute to a death or serious injury. In addition, these regulatory requirements may change in the future in a way
that adversely affects us. If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject
to enforcement action by regulatory agencies, which may include, among others, any of the following sanctions:
● warning letters, fines, injunctions, consent decrees and civil penalties;
● customer notification, or orders for repair, replacement, or refunds;
● voluntary or mandatory recall or seizure of our products;
● imposing operating restrictions, suspension, or shutdown of production;
● criminal prosecution.
The occurrence of any of these events may have
a material adverse effect on our business, financial condition and results of operations.
Product clearances and approvals can often
be denied or significantly delayed.
Under FDA regulations, unless exempt, a new medical
device may only be commercially distributed after it has received 510(k) clearance, is authorized through the de novo classification process,
or is the subject of a PMA. The FDA will clear marketing of a medical device through the 510(k) process if it is demonstrated that the
new product is substantially equivalent to another legally marketed product not subject to a PMA. Sometimes, a 510(k) clearance must be
supported by preclinical and clinical data.
The PMA process typically is more costly, lengthy,
and stringent than either the 510(k) process or the de novo classification process. Unlike a 510(k) review, which determines “substantial
equivalence,” a PMA requires that the applicant demonstrate reasonable assurance that the device is safe and effective by producing
valid scientific evidence, including data from preclinical studies and human clinical trials. Therefore, to obtain regulatory clearance
or approvals, we typically must, among other requirements, provide the FDA and similar foreign regulatory authorities with preclinical
and clinical data that demonstrate to their satisfaction that our products satisfy the criteria for approval. Preclinical testing and
clinical trials must comply with the regulations of the FDA and other government authorities in the United States and similar agencies
in other countries.
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We may be required to obtain PMAs, PMA supplements,
de novo classification, or additional 510(k) pre-market clearances to market modifications to our products once they are approved and
commercialized. The FDA requires device manufacturers to make and document a determination of whether a device modification requires approval
or clearance; however, the FDA can review a manufacturer’s decision. The FDA may not agree with our decisions not to seek approvals
or clearances for particular device modifications. If the FDA requires us to obtain PMAs, PMA supplements or pre-market clearances for
any modification to a previously cleared or approved device, we may be required to cease manufacturing and marketing of the modified device
and perhaps also to recall such modified device until we obtain FDA clearance or approval. We may also be subject to significant regulatory
fines or penalties.
The FDA may not clear or approve our product submissions
or applications on a timely basis or at all. Such delays or refusals could have a material adverse effect on our business, financial condition,
and results of operations.
The FDA may also change its clearance and approval
policies, adopt additional regulations, or revise existing regulations, or take other actions which may prevent or delay approval or clearance
of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis. Any of
these actions could have a material adverse effect on our business, financial condition, and results of operations.
International regulatory clearance processes may
take more or less time than the FDA’s clearance process. If we fail to comply with applicable FDA and comparable non-U.S. regulatory
requirements, we may not receive regulatory clearances or approvals or may be subject to FDA or comparable non-U.S. enforcement actions.
We may be unable to obtain future regulatory clearance or approval in a timely manner, or at all, especially if existing regulations are
changed or new regulations are adopted. For example, the FDA’s clearance or approval process can take longer than anticipated due
to requests for additional clinical data and changes in regulatory requirements. Any failure or delay in obtaining necessary regulatory
clearances or approvals would materially adversely affect our business, financial condition, and results of operations.