UNITED STATES
証券取引委員会
ワシントンDC20549
フォーム
証券取引法第13条または15条（d）に基づく四半期報告書 | ||
報告期間が終了した2023年6月30日をもって
または
証券取引法第13条または15(d)条に基づく移行報告書 |
___から___の移行期間
報告書番号：
（会社設立時の指定名）
（設立または組織の州または管轄区域） | （国税庁雇用者識別番号） |
(主要執行オフィスの住所) | （郵便番号） |
( |
（登録者の電話番号（市外局番を含む）） |
法第12(b)条に基づく登録証券：
各クラスの名称 |
| 取引シンボル |
| 登録している取引所の名前 |
|
|
エミッター（1）が、過去12か月間（または報告を提出する必要があった期間の短い期間に）証券取引法第13条または15(d)条によって提出が必要なすべての報告書を提出したかどうか、および（2）過去90日間、そのような提出要件の対象となっていたかどうかを示す。
取引所405条の規制に基づき、前の12か月間（または登録がそのようなファイルを提出する必要があったより短い期間）に、登録者が提出すべきすべての対話型データファイルを電子的に提出したかどうかをチェックマークで示してください。
申請人が大型加速優遇申請人、加速優遇申請人、非加速優遇申請人、小規模報告会社、または新興成長企業であるかどうかをチェックマークで示してください。大型加速優遇申請人、加速優遇申請人、小規模報告会社、および新興成長企業の定義については、Exchange ActのRule 120億2を参照してください。
大型加速ファイラー | ☐ |
| 加速ファイラー | ☐ |
☒ |
| レポート義務のある中小企業 | ||
|
| 新興成長企業 |
新興成長企業である場合、取引所法第13条(a)に基づき提供された新しいまたは改訂された財務会計基準の遵守についての拡張移行期間を利用しないことを選択した場合は、チェックマークを付けて示してください。☐
✓印を付してください。 企業がshell companyである場合は、取引法の規則12b-2で定義されています。
2024年10月31日現在、
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このレポートでは、特に明記されていない限り、または文脈上別段の定めがない限り、「セムラー・サイエンティフィック」、「当社」、「私たち」、および同様の言及は、セムラー・サイエンティフィック社を指します。このレポートに記載されているセムラー・サイエンティフィックのロゴ、QuantaFlo、およびセムラー・サイエンティフィック社のその他の商標またはサービスマークは、セムラー・サイエンティフィック社の所有物です。このレポートには登録商標も含まれています。他の会社の商標と商号。このレポートに記載されているその他すべての商標、登録商標、および商号は、それぞれの所有者に帰属します。
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前向きな声明に関する注意書き
すべての先行き不安定な声明については、この報告書全体で議論された要素を参照してください。これらの先を見据えた声明は、私たちの現在の予想と将来のイベントに関する私たちの現在の予測と投影に基づいており、未知かつ既知のリスクおよび不確実な要因にさらされており、実際の結果と開発がこれらの声明で表現されたものとは異なる可能性があります。 この四半期報告書全体を通じて、私たちが参照している書類を完全に理解して読み、私たちが提出したエキシビットとして提出した書類を理解して読む必要があります。 したがって、この四半期報告書に表示される情報が、私たちが期待する実際の将来の結果と大きく異なる可能性があることを前提とする必要があります。私たちまたは私たちの代理人が行った先を見据えた声明について依存するべきではなく、こうしたリスク要因が含まれているため、これに過度に依存してはいけません。 はじめに、リスク要因をPart II、Item 1Aの「リスク要因」の見出しの下で、「財務状態および業績に関する経営陣の討論」の「その他のレポート」に説明します。さらに、どの先を見据えた声明も、それがなされた日付にのみ有効であり、どの先を見据えた声明に対しても、その宣言がなされた日付以降のイベントまたは事象を反映するように先を見据えた宣言を更新する義務はありません。新しいリスク要因が時折現れ、どの要因が発生するかを予測することはできません。 さらに、私たちは各因子がビジネスに及ぼす影響や、どのような因子、またはどのような因子の組み合わせが、実際の結果が先に示されているものと異なる可能性があることに対して評価することができません。 私たちは、特に先を見据えた声明を、それらの警告的声明によって修飾します。 この四半期報告書全体、特に先を見据えた声明を、こうした警告的声明を通じて修飾することによって、私たちが提示するすべての情報が限定され、あなたが理解するための助けとなるべきであり、私たちが提供した先を見据えた声明を依存することによって、これらの警告的声明を無視してはなりません。
| ● | 私たちのビットコイン財務戦略の実施とそのビジネスへの影響; |
| ● | 私たちの新しい米国食品医薬品局（FDA）のQuantaFloの拡張使用に関する510（k）承認を取得することを目指しています。 |
| ● | 2024年のメディケアアドバンテージおよびパートDの最終レート発表は、メディケアおよびメディケイドサービスセンター、またはCMSによって発行されたものであり、収益に与える影響について述べています。 |
将来の出来事に関する当社の現在の期待と予測に基づくこれらの前向きな声明は、この四半期報告書に記載されている要因への参照によって完全に修正されています。これらの前向きな声明は、既知および未知のリスクと不確実性に基づいており、これらの声明において明示または暗黙に物言うことができる実際の結果や進展に差異が生じる恐れがあります。
この四半期報告書10-Qと当社が参照し、証書として提出した文書全体を十分に理解してお読みください。実際の将来の結果は私たちの予想と大きく異なる可能性があることを前提としてください。この四半期報告書10-Qに記載されている情報は、この報告書を提出した日時点でのみ正確であると仮定してください。
この四半期報告書には、第三者によって実施された業界の出版物、調査および研究によって取得された統計およびその他の業界および市場データが含まれています。 業界の出版物および第三者の研究、調査、および研究によって得られたデータは、一般的に、信頼できる情報源から入手されたことを示していますが、そのような情報の正確性または完全性を保証するものではありません。 私たちは、これらの業界の出版物および第三者の研究、調査、および研究が信頼できると信じていますが、そのようなデータを独自に検証していません。
リスクファクターの要約
当社のビジネスは重大なリスクを伴っています。 当社のビジネスに直面する重大なリスクの概要を以下に示します。これにより、当社の普通株式に投資することは、投機的で危険であるというところが明確にされます。 この概要は、これらのリスクに対処しません。これらのリスクに注意を払うために、この四半期報告書のPart II、Item 1Aの「リスク要因」の見出しの下に、これらのリスクを詳しく説明します。 当社の普通株式に関する投資判断をする前に、これらのリスクについて注意深く考慮する必要があります。以下のイベントまたは状況のいずれかが発生した場合、当社のビジネス、業績、財務状態、見通し、そして株価に重大な悪影響を及ぼす可能性があります。そのようなイベントが発生した場合、当社の普通株式の市場価格が下落し、投資額のすべてまたは一部を失う可能性があります。 ・ビジネス戦略、特にビットコイン金庫戦略を成功裏に実施しなかった場合、当社のビジネスおよび業績に不利な影響を与える可能性があります。
| ● | ビジネス戦略、ビットコイン準備金戦略を含む戦略を実施できない場合、当社のビジネスと業績に不利な影響が生じます。 |
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| ● | 私たちは主に1つのFDA承認の血管検査製品のみを市場展開しており、広範な市場受容または商業的成功を達成しない可能性があります。最近の変化 規制的な補償風景における、 Medicare AdvantageおよびPart D処方薬プログラムの支払い変更を伴う2024年最終レート発表など、最近の変化 CMSによって発行された、末梢動脈疾患、またはPADの診断支援に私たちの製品を使用する際の収益性に影響を及ぼしました。 |
| ● | QuantaFloを心臓機能不全の診断の補助として販売することをやめたため、拡大使用に対するFDA 510（k）クリアランスを得る保証はありません。 |
| ● | ヘルスケアプロバイダーが十分なカバレッジと払い戻しを受けられない場合、当社の製品が広く受け入れられる可能性は低いでしょう。QuantaFloは第三者支払いコードの下で特に承認されていません。 |
| ● | 我々は一部のキーパーソンの才能に大きく依存しており、彼らが失われると、会社が深刻な損害を受ける可能性があります。 |
| ● | 当社の顧客に対して、当社の製品やサービスのために長期的なライセンスやメンテナンス契約を結ぶよう要求していないため、短期的に顧客を失う可能性があります。私たちの収益の大部分と売掛金は、限られた数の顧客とあります。 |
| ● | 我々はQuantaFloの製造のための独立したサプライヤーと施設の少数に依存しています。製品や施設の供給に遅延や中断が発生すると、当社の運営に否定的な影響を与える可能性があります。 |
| ● | 当社は産業責任リスクに対して十分に保険に加入していない可能性があり、重大なクレームに対応する必要があります。 |
| ● | 当社の製品に欠陥がある場合、または製品の改良や修正により製品回収、自主市場撤退、または出荷停止を実施する場合があり、これにより当社のコストが大幅に増加する可能性があります。 |
| ● | 情報セキュリティ事件、サイバーセキュリティ侵害を含むことが当社のビジネスや評判に悪影響を与える可能性があります。 |
| ● | 将来の財務パフォーマンスは、血管検査製品の成功した改善やソフトウェアの更新のコスト効果の良い方法、新しい製品やサービスの提供を開発する能力、QuantaFloの指示を拡大する能力に依存するでしょう。 |
| ● | 我々は激しく競争があり、急速に変化するビジネス環境で事業を運営していますが、製品やサービスの提供が時代遅れや競争力を失う可能性があります。 |
| ● | 当社のビジネスは、医療機器の製造と販売に関する多くの法律や規制、FDAの510（k）審査プロセス、患者データや情報に関する法律や規制、および一般的な税制度や規制などの規制対象となっており、すべてが変更の対象となります。 |
| ● | 我々のビジネス戦略の一部は、政府のヘルスケア改革下で成立した支払い規定に基づいていますが、ヘルスケア改革法の実施、変革、廃止および代替に関する業界全体の大きな不確実性も抱えています。 |
| ● | 適用される医療詐欺と乱用の法律と規制は、強化された違反環境につながる可能性があり、私たちを標的とした執行行動が行われる場合があり、これが私たちのビジネスに否定的な影響を与える可能性があります。 |
| ● | 当社の財務報告には実質的な内部統制上の欠陥があります。私たちは前の実質的な欠陥を是正しましたが、将来的に追加の実質的な欠陥を特定した場合、または以前の実質的な欠陥が再発した場合、会社に否定的な影響を与える可能性があります。 |
| ● | 当社のビットコイン資産戦略には、ビットコインに関連するさまざまなリスクがあります。 |
| ● | ビットコインは非常に変動しやすい資産であり、ビットコイン価格の変動は当社の財務結果と共通株式の市場価格に影響を与える可能性が高いです。 |
| ● | ビットコインおよびその他のデジタル資産は、重要な法的、商業、規制、技術上の不確実性にさらされています。 |
| ● | 当社の過去の財務諸表には、将来的に私たちが所有するビットコインに関連する収益の可能性のばらつきを反映していない可能性があります。 |
| ● | スポットビットコイン取引所取引商品（ETP）の利用可能性が高まると、私たちの普通株式の市場価格に悪影響を及ぼす可能性があります。 |
| ● | ビットコインの財務戦略に従うことで、強化された規制上の監督を受けることになります。 |
| ● | ビットコイン取引所の多くの運営には未規制の性質や透明性の欠如があり、これによって断続的に不正、セキュリティの失敗、規制や運営上の問題が生じる可能性があります。これは、より確立された資産クラスの取引所よりもビットコイン取引所に対する信頼の喪失につながり、ビットコインの価値を損なう可能性があります。 |
| ● | ビットコイン保有の集中は、ビットコインの財務戦略に内在するリスクを高めます。 |
| ● | 民間部門に加え、公的・民間の複数の支援を受けるその他のデジタル資産が出現したり成長したりすれば、ビットコインの価格に負の影響を与え、当社の財務状況および業績に不利な影響を与える可能性があります。 |
| ● | ビットコインの保有は、既存の現金や現金同等物よりも流動性が低く、同じ範囲での当社の流動性源としての役割を果たすことができない可能性があります。 |
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| ● | 私たちまたは第三者サービスプロバイダーがセキュリティ侵害またはサイバー攻撃を受け、不正な第三者がビットコインにアクセスしたり、またはプライベートキーが紛失・破壊されたり、その他の同様の状況が起こると、私たちは一部または全部のビットコインを失い、財務状況および業績に重大な不利益を与える可能性があります。 |
| ● | ビットコインの保管に関するリスクを負っており、ビットコインにアクセスするために必要なプライベートキーの紛失、破壊またはサイバー攻撃またはその他のデータ喪失に関するリスクを抱えています。 |
| ● | ビットコインを有価証券として再分類する規制規定が出てくると、投資会社法に基づく「投資会社」に当社が分類される可能性があり、ビットコインの市場価格と当社の普通株式の市場価格に不利な影響を与える可能性があります。 |
| ● | 暗号資産および暗号資産市場に関する規制上の進展に反応して、当社のビジネス、財務状況、および業績に不利な影響を与える可能性があります。 |
| ● | ビットコインの財務戦略により、当事者による履行リスクに曝される可能性があります。 |
| ● | もし当社のカストディアンが破産、受信、または同様の不履行手続きに入った場合、当社が所有するカストディアンホールドのビットコインはカストディアンの破産管財人の持分になる可能性があります。 |
| ● | ビットコインまたはその他の暗号資産のブロックチェーン「フォーク」がビジネスに不利な影響を与えることがあります。 |
| ● | 制裁を受けた企業との取引を回避するために、私たちと流動性プロバイダーが実施するデューデリジェンス手続きがすべて上手くいかず、制裁を受けた企業との取引が成立されてしまう可能性があります。そのような取引は、私たちの財務状況および業績に不利益をもたらす可能性があります。 |
| ● | 取締役会、役員、および主要株主が協力しなければ、全ての株主によって承認されることになる全ての事項に対して、それらの関係者が大きな影響を与える可能性があります。 |
| ● | 当社の企業憲章書類とデラウェア州の法律には、当社を買収すること（株主にとって有益である可能性がある）を難しくし、現在の経営陣を置き換えたり解任したりする株主による試みを防止するための規定が含まれている可能性があります。 |
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パートI — 財務情報
アイテム 1.財務諸表。
セムラー・サイエンティフィック株式会社
要約損益計算書
未監査
（千米ドル、1株あたりのデータを除く）
9月30日に終了した3か月間、 | 9月30日に終了した9か月間、 | |||||||||||
2024 | 2023 |
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収入 | $ | | $ | | $ | | $ | | ||||
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エンジニアリングと製品開発 |
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セールスとマーケティング |
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一般と管理 |
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戦略的合理化 | — | | — | | ||||||||
営業費用の合計 |
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事業からの収入 |
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利息および配当収入 |
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投資目的で保有されている債券の公正価値の変動 |
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デジタル資産の公正価値の変動 | | — | ( | — | ||||||||
その他の収入 (費用) | | ( | | ( | ||||||||
その他の収益（費用）、純額 |
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所得税規定 |
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純利益 | $ | | $ | | $ | | $ | | ||||
1株当たり純利益、基本利益 | $ | | $ | | $ | | $ | | ||||
1株当たりの基本純利益の計算に使用される加重平均株式数 |
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希薄化後の1株当たり純利益 | $ | | $ | | $ | | $ | | ||||
希薄化後の1株当たり純利益の計算に使用された加重平均株式数 | | | | | ||||||||
未監査の要約財務諸表の添付注記を参照してください。
1
セムラー・サイエンティフィック株式会社
要約貸借対照表
（千米ドル、1株あたりのデータを除く）
9月30日、 | 12月31日 | |||||
2024 |
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現金および現金同等物 | $ | | $ | | ||
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売掛金、信用損失引当金を差し引いた金額 |
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在庫、純額 | | | ||||
前払費用およびその他の流動資産 |
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流動資産合計 |
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リース資産、純額 |
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資産および設備、純額 |
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長期投資 |
| |
| | ||
投資用に保管されているメモ | — | | ||||
無形デジタル資産 | | — | ||||
その他の非流動資産 | | | ||||
繰延税金資産、評価引当金を差し引いた金額 | | | ||||
総資産 | $ | | $ | | ||
負債と株主資本 |
|
|
|
| ||
現在の負債: |
|
| ||||
買掛金 | $ | | $ | | ||
未払費用 |
| |
| | ||
繰延収益 |
| |
| | ||
その他の短期負債 | | | ||||
流動負債合計 |
| |
| | ||
長期負債: |
|
|
|
| ||
その他の長期負債 | — | | ||||
長期負債合計 |
| — |
| | ||
コミットメントと不測の事態（注15） | ||||||
株主資本: |
|
| ||||
普通株式、$ |
| |
| | ||
その他の払込資本 |
| |
| | ||
利益剰余金 |
| |
| | ||
株主資本の総額 |
| |
| | ||
負債総額と株主資本 | $ | | $ | | ||
未監査の要約財務諸表の添付注記を参照してください。
2
Semler Scientific, Inc.
株主資本の簡易な財務諸表
未監査
(米ドル千ドル単位、株式および1株当たりのデータを除く）
2023年9月30日までの3か月間の期間 | ||||||||||||||||
普通株式 | 自己株式 | 追加 | 総計 | |||||||||||||
普通株式 | 出資済み | 保有 | 株主資本 | |||||||||||||
| 発行済株式 |
| 数量 |
| 株式 |
| 2002年に設立されたKingSett Capitalは、機関投資家と超高純資産のクライアントとの共同投資で、持続可能でプレミアムなリスク加重リターンを提供する、カナダをリードするプライベートエクイティ不動産会社です。KingSettは、グローバル不動産サステナビリティベンチマーク（GRESB）調査において、リストに掲載されていない同業種の純財産部門で第1位、北アメリカの多様化したオフィス/リストに掲載されていない純財産部門で第2位にランクインし、持続可能性への取り組みが評価されました。業界のリーダーとして、KingSettは不動産セクターを前進させ、様々な不動産物件、開発、共同事業、住宅ローンの新しい投資機会を探し続けることに専念しています。 |
| 希薄化後一株当たりの収益 |
| 株式 | |||||
2023年6月30日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
従業員株式の付与 | | — | — | — | — | — | ||||||||||
株式報酬の実質配当の純額決済に伴う支払いの税金 | ( | — | — | ( | — | ( | ||||||||||
ストックオプションの行使 |
| |
| — |
| — |
| |
| — |
| | ||||
株式報酬認識支払い |
| — |
| — |
| — |
| |
| — |
| | ||||
当期純利益 |
| — |
| — |
| — |
| — |
| |
| | ||||
2023年9月30日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
2023年9月30日終了の9か月間 | ||||||||||||||||
普通株式 | 自己株式 | 追加 | 総計 | |||||||||||||
普通株式 | 出資済み | 保有 | 株主資本 | |||||||||||||
| 発行済株式 |
| 数量 |
| 株式 |
| 2002年に設立されたKingSett Capitalは、機関投資家と超高純資産のクライアントとの共同投資で、持続可能でプレミアムなリスク加重リターンを提供する、カナダをリードするプライベートエクイティ不動産会社です。KingSettは、グローバル不動産サステナビリティベンチマーク（GRESB）調査において、リストに掲載されていない同業種の純財産部門で第1位、北アメリカの多様化したオフィス/リストに掲載されていない純財産部門で第2位にランクインし、持続可能性への取り組みが評価されました。業界のリーダーとして、KingSettは不動産セクターを前進させ、様々な不動産物件、開発、共同事業、住宅ローンの新しい投資機会を探し続けることに専念しています。 |
| Earnings |
| 株式 | |||||
2022年12月31日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
普通株式warrantsを取得 |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||
従業員株式の補助金 | | — | — | | — | | ||||||||||
株式報酬の純株式決済に関連する支払いに対する税金 | ( | — | — | ( | — | ( | ||||||||||
ストックオプションの行使 |
| |
| — |
| — |
| |
| — |
| | ||||
株式報酬認識支払い |
| — |
| — |
| — |
| |
| — |
| | ||||
当期純利益 |
| — |
| — |
| — |
| — |
| |
| | ||||
2023年9月30日時点残高 | | $ | |
| ( | $ | | $ | | $ | | |||||
2024年9月30日までの3ヶ月間 | ||||||||||||||||
普通株式 | 自己株式 | 追加 | 総計 | |||||||||||||
普通株式 | 出資済み | 保有 | 株主資本 | |||||||||||||
| 発行済みシェア |
| 数量 |
| 株式 |
| 2002年に設立されたKingSett Capitalは、機関投資家と超高純資産のクライアントとの共同投資で、持続可能でプレミアムなリスク加重リターンを提供する、カナダをリードするプライベートエクイティ不動産会社です。KingSettは、グローバル不動産サステナビリティベンチマーク（GRESB）調査において、リストに掲載されていない同業種の純財産部門で第1位、北アメリカの多様化したオフィス/リストに掲載されていない純財産部門で第2位にランクインし、持続可能性への取り組みが評価されました。業界のリーダーとして、KingSettは不動産セクターを前進させ、様々な不動産物件、開発、共同事業、住宅ローンの新しい投資機会を探し続けることに専念しています。 |
| 当期純利益 |
| 株式 | |||||
2024年6月30日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
ストックオプションの行使 |
| | — | — | | — | | |||||||||
普通株式の発行 | | — | — | | | |||||||||||
株式発行費用 | — | — | — | ( | ( | |||||||||||
当期純利益に関連する株式報酬の純シェア決済に支払われた税金 | ( | — | — | ( | ( | |||||||||||
株式報酬認識支払い | — | — | — | | — | | ||||||||||
当期純利益 |
| — |
| — |
| — |
| — |
| |
| | ||||
2024年9月30日の残高 | | $ | |
| ( | $ | | $ | | $ | | |||||
2024年9月30日終了の9か月間にわたる | ||||||||||||||||
普通株式 | 自己株式 | 追加 | 総計 | |||||||||||||
普通株式 | 出資済み | 保有 | 株主資本 | |||||||||||||
| 発行済株式 |
| 数量 |
| 株式 |
| 2002年に設立されたKingSett Capitalは、機関投資家と超高純資産のクライアントとの共同投資で、持続可能でプレミアムなリスク加重リターンを提供する、カナダをリードするプライベートエクイティ不動産会社です。KingSettは、グローバル不動産サステナビリティベンチマーク（GRESB）調査において、リストに掲載されていない同業種の純財産部門で第1位、北アメリカの多様化したオフィス/リストに掲載されていない純財産部門で第2位にランクインし、持続可能性への取り組みが評価されました。業界のリーダーとして、KingSettは不動産セクターを前進させ、様々な不動産物件、開発、共同事業、住宅ローンの新しい投資機会を探し続けることに専念しています。 |
| Earnings |
| 株式 | |||||
2023年12月31日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
取締役の株式付与 |
| |
| — |
| — |
| |
| — |
| | ||||
普通株式の発行 | | — | — | | — | | ||||||||||
株式発行費用 | — | — | — | ( | — | ( | ||||||||||
当期純利益に関連する株式報酬のネットシェア決済に支払った税金 | ( | — | — | ( | — | ( | ||||||||||
ストックオプションの行使 |
| | — | — | | — | | |||||||||
株式報酬認識支払い |
| — |
| — |
| — |
| |
| — |
| | ||||
当期純利益 |
| — |
| — |
| — |
| — |
| |
| | ||||
2024年9月30日の残高 |
| | $ | |
| ( | $ | | $ | | $ | | ||||
未監査の要約財務諸表に関連する注記を参照してください
3
Semler Scientific, Inc.
キャッシュフローの簡略版財務諸表
未監査
（千米ドル単位）
9か月間（9月30日まで） | ||||||
| 2024 |
| 2023 | |||
営業活動からのキャッシュ・フロー: | ||||||
当期純利益 | $ | | $ | | ||
当期純利益を営業活動による純現金流入額に調整： |
|
| ||||
減価償却費用 |
| |
| | ||
繰延税金費用 | ( | ( | ||||
賃貸資産の売却損失 |
| |
| | ||
在庫の廃棄損失 | — | | ||||
短期投資による利益 | — | ( | ||||
貸倒引当金の積み増し |
| ( |
| | ||
投資目的で保有しているノートの公正価値の変動 | ( | | ||||
デジタル資産の公正価値の変化 | | — | ||||
株式報酬認識支払い |
| |
| | ||
運転資産および負債の変化： |
|
| ||||
売掛金の取引 |
| ( |
| ( | ||
在庫 | | | ||||
前払い費用およびその他の流動資産 |
| |
| ( | ||
その他の固定資産 | | | ||||
支払調整金 |
| |
| ( | ||
未払費用 |
| |
| | ||
その他の流動負債および非流動負債 | ( | ( | ||||
前受収益 | ( | ( | ||||
オペレーティング活動からの純現金流量 |
| |
| | ||
投資活動によるキャッシュ・フロー: |
|
| ||||
有形固定資産への追加 |
| ( |
| ( | ||
投資目的の保有ノートの購入 | ( | ( | ||||
デジタル資産の購入 | ( | — | ||||
短期投資の満期による受取り金額 | — | | ||||
短期投資の購入 | — | ( | ||||
賃貸用資産の購入 |
| ( |
| ( | ||
投資活動によるキャッシュの流出 |
| ( |
| ( | ||
|
| |||||
財務活動からのキャッシュフロー: |
|
|
|
| ||
ワラントの買戻し | — | ( | ||||
普通株式の発行による受取金額 | | — | ||||
株式報酬の純清算に関連する支払われた税金 | ( | ( | ||||
株式発行費用 | ( | — | ||||
株式オプションの行使による収益 |
| |
| | ||
財務活動による純現金供与（使用） |
| |
| ( | ||
現金の（減少）増加 | ( |
| | |||
期初現金、現金同等物および制限付き現金 |
| |
| | ||
期末現金、現金同等物および制限付き現金 | $ | | $ | | ||
未監査の要約財務諸表に添付の注記を参照してください
4
| 1. | 「Performance-Based Awards（成果に基づく受賞）」は、第7.7条に基づき、委員会によって設定されたパフォーマンス目標や他の事業目標の達成に依存して現金、株式またはその他の受賞を受け取るための受賞です。 |
Semler Scientific, Inc.、デラウェア州の法人（以下「セムラー」または「当社」）は、米国一般会計原則（GAAP）および証券取引委員会（SEC）の適用法規に準拠して、この報告書に含まれる未監査の中間財務諸表を作成しました。GAAPに準拠して準備された財務諸表に通常含まれる特定の情報や注記開示は、これらの規則に従って要約または省略されています。したがって、本四半期報告書（フォーム10-Q）に含まれる情報は、2023年12月31日に提出された当社の年次報告書（フォーム10-K）内の監査済みの財務諸表および関連注記と併せて読むべきです。当社経営陣の見解では、これらの財務諸表は、提示された期間の当社の財政状態、業績、およびキャッシュフローのすべての適正な調整（通常の繰り返し調整を含む）を含んでいます。この報告書に示される中間期間の業績は、将来の任意の期間（年全体を含む）で期待される結果を必ずしも示しているわけではありません。
無形デジタル資産
当社は、ASC 350に基づき、全てがビットコインで構成されるデジタル資産を無定の無形資産として処理しています。 無形資産-資産価値およびその他当社は、ビットコインの資産、つまり所有権と管理を持ち、地理的に分散された複数の場所で第三者のカストディアルサービスを使用してビットコインを保管しています。当社のデジタル資産は、当初取得原価で記録され、その後、各報告期末に公正価値に再評価され、変動は当期純利益に認識されます。
会社はビットコインを長期投資用に購入しています。デジタル資産を長期保有し、税務上は長期資本資産として取り扱っています。未実現の利益/損失は税務上キャピタルゲイン/ロスとして取り扱われます。未実現のキャピタルロスに対しては評価引当金が計上されています。会社のデジタル資産の購入および売却に関する詳細情報については、未監査の縮小された財務諸表の注記10を参照してください。
最近発行された会計基準
2023年12月、米国財務会計基準委員会（FASB）は、会計基準改定（ASU）第2023-09号を発行しました。 所得税（740番）：所得税開示の改良 ASU 2023-09は、所得税に関連する強化された開示を要求します。特に、税率調整と支払所得税情報に関するものです。年次基準で、企業は税率調整における特定カテゴリを開示することが求められ、定量的基準を満たす調整項目に関する追加情報を提供する必要があります。企業はまた、年次基準で、連邦、州、および外国税によって分類された所得税の額を開示し、定量的基準を超える個々の管轄区分で分割することも求められます。この基準は、2024年12月15日以降の会社の年次期間向けに効力が発生し、遡及適用は、提示されたすべての以前の期間に許可されます。早期適用が許可されています。会社は現在、このガイダンスが開示に及ぼす影響を評価しています。
最近採用された会計原則声明
2023年12月、FASBはASU No. 2023-08を発行しました。 無形資産-のブランドと他-暗号資産（サブトピック350-60）：暗号資産の会計処理および開示 （ASU 2023-08）。 ASU 2023-08は、ステートメント・オブ・金融的位置における対象の暗号資産を公正価値で計測することを要求し、そのような暗号資産の公正価値の変動に伴う利益および損失を毎報告期ごとに当期純利益に認識する。 ASU 2023-08はまた、基準の対象となる暗号資産に関する一部の中間期および年次開示を要求します。この基準は、2024年12月15日以降の中間期および年次について、会社にとって有効であり、会社がガイダンスを採用する年次報告期の初めの時点の保有利益の開設収益への累積効果調整を要求します。早期の採用は、年次報告期の初めの時点で会社の財務諸表が発行されていない場合には、いかなる中間期または年次においても許可されています。会社はASU 2023-08を早期採用しました エクイティ-ETF（NAV合計リターン1年）
5
2024年6月30日に終了した第2四半期は、2024年1月1日からの効力を持って、遡及的に有効となります。
2.変動手数料収入
会社は、ハードウェア機器やアクセサリーの販売に加えて、変動手数料ライセンス（つまり、テストごとの手数料）を会計基準コーディケーション（"ASC"）606に従って認識します。 契約に基づく収益。変動手数料ライセンスからの合計料金は、2024年と2023年の9月30日までの3か月間で約$
変動収益ライセンス契約に基づく出荷時には、リース資産が顧客に売却され、その資産が売上原価として認識されます。.
3. 売掛金、純額：
売掛金は請求額を基に、信用損失に対する引当金を差し引いて記録されます。信用損失に対する引当金は、売掛金の回収可能性に関する経営判断に基づいています。企業は、歴史的な経験、売掛金残高の経過年数、顧客の信用格付け、現在の経済状況、将来の経済状況の合理的かつサポート可能な予測、および顧客の支払い能力に影響を与えるその他の要因を検討することで、信用損失に対するこの引当金の適格性を定期的に審査しています。回収不能と判断された売掛金は、特定の引当金に充当されます。売掛金は、2024年9月30日および2023年12月31日時点において、それぞれ100ドル、収益をASC 606に基づいて認識されたものを含んでいます。
2024年9月30日時点で、貸倒引当金は $
4. 在庫
製品アセットからなる在庫は、原価または正味実現価値のいずれか小さい方で計上されます。原価は先入れ先出し法によって決定されます。企業は定期的に在庫レベルを分析し、原価基準を超過する在庫を特定して適切に減損処理を行います。在庫残高は$
5. リース資産、純額
企業は、一部の機器に対する財務をオペレーティングリースを通じて提供しています（未監査の要約された財務諸表の注14を参照）。
6
リース資産は以下の通りです:
2024年6月30日および2023年9月30日における | 12月31日、 | ||||||
2024 |
| 2023 |
| ||||
リース用資産 | $ | | $ | | |||
減：累計減価償却費 |
| ( |
| ( | |||
資産はリース用です、純額 | $ | | $ | | |||
減価償却費はそれぞれ、2024年3月31日および2023年3月31日に、$でした。
6. 固定資産および設備、純額
不動産、工場・設備の純額は、以下のとおりです。
2024年6月30日および2023年9月30日における | 12月31日、 | ||||||
2024 |
| 2023 |
| ||||
不動産、工場・設備の総額 | $ | | $ | | |||
減：累計減価償却 |
| ( |
| ( | |||
有形固定資産、正味額 | $ | | $ | | |||
減価償却費は、 $
7.長期投資
新規買投資は、提示された期間の以下のようになります:
2024年6月30日および2023年9月30日における | 12月31日、 | ||||||
2024 |
| 2023 | |||||
SYNAPS Dxへの投資 |
| $ | | $ | | ||
総長期投資 | $ | | $ | | |||
2020年9月、会社はニューロダイアグノスティクス社（SYNAPS Dxとしてビジネスを展開）から約束手形を取得し、その元本額が$ XXXでした
SYNAPS Dxへの投資はASC 321に従って記録されました 投資 - 出資証券 （「ASC 321」）は、公正な価値を簡単に決定できない非公開企業の株式投資は、一般的に同等または類似の投資についての観察可能な価格変動をもとに、債務割引を含む原価で記録され、別の視覚的価格変動がない限り、インパットメントの金額を差し引いたものです。会社はASC 321で許可されている便宜的急送を選択し、上記の投資を原価ベースで記録しました。インパリメント指標の評価の一環として、会社は収益性能の著しい低下を考慮します
7
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
and overall business prospects of the investee as well as significant adverse changes in the external environment these investments operate. If qualitative assessment indicates the investments are impaired, the fair value of these equity securities would be estimated, which would involve a significant degree of judgement and subjectivity.
The Company qualitatively assessed the investment for impairment in accordance with ASC 321. As of September 30, 2024 and December 31, 2023, the Company determined that there was
8.Fair Value Measurements
The following table presents fair value hierarchy of the Company’s financial assets measured at fair value on a recurring basis:
Fair Value Hierarchy | |||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||
As of September 30, 2024 | |||||||||||
U.S. Government money market fund accounts | $ | | $ | — | $ | — | $ | | |||
(Included in cash and cash equivalents) | |||||||||||
Bitcoin investments | | — | — | | |||||||
(Included in intangible digital assets) | |||||||||||
Investment in debt securities | — | — | | | |||||||
(Included in short-term notes held for investment) | |||||||||||
Total Assets | $ | | $ | — | $ | | $ | | |||
Level 1 | Level 2 | Level 3 | Total | ||||||||
As of December 31, 2023 | |||||||||||
U.S. Government money market fund accounts | $ | | $ | — | $ | — | $ | | |||
(Included in cash and cash equivalents) | |||||||||||
U.S. Treasury bill | — | | — | | |||||||
(Included in cash and cash equivalents) | |||||||||||
Investment in debt securities | — | — | | | |||||||
(Included in notes held for investment) | |||||||||||
Total Assets | $ | | $ | | $ | | $ | | |||
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy under FASB ASC 820, Fair Value Measurement, are described as follows:
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 — Inputs other than quoted prices included in Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and
Level 3 — Unobservable inputs that are supported by little or no market activity, which requires the Company to develop its own models.
8
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
The financial instruments of the Company consist primarily of cash, U.S. government money market fund accounts, trade receivables, trade payables, bitcoins, U.S. treasury bill investments and debt securities. Because carrying values of cash, trade receivables, and payables are equal to or approximate their fair value, the Company excluded them from the leveling requirements. U.S. government money market fund accounts are classified as Level 1 due to their short-term nature, their market interest rates and also based on the fact that they are publicly traded. Bitcoins purchased for investments, which are included in Intangible digital assets are classified as Level 1 as the unadjusted quoted prices in active markets are used for the fair valuation. The Company also invested in non-convertible promissory notes and equity securities in a privately held company, which were recorded on cost basis. See Notes 7 and 9 to the Unaudited Condensed Financial Statements for more information.
The Company's privately held debt security is recorded at fair value on a recurring basis. The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company deems these assets as Level 3 within the fair value measurement framework.
As of September 30, 2024, the Company valued the debt security at face value of $
9.Notes Held for Investment
Notes receivable consists of the following for the periods presented:
September 30, | December 31, | ||||||
2024 | 2023 | ||||||
Senior secured promissory notes | $ | | $ | | |||
Secured convertible promissory notes | | | |||||
Total notes held for investment | $ | | $ | | |||
In June 2022, the Company loaned Mellitus an aggregate of $
In December 2022, the Company entered into a senior convertible promissory note arrangement with Monarch, providing Monarch with up to $
The Company made an irrevocable election to account for the Mellitus and Monarch debt securities using the fair value option under ASC 825 – Financial Instruments (“ASC 825”) and will measure the fair value of such debt securities in accordance with ASC 820. The Company made the fair value option election to present the debt securities in their entirety at fair value, which it
9
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
believes to be preferable to recognizing the host instrument at fair value under ASC 320 and potentially separately recognizing certain embedded features as bifurcated derivatives under ASC 815. As of September 30, 2024 and December 31, 2023, the Company estimated the fair value of the Monarch debt security to be $
The Company recognizes interest income on the Monarch debt securities, which is included in interest and dividend income in the Unaudited Condensed Statements of Income. For the three months ended September 30, 2024 and 2023, the Company recognized $
10.Intangible Digital Assets
On May 28, 2024, the Company announced that its board of directors adopted bitcoin as its primary treasury reserve asset. Under this new treasury strategy, the Company purchases and holds bitcoins for long term investment purposes. The Company accounts for its bitcoin as an indefinite-lived intangible asset in accordance with ASC 350, Intangibles—Goodwill and Other and has ownership of and control over its bitcoin, which are included in Intangible digital assets in the Unaudited Condensed Balance Sheets. As of September 30, 2024, there were no contractual restrictions on the sale of bitcoins.
Bitcoin Investment
The Company early adopted ASU No. 2023-08 in the second quarter of 2024 effective retroactively as of January 1, 2024. See Recently Adopted Accounting Pronouncement in Note 1 to the Unaudited Condensed Financial Statements.
The Company’s bitcoin purchased for investment purpose are initially recorded at cost, inclusive of transaction costs and fees. Subsequently, the at fair value at the end of each reporting period with changes recognized in net income through “Other (expense) income, net” in the Company’s Unaudited Condensed Statements of Income. As of September 30, 2024, the Company held approximately
Reconciliation of fair value
The following table represents a reconciliation of the fair values of the Company’s Intangible digital assets held:
For the | For the | ||||
Three-Months | Nine-Months | ||||
Period Ended | Period Ended | ||||
September 30, 2024 | September 30, 2024 | ||||
Intangible digital assets held: | |||||
Beginning balance at fair value | $ | $ | — | ||
Additions | | | |||
Dispositions | - | - | |||
Unrealized gain, net | | | |||
Unrealized loss, net | — | ( | |||
Ending Balance | $ | | $ | | |
10
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
11. Other Non-current assets
Other non-current assets consist of right-of-use assets (“ROU”) of $
12.Accrued Expenses
Accrued expenses consist of the following:
September 30, | December 31, | ||||||
2024 |
| 2023 |
| ||||
Compensation | $ | | $ | | |||
Accrued Taxes | | | |||||
Miscellaneous Accruals |
| |
| | |||
Total Accrued Expenses | $ | | $ | | |||
13.Concentration of Credit Risk
Credit risk is the risk of loss from amounts owed by the financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject the Company to credit risk consist of cash, bitcoins and accounts receivable.
The Company maintains cash with major financial institutions. The Company’s cash consists of bank deposits held with banks that, at times, exceed federally insured limits. As of September 30, 2024 and December 31, 2023, the Company held deposits of $
Management periodically monitors the creditworthiness of its customers and believes that it has adequately provided for exposure to potential credit loss. For the three months ended September 30, 2024,
As of September 30, 2024,
11
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
14.Leases
Lessee Arrangements
On July 31, 2020, the Company entered into a
As of September 30, 2024, the remaining lease term is
| Total | ||
2024 Remaining period |
| | |
2025 |
| | |
Total undiscounted future minimum lease payments |
| | |
Less: present value discount |
| ( | |
Total lease liabilities |
| | |
Lease expense in excess cash payment |
| ( | |
Total ROU asset | $ | | |
As of September 30, 2024, the Company’s was $
Lessor Arrangements
The Company enters into contracts with customers for the Company’s QuantaFlo product. The Company has determined these contracts meet the definition of a lease under Topic 842. The lease portfolio primarily consists of operating leases that are short-term in nature (monthly, quarterly or one year, all of which have renewal options). During the three months ended September 30, 2024 and 2023, the Company recognized approximately $
15.Commitments and Contingencies
Indemnification Obligations
The Company enters into agreements with customers, partners, lenders, consultants, lessors, contractors, sales representatives and parties to certain transactions in the ordinary course of the Company’s business. These agreements may require the Company to indemnify the other party against third party claims alleging that its product infringes a patent or copyright. Certain of these agreements require the Company to indemnify the other party against losses arising from: a breach of representations or covenants, claims relating to property damage, personal injury or acts or omissions of the Company, its employees, agents or representatives. The Company has also agreed to indemnify the directors and certain officers and employees in accordance with the by-laws of the
12
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
Company. These indemnification provisions will vary based upon the nature and terms of the agreements. In many cases, these indemnification provisions do not contain limits on the Company’s liability, and the occurrence of contingent events that will trigger payment under these indemnities is difficult to predict. As a result, the Company cannot estimate its potential liability under these indemnities. The Company believes that the likelihood of conditions arising that would trigger these indemnities is remote and, historically, the Company has not made any significant payment under such indemnification provisions. Accordingly, the Company has not recorded any liabilities relating to these agreements. In certain cases, the Company has recourse against third parties with respect to the aforesaid indemnities, and the Company believes it maintains adequate levels of insurance coverage to protect the Company with respect to potential claims arising from such agreements.
401(K) Plan
Effective January 1, 2022, the Company started to match
Other
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides for an employee retention payroll tax credit for certain employers, which is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020 and before December 31, 2021. For each employee, wages (including health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. The Company started claiming this credit on its July 2020 payroll until mid-April 2021 when it determined that it no longer qualified given the change in government restrictions on travel that had impacted its sales activities. The Company’s determination that it qualified to claim the employee retention payroll tax credit is subjective and subject to audit by the Internal Revenue Service (“IRS”). If the IRS were to disagree with the Company’s tax position, it could be required to pay back the retention credit earned, along with penalties. As of September 30, 2024, the Company has collected $
Litigation
From time to time in the normal course of business, the Company is subject to various legal matters, such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Company does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.
16.Stockholders’ Equity
The Company has
Issuance of Common Stock
On June 6, 2024, the Company filed a shelf registration statement on Form S-3, and filed amendments thereto on July 11, 2024 and July 31, 2024, which became effective on August 13, 2024, under which the Company may, from time to time offer, issue and sell debt securities, common stock, units and/or warrants in one or more offerings with a total amount up to $
At the same time, the Company filed an “at the market” offering prospectus covering the offering, issuance and sale of up to $
13
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
for sale in other offerings pursuant to the base prospectus and a corresponding prospectus supplement, and if no shares are sold under the Sales Agreement, the full $
During the quarter ended September 30, 2024, the Company sold an aggregate of
17.Stock Incentive Plan
The Company’s stock-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of its stockholders. Stock options have been granted to employees under the stockholder-approved 2007 Key Person Stock Option Plan (the “2007 Plan”) and stock options and stock have been granted to employees under the stockholder-approved 2014 Stock Incentive Plan (the “2014 Plan”). As of September 30, 2024, there were no longer any awards outstanding options under the 2007 Plan. Stockholder approval of the 2014 Plan (which expired per its terms on July 24, 2024) became effective in September 2014. The 2014 Plan originally provided that the aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2014 Plan may not exceed
On August 14, 2024, the board of directors of the Company adopted a new stock option and incentive Plan (the “2024 Plan”), which was subsequently approved by the Company’s stockholders at the Annual Meeting of Stockholders held on October 4, 2024. The 2024 Plan is the successor to the 2014 Plan.
The maximum number of shares of common stock to be issued under the 2024 Plan is
Stock Awards
The Company granted fully vested stock awards of
14
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
Stock Options
Aggregate intrinsic value represents the difference between the closing market value as of September 30, 2024 of the underlying common stock and the exercise price of outstanding, in-the-money options. A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2024 is as follows:
Options Outstanding | ||||||||||
Weighted | ||||||||||
Average | ||||||||||
Number of | Weighted | Remaining | Aggregate | |||||||
Stock Options | Average | Contractual | Intrinsic Value | |||||||
| Outstanding |
| Exercise Price |
| Term (In Years) |
| (In Thousands) | |||
Balance, December 31, 2023 |
| | $ | |
| $ | | |||
Options granted | | $ | | — | — | |||||
Options forfeited/cancelled | ( | — | — | — | ||||||
Options exercised |
| ( | $ | | — |
| — | |||
Balance, September 30, 2024 |
| | $ | |
| $ | | |||
Exercisable as of September 30, 2024 |
| | $ | |
| $ | | |||
As of September 30, 2024, the fair value of unvested stock options was approximately $
During the nine months ended September 30, 2024, the Company granted
Employee options have vesting terms of th of options being vested
The following table represents the stock based compensation for the three and nine months ended September 30, 2024 and 2023:
Three months ended September 30, | Nine months ended September 30 | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
Cost of Revenues | $ | | $ | | $ | | $ | | |||||
Engineering and Product Development | | | | | |||||||||
Sales and Marketing |
| |
| | | | |||||||
General and Administrative |
| |
| | | | |||||||
Total | $ | | $ | | $ | | $ | | |||||
18.Income Taxes
The Company’s income tax provision for the three months ended September 30, 2024 and 2023 was $
15
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
year, adjusted for any discrete events that are recorded in the period in which they occurred. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.
For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the statements of income.
The effective tax rate for the three and nine months ended September 30, 2024 was
The effective tax rate for the three and nine months ended September 30, 2024 differed from the U.S. federal statutory rate of
As of September 30, 2024, and December 31, 2023, the Company had $
On August 16, 2022, the Creating Helpful Incentives to Produce Semiconductors for America Act of 2022 (“CHIPS and Science Act”), and Inflation Reduction Act (“IRA”) were signed into law in the United States. Among other things, the CHIPS and Science Act provides incentives and tax credits for the global chip manufacturers who choose to set-up or expand existing operations in the United States. The IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. The IRA is primarily applicable to large corporations with an annual revenue of $1 billion or over. Implementation of this act had no impact on the Company’s financial statements as of September 30, 2024.
19.Net Income Per Share, Basic and Diluted
Basic earnings per share (“EPS”) represent net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represents net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period using the treasury stock method.
16
Semler Scientific, Inc.
Notes to Condensed Financial Statements
Unaudited
(In thousands of U.S. Dollars, except share and per share data)
Basic and diluted EPS is calculated as follows:
Three months ended September 30, | ||||||||||||||||
2024 | 2023 | |||||||||||||||
Shares |
| Net Income |
| EPS |
| Shares |
| Net Income |
| EPS | ||||||
Basic | | $ | | $ | |
| | $ | | $ | | |||||
Common stock options | |
|
|
| |
| |
| ||||||||
Diluted | | $ | | $ | |
| | $ | | $ | | |||||
Nine months ended September 30, | ||||||||||||||||
2024 | 2023 | |||||||||||||||
Shares |
| Net Income |
| EPS |
| Shares |
| Net Income |
| EPS | ||||||
Basic | | $ | | $ | |
| | $ | | $ | | |||||
Common stock warrants | — |
|
|
| |
| |
| ||||||||
Common stock options | |
|
|
| |
| |
| ||||||||
Diluted | | $ | | $ | |
| | $ | | $ | | |||||
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read together with our condensed unaudited financial statements and the related notes appearing elsewhere in this quarterly report on Form 10-Q and with the audited financial statements and notes for the fiscal year ended December 31, 2023, and the information under the headings “Risk Factors” in Part II, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K filed with the SEC on March 7, 2024, or the Annual Report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” in Part II, Item 1A herein.
Overview
We are a company providing technology solutions to improve the clinical effectiveness and efficiency of healthcare providers. Our mission is to develop, manufacture and market innovative products and services that assist our customers combat chronic diseases. Our patented and FDA cleared product, QuantaFlo, measures arterial blood flow in the extremities to aid in the diagnosis of cardiovascular diseases, such as peripheral arterial disease, or PAD. We also invest in bitcoin and have adopted bitcoin as our primary treasury asset.
We are currently seeking a new 510(k) clearance from the FDA for the expanded use of QuantaFlo, which is intended to enable expanded labeling as an aid in the diagnosis of other cardiovascular diseases in addition to PAD. We continue to develop additional complementary proprietary products in-house and seek out other arrangements for additional products and services that we believe will bring value to our customers and to our company. We believe our current products and services, and any future products or services that we may offer, position us to provide valuable information to our customer base, which in turn permits them to better guide patient care.
In the three months ended September 30, 2024, we had total revenues of $13.5 million and net income of $5.6 million, compared to total revenues of $16.3 million and net income of $5.5 million in the same period in 2023. In the nine months ended September 30, 2024, we had total revenues of $43.9 million and net income of $11.7 million, compared to total revenues of $53.1 million and net income of $16.4 million in the same period in 2023.
Recent Developments
WE ARE NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940 AND STOCKHOLDERS DO NOT HAVE THE PROTECTIONS ASSOCIATED WITH OWNERSHIP OF SHARES IN A REGISTERED INVESTMENT COMPANY NOR THE PROTECTIONS AFFORDED BY THE COMMODITIES EXCHANGE ACT.
Our Bitcoin Treasury Strategy
On May 28, 2024, we announced that our board of directors adopted bitcoin as our primary treasury reserve asset on an ongoing basis, subject to market conditions and our anticipated cash needs and that we purchased 581 bitcoins for an aggregate amount of $40.0 million. As of June 30, 2024, we held a total of 877 bitcoins for an aggregate purchase price of $60 million. During the third quarter of 2024, we purchased 141 bitcoins for $8.4 million. In October 2024, we purchased 40 bitcoins for $2.6 million. All purchase amounts include fees and expenses.
As of September 30, 2024, the fair value of our digital assets (comprised of 1,018 bitcoins) was $64.5 million, which reflects a cumulative reduction in fair value of $3.9 million since acquisition. As of September 30, 2024, the original cost basis of our bitcoins was $68.4 million.
We view bitcoin as a reliable store of value and a compelling investment. We believe it has unique characteristics as a scarce and finite asset that can serve as a reasonable inflation hedge and safe haven amid global instability. Bitcoin is often compared to gold, which has been viewed as a dependable store of value throughout history. Gold’s value has appreciated substantially over time. For example, 25 years ago, the price of gold was approximately $500 per ounce. In 2024, the price of gold has traded higher than $2,400 per ounce. As of September 30, 2024, the total market capitalization of gold was approximately $18.0 trillion compared to approximately $1.3 trillion for bitcoin. Bitcoin is a highly volatile asset that has traded below $36,000 per bitcoin and above $70,000
18
per bitcoin on Coinbase in the 12 months preceding the date of this quarterly report on Form 10-Q. While highly volatile, bitcoin’s price has also appreciated significantly since bitcoin’s inception in January 2009 (at zero per bitcoin). We believe that a substantial portion of bitcoin’s appreciation is attributable to the view that bitcoin is or will become a reliable store of value. Like gold, bitcoin is also viewed as a scarce asset; the ultimate supply of bitcoin is limited to 21 million coins and approximately 94% of its supply already exists. We believe that bitcoin’s finite, digital and decentralized nature as well as its architectural resilience make it preferable to gold, which, as noted above, has a market capitalization 14 times higher than the market capitalization of bitcoin as of September 2024. Given our belief that bitcoin is a comparable and possibly better store of value than gold, we believe that bitcoin has the potential to approach or exceed the value of gold over time. Given the substantial gap in value between gold and bitcoin based on current market capitalization, we believe that bitcoin has the potential to generate outsize returns as it gains increasing acceptance as “digital gold.” We believe that the growing global acceptance and “institutionalization” of bitcoin supports our view that bitcoin is a reliable store of value. We believe that bitcoin’s unique attributes discussed above not only differentiate it from fiat money, but also from other cryptocurrency assets, and for that reason, we have no plans to purchase cryptocurrency assets other than bitcoin.
CMS Rate Notice
In late March 2023, CMS issued the final 2024 rate announcement with payment changes for the Medicare Advantage and Part D prescription drug programs. Essentially, CMS is phasing in a new Medicare Advantage risk adjustment model (V28 model) from the previous model (V24 model) over a three-year period. The V28 model does not include risk adjusted payments for PAD without complications, which payments many health insurers, including our customers, relied upon for their Medicare Advantage patients in the V24 model. 2024 marks the first year the changes are being phased in, which adjustments are as follows: in calendar year 2023, full payment under the V24 model; in calendar year 2024, 67% of the V24 model; in calendar year 2025, 33% of the V24 model.
Results of Operations
Three Months ended September 30, 2024 Compared to Three Months ended September 30, 2023
Revenues
We had revenues of $13.5 million for the three months ended September 30, 2024, a decrease of $2.8 million or 17% compared to $16.3 million in the same period of 2023. The primary reason for the decrease in revenues was the introduction of volume pricing tiers for some of our largest customers, as well as the CMS rate announcement.
Operating expenses
We had total operating expenses of $8.4 million for the three months ended September 30, 2024, a decrease of $1.6 million or 16%, compared to $10.0 million in the same period in the prior year. As a percentage of revenues, operating expenses increased to 63% in the third quarter of 2024 as compared to 61% in the prior year period. The changes in the various components of our operating expenses are described below.
Cost of revenues
We had cost of revenues of $1.2 million for the three months ended September 30, 2024, an increase of $0.1 million, or 4% compared to $1.1 million for the same period in 2023. As a percentage of revenues, cost of revenues was 9% in the third quarter of 2024, compared to 7% in the prior year period.
Engineering and product development expense
We had engineering and product development expense of $1.2 million for the three months ended September 30, 2024, with no change from the same period in 2023. Lower compensation and clinical studies expenses were offset by higher consulting expenses. As a percentage of revenues, engineering and product development expense increased to 9% in the third quarter of 2024, compared to 7% in the prior year period.
19
Sales and marketing expense
We had sales and marketing expense of $3.0 million for the three months ended September 30, 2024, a decrease of $0.4 million, or 13%, compared to $3.4 million in the same period of the prior year. The decrease was primarily due to lower compensation, consulting, trade show and travel expenses. As a percentage of revenues, sales and marketing expense increased to 22% in the third quarter of 2024, compared to 21% in the prior year period.
General and administrative expense
We had general and administrative expense of $3.1 million for the three months ended September 30, 2024, a decrease of $0.6 million, or 15%, compared to $3.7 million in the same period of the prior year. The decrease was primarily due to lower legal and professional, consulting and other expenses, partially offset by higher public company, stock based compensation and insurance expenses. As a percentage of revenues, general and administrative expense was 23% in the third quarter of 2024, with no change from the prior year period.
Other income, net
We had total other income, net, of $1.3 million for the three months ended September 30, 2024 an increase of $0.6 million, compared to other income, net, of $0.7 million in the same period of the prior year. The increase was primarily driven by a unrealized gain of $1.1 million resulting from the change in the fair value of our bitcoin.
Income tax provision
We had income tax provision of $0.8 million for the three months ended September 30, 2024, a decrease of $0.7 million or 48%, compared to $1.5 million for the same period of the prior year. The effective tax rate for the three months ended September 30, 2024 was 12% compared to 21% in the same period of the prior year. The decrease in the effective tax rate for the three months ended September 30, 2024 was primarily due to the reduction in valuation allowance related to net unrealized capital losses incurred from the change in fair value of our bitcoin, and higher tax benefits associated with employee stock-based compensation.
Net income
For the foregoing reasons, we had net income of $5.6 million, or $0.80 per basic share and $0.72 per diluted share, for the three months ended September 30, 2024, an increase of $0.1 million, or 2%, compared to a net income of $5.5 million, or $0.82 per basic share and $0.71 per diluted share, for the same period of the prior year.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Revenues
We had revenues of $43.9 million for the nine months ended September 30, 2024, a decrease of $9.2 million, or 17%, compared to $53.1 million in the same period in 2023. The primary reason for the decrease in revenues was the introduction of volume pricing tiers for some of our largest customers, as well as the CMS rate announcement.
Operating expenses
We had total operating expenses of $26.5 million for the nine months ended September 30, 2024, a decrease of $6.9 million or 21%, compared to $33.4 million in the same period in the prior year. As a percentage of revenues, operating expenses decreased to 60% in the first nine months of 2024 as compared to 63% in the prior year period. The changes in the various components of our operating expenses are described below.
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Cost of revenues
We had cost of revenues of $3.7 million for the nine months ended September 30, 2024, an increase of $0.1 million or 2%, compared to $3.6 million in the same period in 2023. As a percentage of revenues, cost of revenues was 8% in the first nine months of 2024, compared to 7% in the prior year period.
Engineering and product development expense
We had engineering and product development expense of $3.8 million for the nine months ended September 30, 2024, a decrease of $0.8 million, or 18%, compared to $4.6 million in the same period of the prior year. The decrease was primarily due to lower compensation related and consulting expenses, partially offset by higher clinical studies expenses. As a percentage of revenues, engineering and product development expenses were flat at 9% in the first nine months of 2024, compared to the prior year period.
Sales and marketing expense
We had sales and marketing expense of $10.1 million for the nine months ended September 30, 2024, a decrease of $3.5 million, or 26%, compared to $13.6 million in the same period of the prior year. The decrease was primarily due to lower compensation related expenses, consulting, trade show, travel, and other expenses. As a percentage of revenues, sales and marketing expense decreased to 23% in the first nine months of 2024, as compared to 26% in the prior year period.
General and administrative expense
We had general and administrative expense of $9.0 million for the nine months ended September 30, 2024, a decrease of $2.0 million, or 19%, compared to $11.0 million in the same period of the prior year. The decrease was primarily due to lower compensation related, legal and professional and bad debt expenses, partially offset by higher dues and subscriptions expenses. As a percentage of revenues, general and administrative expense decreased to 20% in the first nine months of 2024, as compared to 21% in the prior year period.
Other (expense) income, net
We had total other expense, net, of $2.1 million, a decrease of $3.6 million for the nine months ended September 30, 2024, compared to total other income, net, of $1.6 million in the same period of the prior year. The change was primarily driven by unrealized loss of $3.9 million from the change in fair value of our digital assets.
Income tax provision
We had income tax provision of $3.6 million for the nine months ended September 30, 2024, a decrease of $1.3 million or 27%, compared to $4.9 million in the prior year period. The effective tax rate for the nine months ended September 30, 2024 was 24%, compared to 23%, in the same period of the prior year. The increase in our effective tax rate was primarily due to the valuation allowance related to net unrealized capital losses incurred due to the change in fair value of our digital assets.
Net income
For the foregoing reasons, we had net income of $11.7 million, or $1.68 per basic share and $1.50 per diluted share, for the nine months ended September 30, 2024, a decrease of $4.7 million, or 29%, compared to a net income of $16.4 million, or $2.44 per basic share and $2.09 per diluted share, for the same period of the prior year.
Liquidity and Capital Resources
We had cash, cash equivalents and restricted cash of $6.7 million at September 30, 2024 compared to $57.3 million at December 31, 2023, and total current liabilities of $6.8 million at September 30, 2024 compared to $6.2 million at December 31, 2023. As of September 30, 2024, we held 1,018 bitcoins with an aggregate fair value of $64.5 million at such date. Our bitcoins are held offline in cold storage with multiple third-party providers. Digital assets like bitcoin depend on private keys to retrieve and transfer funds. A bitcoin is considered an indefinite-lived intangible asset, and our bitcoin investment is remeasured at fair value at each reporting date with changes recognized in net income through “other income (expenses), net” in our condensed statement of
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income. We recognized an unrealized gain of $1.1 million and unrealized loss of $3.9 million from the remeasurement of fair value of our digital assets for the three and nine month periods ended September 30, 2024, respectively. As of September 30, 2024, we had working capital of approximately $14.7 million. We believe that our current sources of funds will provide us with adequate liquidity during the 12 month period following September 30, 2024, as well as in the long-term.
Our cash is held in a variety of non-interest bearing bank accounts. At September 30, 2024, we held approximately $3.6 million in U.S. Government money market fund account and the remaining cash of $3.1 million was held in non-interest bearing bank accounts. Our investment guidelines allow for holdings in bitcoins, U.S. government and agency securities, corporate securities, taxable municipal bonds, commercial paper, money market accounts and treasury bills. In addition, we have, and may in the future, choose to invest some of our cash resources in other entities that may have complementary technologies or product offerings.
Operating activities
We generated $17.0 million of net cash from operating activities for the nine months ended September 30, 2024. Non-cash adjustments to reconcile net income to net cash from operating activities provided net cash of $4.7 million and were primarily due to, an unrealized loss in fair value of bitcoin of $3.9 million, depreciation of $0.5 million, stock based compensation of $0.5 million and loss on disposal of assets for lease of $0.3 million, partially offset by deferred tax expense of $0.4 million, and gain in fair value of notes held for investment of $0.1 million. Changes in operating assets and liabilities provided $0.6 million of net cash. These changes in operating assets and liabilities included an increase in accrued expenses of $0.8 million, decrease in prepaid expenses and other assets of $0.4 million, decrease in inventory of $0.1 million, increase in trade payables of $0.1 million, partially offset by an increase in trade receivable of $0.5 million, and a decrease in deferred revenue of $0.3 million.
We generated $16.9 million of net cash from operating activities for the nine months ended September 30, 2023. The change was primarily due to generation of additional net income from operating activities. Non-cash adjustments to reconcile net income to net cash from operating activities provided net cash of $1.5 million and were primarily due to stock-based compensation expense of $0.9 million, depreciation of $0.4 million, loss on disposal of assets for lease of $0.4 million, change in fair values of investments of $0.2 million, loss on disposal of inventory of $0.2 million and allowance for credit losses of $0.2 million, partially offset by deferred tax income of $0.5 million and gain on short-term investments of $0.3 million. Changes in operating assets and liabilities used $1.0 million of net cash. These changes in operating assets and liabilities included an increase in trade receivable of $2.3 million, prepaid expenses and other assets of $0.5 million and a decrease in trade payables of $0.5 million, partially offset by an increase in accrued expenses of $2.2 million, and a decrease in other non-current assets of $0.1 million.
Investing activities
We used $69.0 million of net cash in investing activities for the nine months ended September 30, 2024, primarily to purchase $68.4 million of bitcoin, purchase of a promissory note held for investment of $0.5 million and purchase of property and equipment of $0.1 million.
We used $0.2 million of net cash in investing activities for the nine months ended September 30, 2023, primarily to purchase $57.8 million of short-term treasury bills, a $1.0 million promissory note held for investment, $0.8 million of assets for lease and $0.3 million of fixed assets to support our growing business, partially offset by the maturities of short-term treasury bills of $59.7 million.
Financing activities
We generated $1.4 million in net cash from financing activities during the nine months ended September 30, 2024, which reflects proceeds from the issuance of common stock of $2.5 million under our at-the-market offering program and proceeds from exercise of stock options of $0.3 million, partially offset by the payment of taxes withheld for stock grants of $0.8 million the payment of stock issuance expenses of $0.6 million.
We used $2.2 million in net cash in financing activities during the nine months ended September 30, 2023, which reflects the purchase of common stock warrants of $2.0 million from our chief executive officer, and payment of taxes withheld for stock grants of $0.2 million.
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Critical Accounting Policies and Estimates
On May 28, 2024, we announced that our board of directors adopted bitcoin as our primary treasury reserve asset. Our bitcoin treasury strategy includes acquiring bitcoin using cash flows from operations and proceeds from equity and debt financings.
Other than the above, there have been no material changes to our critical accounting policies and estimates described in our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 7, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Bitcoin Market Price Risk.
Our bitcoin investment is measured using observed prices from active exchanges and adjustments are recorded in net income through “other (expense) income, net” on our condensed statements of income. The bitcoin market price may fluctuate significantly and a decline in the market price of bitcoin could result in a material adverse effect on our financial results in future periods. See Part II, Item 1A, “Risk Factors,” for information regarding the risks related to our bitcoin holdings. As of September 30, 2024, the fair value of our bitcoin investment included in other non-current assets was $64.5 million, and for the three and nine months ended September 30, 2024 we recognized a $1.1 million unrealized gain and unrealized loss of $3.9 million, respectively, from the remeasurement of our bitcoin investment.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure material information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision of and with the participation of our management, including our chief executive officer and our chief financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. Based upon that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our third quarter ended September 30, 2024.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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Item 1A. Risk Factors.
Any investment in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this quarterly report on Form 10-Q before deciding whether to purchase our common stock. Our business, financial condition or results of operations and trading price or value of our securities could be materially adversely affected by these risks if any of them actually occur. This quarterly report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this quarterly report on Form 10-Q.
Risks Related to Our Business
If we do not successfully implement our medical business strategy, our business and results of operations will be adversely affected.
Our business strategy was formed based on assumptions about the cardiac and vascular diseases market and healthcare reform that might prove wrong. We believe that various demographics and industry-specific trends, including the aging of the general population, growth of capitated payment programs, numbers of undiagnosed patients with cardiac and vascular or other diseases and the importance of codifying vascular disease and potentially other diseases will help drive growth in the cardiac and vascular diseases market and our risk assessment business. However, these demographics and trends, and our assumptions about them, are uncertain. Actual demand for our products and service offerings could differ materially from projected demand if our assumptions regarding these factors prove to be incorrect or do not materialize, or if alternatives to our products or other risk assessment service providers gain widespread acceptance. Moreover, if our customers do not believe they can benefit from increased capitated payments by identifying sicker patients in their patient pools, they may not see the benefit in screening patients for PAD using our products, which would have material and adverse effect on our business, financial condition and results of operations. For example, CMS revised the HCC codes for vascular disease and created uncertainty in the future whether identifying patients with PAD will qualify for an increased capitated payment. More specifically, in late March 2023, CMS issued a final 2024 rate announcement with payment changes for the Medicare Advantage and Part D prescription drug programs and under which CMS is phasing in a new Medicare Advantage risk adjustment model (2024 model) from the previous model (2020 model) over a three-year period. The 2024 model does not include risk adjusted payments for PAD without complications, which payments many health insurers have previously relied upon for their Medicare Advantage patients under the previous 2020 model. These changes are being phased in as follows: in calendar year 2023, full payment under the 2020 model continued; in calendar year 2024, 67% of the 2020 model is available; in calendar year 2025, 33% of the 2020 model will be available. Such changes in the regulatory landscape for HCC codes had impacted the perceived profitability of using QuantaFlo to aid diagnosis of cardiovascular diseases.
In addition, we may not be able to successfully implement our business strategy. To implement our business strategy, we need to (among other things) find new applications for and improve our products and service offerings and educate healthcare providers and plans about the clinical and cost benefits of our products, all of which we believe could increase acceptance of our products by physicians. We have ceased marketing of QuantaFlo as an aid in the diagnosis of heart dysfunction and there is no guarantee that we will obtain a new FDA 510(k) clearance for the expanded use. Although we had a distribution agreement for Insulin Insights from Mellitus, we were not able to generate significant revenue and wrote off the entire balance of our $2.5 million investment in December 2023. We may also need to develop or acquire rights to other products and services that would be of interest to our customers given the patient populations they serve. In addition, we are seeking to increase our sales and, in order to do so, might need to continue to expand our direct and distributor sales forces in existing and new territories, which could subject us to additional or different regulatory requirements with which we may not be able to comply. Moreover, even if we successfully implement our business strategy, our operating results may not improve or may decline. We may decide to alter or discontinue aspects of our business strategy and may adopt different strategies due to business or competitive factors not currently foreseen, such as new medical technologies that would make our products obsolete or changes in the regulatory landscape that may undermine the economic rationale for QuantaFlo or difficulties in obtaining a new 510(k) clearance, which could cause us to cease efforts to expand the indications for QuantaFlo. Our attempts to alter aspects of our business strategy, such as our prior entry into an exclusive marketing and distribution agreement and our investments in private companies, may not yield positive effects on our business, results of operations and financial condition. Any delay or failure to implement our business strategy may adversely affect our business, results of operations and financial condition.
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We predominantly market only one FDA-cleared vascular testing product; it may not achieve broad market acceptance or be commercially successful. We may also fail to generate meaningful revenues from our Insulin Insights distribution arrangement, which includes prepaid licenses, or benefit from our recent investments in other companies developing complementary products.
We currently actively market only one vascular testing product, QuantaFlo. Although we had an exclusive marketing and distribution agreement for Insulin Insights, a software product line, in the United States, including Puerto Rico, for which we prepaid an aggregate of $2.5 million of software licenses, we did not generate meaningful revenues from distribution of our prepaid licenses, and we wrote off our prepaid licenses and a portion of our investment in December 2023. We also have a minority investment in NeuroDiagnostics Inc., doing business as SYNAPS Dx, which is developing an additional potentially complementary product offering, Discern, although such product is in early stages and may not ultimately fit with our strategy and customer base. We do not have any distribution agreement for Discern. In December 2022, we committed to loan up to $5.0 million through the purchase of a senior convertible promissory note to Monarch, a digital health company whose proprietary product, EndoTool, offers a technology-enabled approach to inpatient glycemic management all of which has been drawn as of September 30, 2024. We do not have any distribution agreement for EndoTool. Moreover, there is a risk that we may never receive repayment of our loans to Mellitus or Monarch, nor receive any benefit from our equity investment in SYNAPS Dx. Accordingly, we expect that revenues from our vascular testing product will account for the vast majority of our revenues for at least the next several years.
QuantaFlo, and any other products we may be offering in the future, may not gain broad market acceptance unless we continue to educate physicians and plans of their benefits. Moreover, even if insurance plans, home health care providers and physicians understand the benefits of cardiovascular and other risk assessment testing, they still may elect not to use our products for a variety of reasons, such as familiarity with other devices and approaches, or the impact of CMS regulatory revisions, which revised the regulatory landscape for HCC codes and has impacted the perceived profitability of using QuantaFlo to aid diagnosis of cardiovascular diseases. We may not be successful in gaining market acceptance of a technique measuring comparative blood flows using our proprietary algorithm to indicate flow obstruction as opposed to existing techniques that measure comparative blood pressures using well-accepted criteria to indicate flow obstruction, or imaging techniques that visualize anatomy of the arteries. Providers may also object to renting an examining tool with ongoing monthly payments rather than making a one-time capital purchase or be reluctant to pay monthly fees for tools in the examining room when they have many such tools, such as thermometer and stethoscope that only required one-time minimal purchases. Providers may also not synch their devices as required per their service contracts in the fee-per-test (variable license fees) model, and thus we may not capture all revenue to which we are entitled.
If QuantaFlo or other products we may offer are not viewed as an attractive alternative to other products, procedures and techniques, we will not achieve significant market penetration or be able to generate significant revenues. To the extent that any products we offer are not commercially successful or are withdrawn from the market for any reason, our revenues will be adversely impacted, and our business, operating results and financial condition will be harmed.
Physicians and other customers may not widely adopt our products unless they determine, based on experience, long-term clinical data and published peer reviewed journal articles, that the use of our products provides a safe and effective alternative to other existing ABI devices.
We believe that physicians and other customers will not widely adopt our vascular testing product or our other products in development or products we distribute unless they determine, based on experience, long-term clinical data and published peer reviewed journal articles, that the use of such product provides a safe and effective alternative to other existing ABI devices.
We cannot provide any assurance that the data collected from our past, current and any future clinical trials will be sufficient to demonstrate that our products are an attractive alternative to other ABI devices or procedures. If we fail to demonstrate safety and efficacy that is at least comparable to other ABI devices that are available on the market, our ability to successfully market our products will be significantly limited. Even if the data collected from clinical studies or clinical experience indicate positive results, each physician’s actual experience with our products will vary. We also believe that published peer-reviewed journal articles and recommendations and support by influential physicians regarding our vascular testing product and our other products in development will be important for market acceptance and adoption, and we cannot assure you that we will receive these recommendations and support, or that supportive articles will be published. Accordingly, there is a risk that our products may not be adopted by many physicians, which would negatively impact our business, financial condition and results of operations.
Moreover, if we acquired exclusive distribution rights to a new product area and to other complementary products, we may not be able to convince potential customers of their benefits, and these rights and potential future rights may not generate any meaningful revenues for our company.
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If healthcare providers are unable to obtain adequate coverage and reimbursement either for procedures performed using our product or patient care incorporating the use of our product, our product might have difficulty gaining widespread acceptance.
Maintaining and growing revenues from our products and service offerings depends on the availability of coverage and adequate reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Healthcare providers that use medical devices such as QuantaFlo to test their patients generally rely on third-party payors to pay for all or part of the costs and fees associated with the procedures performed with these devices, or to compensate them for their patient care services. The existence of coverage and adequate reimbursement for the procedures or patient care performed with QuantaFlo by third-party payors is central to the acceptance of QuantaFlo and any future products. During the past several years, third-party payors have undertaken cost-containment initiatives including different payment methods, monitoring healthcare expenditures, and anti-fraud initiatives. We may not be able to achieve or maintain profitability if third-party payors deny coverage or reduce their current levels of payment, or if our costs of production increase faster than increases in reimbursement levels. Further, many private payors use coverage decisions and payment amounts determined by CMS, which administers the Medicare program, as guidelines in setting their coverage and reimbursement policies. Those private payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for procedures or patient care performed with our vascular testing product. Future action by CMS or other government agencies may diminish payments to physicians, outpatient centers and/or hospitals or may undermine the economic rationale for using QuantaFlo if there is no increased capitated payment for the vascular diseases it helps diagnose. For example, the final 2024 CMS rate announcement for Medicare Advantage and Medicare Part D does not include risk-adjusted payments for PAD without complications. For some governmental programs, such as Medicaid, coverage and reimbursement differ from state to state, and some state Medicaid programs may not pay an adequate amount for the procedures or patient care performed with QuantaFlo if any payment is made at all. As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable to coverage and reimbursement limitations imposed by CMS. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain that the procedures or patient care performed with our product will be reimbursed at a cost-effective level.
QuantaFlo is not specifically approved for reimbursement under any third-party payor codes; if third-party payors refuse to reimburse our customers for their use of our product, it could have a material adverse effect on our business.
QuantaFlo is licensed by healthcare providers. They may bill various third-party payors, including governmental healthcare programs, such as Medicare and Medicaid, private insurance plans and managed care programs for procedures in which our testing product is used. Reimbursement is a significant factor considered by healthcare providers in determining whether to license medical devices or systems such as QuantaFlo. We cannot control whether or not providers who use QuantaFlo will seek reimbursement. Therefore, our ability to successfully commercialize our vascular testing product could depend on the coverage and adequacy of reimbursement from these third-party payors.
Currently, our QuantaFlo is not specifically approved for any particular reimbursement code. Although some of our customers report being covered and reimbursed by third-party payors for procedures, we have not offered any reimbursement guidance, therefore there is a risk that third-party payors may disagree with the reimbursement under a particular code. In addition, some of our potential customers might have deferred renting our product given the uncertainty regarding reimbursement. We do not track denial of requests for reimbursement made by the users of our product. It is our belief that such denials have occurred and might occur in the future with more or less frequency. Even if our product and procedures are often currently covered and reimbursed by third-party payors and Medicare, problems for customers to receive reimbursement or adverse changes in payors’ coverage and reimbursement policies that affect our product could harm our ability to market our vascular testing product. Obtaining approval for a particular reimbursement code is time consuming and can be costly. Accordingly, at this time, and given the way we intend our QuantaFlo to be used, we do not intend to pursue formal approval for QuantaFlo for any particular code.
Moreover, we are unable to predict what changes will be made to the reimbursement methodologies used by third-party payors. We cannot be certain that under current and future payment systems, in which healthcare providers may be reimbursed a set amount based on the type of procedure performed, such as those utilized by Medicare and in many privately managed care systems, the cost of our product will be justified and incorporated into the overall cost of the procedure.
We rely heavily upon the talents of a small number of key personnel, the loss of whom could severely damage our business.
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Our performance depends to a large extent on a small number of key scientific, technical, managerial and marketing personnel. We do not maintain key man insurance for any of our personnel. The loss of the services of any of these key personnel could still severely damage our business prospects, which could have a material adverse effect on our financial condition and results of operations.
We rely on a small number of employees in our direct sales force and face challenges and risk in managing and maintaining our distribution network and the parties who make up that network.
We face significant challenges and risks in managing our distribution network and retaining the parties who make up that network. We had 44 sales and marketing employees as of September 30, 2024. If any of our sales or marketing force were to resign, our sales could be adversely affected. We may need to seek out alternatives, such as increasing our direct sales and marketing force or contracting with external independent sales representatives or enter another distributor relationship. There is no guarantee that we would be successful in our efforts to find independent sales representatives or a large distributor, or that we would be able to negotiate contract terms favorable to us. Failure to hire or retain qualified direct sales and marketing personnel or independent distributors would prevent us from expanding our business and generating revenues, which would have a material adverse effect on our ability to achieve or maintain profitability.
To adequately commercialize our products and any new products we add, we may need to increase our sales and marketing network, which will require us to hire, train, retain and supervise employees and other independent contractors.
We are currently exploring other sales models to generate revenues from our products in addition to the leasing model, such as our fee per test model. We also may in the future acquire rights to other complementary products. As we increase our marketing efforts to pursue these new strategies and expand our efforts to target insurance plans that serve Medicare Advantage members, we may need to increase our sales and marketing network. Our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled direct sales representatives, independent sales representatives or distributors with significant technical knowledge about our product, in addition to coordinating networks of contract medical assistants and other personnel to staff health and wellness fairs and physicians’ offices in fee-for-service models. New hires and independent contractors require training, supervision and take time to achieve full productivity. If we fail to train and supervise new hires adequately, or if we experience high turnover in our sales force or trained professionals in the future, we cannot be certain that we will maintain or increase our sales. If we are unable to expand our sales and marketing capabilities, we may not be able to effectively commercialize QuantaFlo or our other products and service offerings in development, which would adversely affect our business, results of operations and financial condition.
We do not require our customers to enter into long-term licenses or maintenance contracts for our products or services and may therefore lose customers on short notice.
Our business is primarily based on a leasing model rather than an outright sale of our products although we also generate variable fee revenues, which are based on usage (fee-per-test). Our pricing is based on data collected on use rates and third-party payment rates to physicians and facilities for the use of our product. We require no down payment, long-term commitment or maintenance contract or fees from our customers and replace damaged products free of charge in the service model. If we lose current customers on short notice, we may not be able to find new customers to replace them with in a timely manner and that could adversely affect our business, results of operations and financial condition. In addition, our business model of replacing damaged products free of charge may prove to be costly and affect the profitability of our service model. In our fee-per-test model, we rely on our customers to comply with the terms of service that require them to synchronize devices on a regular and routine basis such that we are able to invoice them for the tests done using our device. There is a risk that customers use our device without synching as agreed, which could lead to inadequate billing and failing to capture revenue based on actual usage. Although we have procedures in place to limit usage of our device if it has not synchronized for a period of time, there is no guarantee that our customers will act in compliance with their terms of service and we may not appropriately capture all per-test fees to which we are entitled.
We are exposed to risk as a significant portion of our revenues and accounts receivables are with a limited number of customers.
A limited number of customers account for a significant portion of our revenues and accounts receivable. For the three months ended September 30, 2024, two customers (including their affiliates) accounted for 44.0% and 28.8% of our revenues, respectively. For the nine months ended September 30, 2024, two customers accounted for 44.2% and 26.6% of our revenues, respectively. As of September 30, 2024, three customers accounted for 55.9%, 16.2% and 10.7% of our accounts receivable. If our largest customers were to cease using or stop payment for our vascular testing devices, it would have a material adverse effect on our
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revenues and/or our accounts receivable. Our efforts to diversify and potentially expand our product offering are preliminary in nature. This concentration of revenues and accounts receivable among a limited number of customers represents a significant risk.
We rely on a small number of independent suppliers and facilities for the manufacturing of QuantaFlo. Any delay or disruption in the supply of the product or facility may negatively impact our operations.
We manufacture QuantaFlo through a small number of independent contractors based in the United States. The loss or disruption of our relationships with outside vendors and suppliers could subject us to substantial delays in the delivery to customers. Our current contractor manufacturers source some supplies from China and should these outside vendors encounter issues due to supply chain disruptions as a result of the global health emergency such as COVID-19 pandemic or otherwise, we believe alternative suppliers should be available. However, significant delays in the delivery of our product or inventory to us could result in possible cancellation of orders and the loss of customers. Although we expect our vendors and suppliers to comply with our contract terms, we do not have control over such parties. Our inability to provide a product that meets delivery schedules could have a material adverse effect on our reputation in the industry, which could have a material adverse effect on our financial condition and results of operations.
Further, QuantaFlo is manufactured in the United States in a limited number of facilities. If an event occurred that resulted in material damage to these manufacturing facilities or our manufacturing contractors lacked sufficient labor to fully operate their facilities, we may be unable to transfer the manufacture of QuantaFlo to another facility or location in a cost-effective or timely manner, if at all. This potential inability to transfer production could occur for a number of reasons, including but not limited to a lack of necessary relevant manufacturing capability at another facility, or the regulatory requirements of the FDA or other governmental regulatory bodies. Even if there are many qualified contract manufacturers available around the country and our product is relatively easy to manufacture, such an event could have a material adverse effect on our financial condition and results of operations.
We will need to generate significant revenues to remain profitable.
We will need to generate significant sales to maintain profitability and we might not be able to do so. Even if we do generate significant sales, we might not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our sales grow more slowly than we anticipate or if our operating expenses exceed our expectations, our financial performance will likely be adversely affected.
Our future financial performance will depend in part on the successful improvements and software updates to QuantaFlo on a cost-effective basis.
Our future financial performance will depend in part on our ability, anticipate, identify and respond to changing user preferences and needs and the technologies relating to the care and treatment of vascular problems. We can provide no assurances that QuantaFlo will achieve significant commercial success and that it will gain meaningful market share. We may not correctly anticipate or identify trends in user preferences or needs or may identify them later than competitors do. In addition, difficulties in manufacturing or in obtaining regulatory approvals may delay or prohibit improvements to QuantaFlo or our other products in development. Further, we may not be able to develop improvements and software updates to QuantaFlo at a cost that allows us to meet our goals for profitability. Service costs relating to our product may be greater than anticipated, rentals may be returned prior to the end of the license term, and we may be required to devote significant resources to address any quality issues associated with QuantaFlo.
Failure to successfully introduce, improve or update our products on a cost-effective basis, or delays in customer decisions related to the evaluation of our products could cause us to lose market acceptance and could materially adversely affect our business, financial condition and results of operations.
One of our business strategies is developing additional products and service offerings that allow healthcare providers to deliver cost-effective wellness programs and receive increased compensation for their services. The development of new products and service offerings involves time and expense and we may never realize the benefits of this investment.
As part of our business strategy, we intend to develop additional products and service offerings that allow healthcare providers to deliver cost-effective wellness programs. Such product and service offering development may require substantial investments and we may commit significant resources and time before knowing whether our efforts will translate into profits for our company. We may continue to choose to invest some of our cash resources in other entities that may have complementary technologies or product offerings and may not realize the benefit of such investments. For example, in December 2023, we wrote off the $2.5 million prepayment for Insulin Insights software licenses as we were not able to generate meaningful revenues, and also took
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a $0.6 million impairment charge on our investment in Mellitus. It is possible that our development efforts will not be successful and that we will not be able to develop new products or service offerings, either alone or in partnership with others, or if developed that we will obtain the necessary regulatory approvals for commercialization. Even if we receive necessary regulatory approvals, there is no guarantee that such approved products or any new service offerings will achieve market acceptance and we may never realize the benefits of any investment in this strategy.
We have used our cash resources to invest in other companies, and there is no guarantee that we will be repaid on maturity nor realize any other expected benefits from such investments, which could harm our business.
From time to time, we have invested, and may in the future invest, in other companies with potentially complementary products or technologies. For example, in September and October 2020, we made investments in Mellitus and SYNAPS Dx, two private companies working in other product areas, Insulin Insights and Discern, and in December 2022, we extended a loan to Monarch, maker of the software product EndoTool. There can be no assurance that the businesses we invest in will become profitable or remain so or that we will realize any financial benefit from our investments, including whether or not we will distribute Discern and EndoTool or that we will be repaid upon maturity of our loans. Notably, in the quarter ended December 31, 2023, we wrote-off our $2.5 million prepayment for Insulin Insights software licenses as we were not able to generate meaningful revenues, and also took a $0.6 million impairment charge on our investment in Mellitus. Additionally, investments in privately held companies are inherently risky, in some instances because the markets for the technologies or products these companies have under development may never materialize or achieve expectations. If these companies do not succeed, we may be forced to record additional impairment charges and could lose some or all of our investment in these companies. Further, we may need to divest our investments or increase our investment to become a controlling interest sooner than we may like in order to comply with regulations regarding the amount of our assets represented by minority investments. These regulatory requirements may not always coincide with our business objectives and could adversely affect our investments and strategy.
Risks Related to Our Legal and Regulatory Environment
Our business is subject to many laws and government regulations governing the manufacture and sale of medical devices, including the FDA’s 510(k) clearance process, and laws and regulations governing patient data and information, among others.
Our vascular testing product and any future medical devices that we may develop or services that we may offer are subject to extensive regulation in the United States by the federal government, including by the FDA. For example, our operations are subject to regulations governing packaging and labeling requirements, adverse event reporting, quality system and manufacturing requirements, clinical testing and recalls. For a discussion of the relevant regulatory regime, see “Business—Government Regulation” in the Annual Report. We cannot assure that any new medical devices or new uses or modifications for QuantaFlo that we develop, including our planned 510(k) for the use of QuantaFlo to enable expanded labeling as an aid in the diagnosis of other cardiovascular diseases in addition to PAD, will be cleared or approved in a timely or cost-effective manner, if cleared or approved at all. Even if such clearances or approvals are received, they may not be for all indications. Because medical devices may only be marketed for cleared or approved indications, this could significantly limit the market for that product and may adversely affect our results of operations.
Furthermore, although QuantaFlo has received FDA clearance, we must make our own determination regarding whether a modification to the device requires a new clearance. For example, in January 2024, we announced that we are seeking a new 510(k) clearance from the FDA for the expanded use of QuantaFlo intended to enable expanded labeling as an aid in the diagnosis of other cardiovascular diseases in addition to PAD. We cannot guarantee that the FDA will agree with our decisions not to seek clearances for particular device modifications or that we will be successful in obtaining 510(k) clearances for modifications. Any such additional clearance processes with the FDA could delay our ability to market a modified product and may adversely affect our results of operations. We also may need to undertake a recall of any modified product that has been distributed.
The FDA may change its policies, adopt additional regulations, or revise existing regulations, in particular relating to the 510(k) clearance process.
The FDA may change its policies, adopt additional regulations, or revise existing regulations, each of which could prevent or delay premarket approval or 510(k) clearance of a device, or could impact our ability to market our currently cleared device. For example, in February 2024, the FDA published a final rule to amend its QSR, requirements to align more closely with the international consensus standards for medical devices by converging with quality management system, requirements used by other regulatory authorities from other countries. Specifically, the final rule does so primarily by incorporating by reference the 2016 edition of the International Organization of Standardization, or ISO, ISO 13485 standard. The amended regulation is referred to as the Quality
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Management System Regulation, and is effective February 2026. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing authorization that we may have obtained, which could have a material adverse effect on our business, prospects, results of operations, financial condition and our ability to achieve or sustain profitability. Further, future reforms could require us to file new 510(k)s and could increase the total number of 510(k)s to be filed. We cannot predict what effect these reforms will have on our ability to obtain 510(k) clearances in a timely manner. We also cannot predict the nature of other regulatory reforms and their resulting effects on our business.
Our business is subject to unannounced inspections by FDA to determine our compliance with FDA requirements.
FDA inspections can result in inspectional observations on FDA’s Form-483, warning letters, untitled letters or other forms of more significant enforcement action. More specifically, if FDA concludes that we are not in compliance with applicable laws or regulations, or that our vascular testing product or any future medical device we develop is ineffective or poses an unreasonable health risk, the FDA could:
| ● | require us to notify health professionals and others that our devices present unreasonable risk of substantial harm to public health; |
| ● | order us to recall, repair, replace or refund the cost of any medical device that we manufactured or distributed; |
| ● | detain, seize or ban adulterated or misbranded medical devices; |
| ● | refuse to provide us with documents necessary to export our product; |
| ● | refuse requests for 510(k) clearance or premarket approval of new products or new intended uses; |
| ● | withdraw 510(k) premarket approvals we may receive or reclassify our device; |
| ● | impose operating restrictions, including requiring a partial or total shutdown of production; |
| ● | enjoin or restrain conduct resulting in violations of applicable law pertaining to medical devices; and/or |
| ● | assess criminal or civil penalties against our officers, employees or us. |
Following correspondence from FDA questioning our reliance on letters-to-file for the expansion into heart dysfunction, we are now seeking a new 510(k) clearance from the FDA for the expanded use of QuantaFlo to enable expanded labeling. If the FDA concludes that we failed to comply with any regulatory requirement during an inspection or otherwise, it could have a material adverse effect on our business and financial condition. We could incur substantial expense and harm to our reputation, and our ability to introduce new or enhanced products in a timely manner could be adversely affected.
We may rely on third parties to support certain aspects of our clinical trials and regulatory processes. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory clearance or approval or commercialize our products, and our business could be substantially harmed.
We may retain the services of knowledgeable external service providers, including consultants and clinical research organizations, to develop and supervise our clinical trials and regulatory processes. These third-party contract research organizations and consultants may carry out portions of our clinical and preclinical research studies and regulatory filing assistance and as a result, if retained, we will have less control over the conduct of the clinical trials, the timing and completion of the trials, the required reporting of adverse events, and the management of data developed through the trials than would be the case if we were relying entirely on our own staff. Outside parties may have staffing difficulties, may undergo changes in priorities or may become financially distressed, adversely affecting their willingness or ability to conduct our trials. Failure by these third parties to comply with regulatory requirements or to meet timing expectations may require us to repeat clinical trials or preclinical studies, which would delay the regulatory clearance or approval process, or require substantial unexpected expenditures.
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If we are found to have improperly promoted our products for off-label uses, we may become subject to significant fines and other liability.
FDA and other regulatory agencies strictly regulate the promotional claims that may be made about medical devices. For example, devices cleared under section 510(k) cannot be marketed for any intended use that is outside of FDA’s substantial equivalence determination for such devices. Physicians nevertheless may use our products on their patients in a manner that is inconsistent with the intended use cleared by FDA. If we are found to have promoted such “off-label” uses, we may become subject to significant government fines and other related liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
Although part of our business strategy is based on payment provisions enacted under government healthcare reform, we also face significant uncertainty in the industry regarding the implementation, transformation or repeal and replacement of the Health Care Reform Law.
Political, economic and regulatory influences are subjecting the healthcare industry to fundamental changes. For example, the Health Care Reform Law brought a new way of doing business for providers and health insurance plans, shifting the focus from fee for service programs to capitated programs that pay a monthly fee per patient. The Health Care Reform law also provided for higher risk factor adjustment payments for sicker patients who have conditions that are codified, as well as economic benefits for achieving certain quality of care measurements. For a discussion of healthcare reform activity, see “Business—Government Regulation—Healthcare Reform” in the Annual Report.
We believe that the Health Care Reform Law measures are mainly positive for our business given the ability of QuantaFlo to measure blood flow in an in-office setting, which can assist doctors and other providers to suspect PAD and other vascular diseases. However, we cannot predict what changes will now be made, and if these features will be repealed. If changes are made to the Health Care Reform Law, or it is repealed altogether without a comparable replacement, such that there are no incentives for identifying sicker patients, it would negatively affect our business prospects and strategy, and could materially adversely affect our business, financial condition and results of operations.
Further, the Health Care Reform Law encourages hospitals and physicians to work collaboratively through shared savings programs, such as accountable care organizations, as well as other bundled payment initiatives, which may ultimately result in the reduction of medical device acquisitions and the consolidation of medical device suppliers used by hospitals. Changes to or repeal of the Health Care Reform Law could adversely affect our financial results and business.
The applicable healthcare fraud and abuse laws and regulations, along with the increased enforcement environment, may lead to an enforcement action targeting us, which could adversely affect our business.
We are subject to various healthcare fraud and abuse laws and regulations, as described “Business—Government Regulation—Healthcare Fraud and Abuse” in the Annual Report. We may be subject to liability under such laws and may also be subject to liability for any future conduct that is deemed by the government or the courts to violate these laws, including significant administrative, criminal and civil penalties, damages, fines, disgorgement, imprisonment, exclusion from participation as a supplier of product to beneficiaries covered by Medicare or Medicaid, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of operations.
Additionally, the government has continued to pursue an increasing number of enforcement actions. This increased enforcement environment may increase scrutiny of us, directly or indirectly, and could increase the likelihood of an enforcement action targeting us. These customers include parties that bill Federal healthcare programs for use of our product, all of whom may be subject to government scrutiny. Finally, to the extent that any of the agreements are breached or terminated, our business may experience a decrease in revenues. In addition, to the extent that our customers, many of whom are providers, may be affected by this increased enforcement environment, our business could correspondingly be affected. It is possible that a review of our business practices or those of our customers by courts or government authorities could result in a determination with an adverse effect on our business. We cannot predict the effect of possible future enforcement actions on our business.
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We have had material weaknesses in our internal control over financial reporting. Although we have remediated our prior material weaknesses, if we identify additional material weaknesses in the future, or if our former material weaknesses recur, it could have an adverse effect on our company.
In prior years, we have identified certain material weaknesses in connection with management’s evaluation of our internal control over financial reporting that we have remediated. These weaknesses have included issues arising from our size and inability to segregate duties; ineffective design of certain of our information technology and change management controls; insufficient controls to validate the completeness and accuracy of underlying data; insufficient protocols and procedures to retain adequate documentary evidence related to the timely review and approval of manual journal entries and those supporting the design and operating effectiveness of certain important management review controls; a lack of controls to identify and analyze related party transactions; a lack of technical accounting competence; and inadequate procedures and controls to appropriately comply with, and account for, certain payroll tax withholdings and related expenses.
Although we have remediated our prior material weaknesses, we cannot assure you that we have identified all material weaknesses or that we will not in the future have additional, or recurrence of our prior, material weaknesses in our internal control over financial reporting. If we have additional material weaknesses in our internal control over financial reporting in the future, or if our former material weaknesses recur, it could have an adverse effect on our company.
Risks Related to Our Intellectual Property
Our success largely depends on our ability to obtain and protect the proprietary information on which we base our product.
Our success depends in large part upon our ability to establish and maintain the proprietary nature of our technology through the patent process, as well as our ability to license from others’ patents and patent applications necessary to develop our product. If our patent or any future patents are successfully challenged, invalidated or circumvented, or our right or ability to manufacture our product was to be limited, our ability to continue to manufacture and market our product could be adversely affected. In addition to patents, we rely on trade secrets and proprietary know-how, which we seek to protect, in part, through confidentiality and proprietary information agreements. The other parties to these agreements may breach these provisions, and we may not have adequate remedies for any breach. Additionally, our trade secrets could otherwise become known to or be independently developed by competitors.
As of September 30, 2024, we have been issued, or have rights to, one U.S. patent (which on expires December 11, 2027). The patent we hold may be successfully challenged, invalidated or circumvented, or we may otherwise be unable to rely on this patent. These risks are also present for the process we use for manufacturing our product. In addition, our competitors, many of whom have substantial resources and have made substantial investments in competing technologies, may apply for and obtain patents that prevent, limit or interfere with our ability to make, use and sell our product, either in the United States or in international markets. The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property rights. We may institute, become party to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product and technology, including interference or derivation proceedings before the U.S. Patent and Trademark Office, or USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our product and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. The defense and prosecution of intellectual property suits, USPTO proceedings and related legal and administrative proceedings are both costly and time consuming. Any litigation or interference proceedings involving us may require us to incur substantial legal and other fees and expenses and may require some of our employees to devote all or a substantial portion of their time to the proceedings.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property, including patent rights that are important or necessary to the development of our vascular testing product or any future products. It may be necessary for us to use the patented or proprietary technology of a third
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party to commercialize our own technology or products, in which case we would be required to obtain a license from such third party. A license to such intellectual property may not be available or may not be available on commercially reasonable terms, which could have a material adverse effect on our business and financial condition.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Although we try to ensure that we and our employees and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or that these employees or independent contractors have used or disclosed intellectual property in violation of the rights of others. These claims may cover a range of matters, such as challenges to our trademarks, as well as claims that our employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. Although we do not expect the resolution of the proceeding to have a material adverse effect on our business or financial condition, litigation to defend ourselves against claims can be both costly and time consuming, and divert management’s attention away from growing our business.
In addition, while it is our policy to require our employees and independent contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and product, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also generally enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party infringed a patent or illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Risks Related to Our Bitcoin Treasury Strategy and Holdings
WE ARE NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940 AND STOCKHOLDERS DO NOT HAVE THE PROTECTIONS ASSOCIATED WITH OWNERSHIP OF SHARES IN A REGISTERED INVESTMENT COMPANY NOR THE PROTECTIONS AFFORDED BY THE COMMODITIES EXCHANGE ACT.
Our bitcoin treasury strategy exposes us to various risks associated with bitcoin.
Bitcoin is a highly volatile asset. Bitcoin is a highly volatile asset that has traded below $36,000 per bitcoin and above $70,000 per bitcoin on the Coinbase exchange in the 12 months preceding the date of this quarterly report on Form 10-Q. The trading price of bitcoin significantly decreased during prior periods, and such declines may occur again in the future. Notwithstanding this volatility, we do not currently intend to hedge our bitcoin holdings and have not adopted a hedging strategy with respect to bitcoin. However, we may from time to time engage in hedging strategies as part of our treasury management operations if deemed appropriate.
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Bitcoin does not pay interest or dividends. Bitcoin does not pay interest or other returns and we can only generate cash from our bitcoin holdings if we sell our bitcoin or implement strategies to create income streams or otherwise generate cash by using our bitcoin holdings. Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our bitcoin holdings, and any such strategies may subject us to additional risks.
Our bitcoin holdings may significantly impact our financial results and the market price of our common stock. Our bitcoin holdings may significantly affect our financial results and if we continue to increase our overall holdings of bitcoin in the future, they will have an even greater impact on our financial results and the market price of our common stock. See “—Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our bitcoin holdings” below.
Our bitcoin treasury strategy has not been tested over an extended period of time or under different market conditions. We only recently adopted our bitcoin treasury strategy and will need to continually examine the risks and rewards of this new strategy. This new strategy has not been tested over an extended period of time or under different market conditions. For example, although we believe bitcoin, due to its limited supply, has the potential to serve as a hedge against inflation in the long term, the short-term price of bitcoin declined in recent periods during which the inflation rate increased. Some investors and other market participants may disagree with our bitcoin treasury strategy or actions we undertake to implement it. If bitcoin prices were to decrease or our bitcoin treasury strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our common stock could be materially adversely affected.
We are subject to counterparty risks, including in particular risks relating to our custodians. Although we have implemented various measures that are designed to mitigate our counterparty risks, including by storing substantially all of the bitcoin we own in custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held bitcoin is not subject to claims of our custodians’ creditors, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts. If our custodially-held bitcoin were nevertheless considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such bitcoin and this may ultimately result in the loss of the value related to some or all of such bitcoin. Even if we are able to prevent our bitcoin from being considered the property of a custodian’s bankruptcy estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our bitcoin held by the affected custodian during the pendency of the insolvency proceedings. Any such outcome could have a material adverse effect on our financial condition and the market price of our common stock.
The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of bitcoin. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc. and Binance Holdings Ltd., the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company, have highlighted the counterparty risks applicable to owning and transacting in digital assets. Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, they have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of bitcoin, limit the availability to us of financing collateralized by bitcoin, or create or expose additional counterparty risks.
Changes in our ownership of bitcoin could have accounting, regulatory and other impacts. While we currently own or will own bitcoin directly, we may investigate other potential approaches to owning bitcoin, including indirect ownership (for example, through ownership interests in a fund that owns bitcoin). If we were to own all or a portion of our bitcoin in a different manner, the accounting treatment for our bitcoin, our ability to use our bitcoin as collateral for additional borrowings, and the regulatory requirements to which we are subject, may correspondingly change. For example, the volatile nature of bitcoin may force us to liquidate our holdings to use it as collateral, which could be negatively effected by any disruptions in the crypto market, and if
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liquidated, the value of the collateral would not reflect potential gains in market value of bitcoin, all of which could negatively affect our business and implementation of our bitcoin strategy.
Changes in the accounting treatment of our bitcoin holdings could have significant accounting impacts, including increasing the volatility of our results. In December 2023, the FASB issued ASU 2023-08, which we early adopted as of January 1, 2024, and which requires us to measure in-scope crypto assets (including our bitcoin holdings) at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our bitcoin in net income each reporting period. ASU 2023-08 will also require us to provide certain interim and annual disclosures with respect to our bitcoin holdings. The standard is effective for our interim and annual periods beginning January 1, 2025. Early adoption is permitted in any interim or annual period for which our financial statements have not been issued as of the beginning of the annual reporting period. Due in particular to the volatility in the price of bitcoin, we expect the adoption of ASU 2023-08 to have a material impact on our financial results in future periods, increase the volatility of our financial results, and affect the carrying value of our bitcoin on our balance sheet, and could have adverse tax consequences, which in turn could have a material adverse effect on our financial results and the market price of our common stock.
The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict.
Bitcoin is a highly volatile asset, and fluctuations in the price of bitcoin are likely to influence our financial results and the market price of our common stock.
Bitcoin is a highly volatile asset, and fluctuations in the price of bitcoin are likely to influence our financial results and the market price of our common stock. Our financial results and the market price of our common stock would be adversely affected, and our business and financial condition would be negatively impacted, if the price of bitcoin decreased substantially (as it has in the past, such as during 2022), including as a result of:
| ● | decreased user and investor confidence in bitcoin, including due to the various factors described herein; |
| ● | investment and trading activities such as (i) trading activities of highly active retail and institutional users, speculators, miners and investors, (ii) actual or expected significant dispositions of bitcoin by large holders, and (iii) actual or perceived manipulation of the spot or derivative markets for bitcoin or spot bitcoin ETPs; |
| ● | negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, bitcoin or the broader digital assets industry, for example, (i) public perception that bitcoin can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine, or to fund criminal or terrorist activities, such as the purported use of digital assets by Hamas to fund its terrorist attack against Israel in October 2023; (ii) expected or pending civil, criminal, regulatory enforcement or other high profile actions against major participants in the bitcoin ecosystem, including the SEC’s enforcement actions against Coinbase, Inc. and Binance Holdings Ltd.; (iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates; and (iv) the actual or perceived environmental impact of bitcoin and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the bitcoin mining process; |
| ● | changes in consumer preferences and the perceived value or prospects of bitcoin; |
| ● | competition from other digital assets that exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets; |
| ● | a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for bitcoin purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of bitcoin or adversely affect investor confidence in digital assets generally; |
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| ● | the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of substantial amounts of bitcoin from bitcoin wallets attributed to Mr. Nakamoto or other “whales” that hold significant amounts of bitcoin; |
| ● | disruptions, failures, unavailability, or interruptions in service of trading venues for bitcoin, such as, for example, the announcement by the digital asset exchange FTX Trading that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the recent SEC enforcement action brought against Binance Holdings Ltd., which initially sought to freeze all of its assets during the pendency of the enforcement action; |
| ● | the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry in 2023, and the exit of Binance Holdings Ltd. from the U.S. market as part of its settlement with the Department of Justice and other federal regulatory agencies; |
| ● | regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of bitcoin, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry; |
| ● | further reductions in mining rewards of bitcoin, including block reward halving events, which are events that occur after a specific period of time that reduce the block reward earned by “miners” who validate bitcoin transactions, or increases in the costs associated with bitcoin mining, including increases in electricity costs and hardware and software used in mining, that may cause a decline in support for the Bitcoin network; |
| ● | transaction congestion and fees associated with processing transactions on the bitcoin network; |
| ● | macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations; |
| ● | developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the bitcoin blockchain becoming insecure or ineffective; and |
| ● | changes in national and international economic and political conditions, including, without limitation, the adverse impact attributable to the economic and political instability caused by the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict, and the potential broadening of the Israel-Hamas conflict to other countries in the Middle East. |
Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty.
Bitcoin and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of bitcoin.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin. For example, the U.S. executive branch, SEC, the European Union’s Markets in Crypto Assets Regulation, among others have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023, or FSMA 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to
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Congress granting additional authorities to the SEC or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and bitcoin specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of bitcoin and in turn adversely affect the market price of our common stock.
Moreover, the risks of engaging in a bitcoin treasury strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of bitcoin in particular, may also impact the price of bitcoin and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of bitcoin may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to bitcoin, institutional demand for bitcoin as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for bitcoin as a means of payment, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term.
Because bitcoin has no physical existence beyond the record of transactions on the bitcoin blockchain, a variety of technical factors related to the bitcoin blockchain could also impact the price of bitcoin. For example, malicious attacks by miners, inadequate mining fees to incentivize validating of bitcoin transactions, hard “forks” of the bitcoin blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the bitcoin blockchain and negatively affect the price of bitcoin. The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny or limit banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin. Similarly, the open-source nature of the bitcoin blockchain means the contributors and developers of the bitcoin blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the bitcoin blockchain could adversely affect the bitcoin blockchain and negatively affect the price of bitcoin.
Recent actions by U.S. banking regulators have reduced the ability of bitcoin-related services providers to gain access to banking services and liquidity of bitcoin may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for bitcoin and other digital assets.
Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our bitcoin holdings.
Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of bitcoin.
The price of bitcoin has historically been subject to dramatic price fluctuations and is highly volatile. We determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange, and following our early adoption of ASU 2023-08 we are required to measure our bitcoin holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our bitcoin in net income each reporting period, which may create significant volatility in our reported earnings and decrease the carrying value of our digital assets, which in turn could have a material adverse effect on the market price of our common stock. Conversely, any sale of bitcoins at prices above our carrying value for such assets creates a gain for financial reporting purposes even if we would otherwise incur an economic or tax loss with respect to such transaction, which also may result in significant volatility in our reported earnings.
Due in particular to the volatility in the price of bitcoin, we expect our early adoption of ASU 2023-08 to increase the volatility of our financial results and it could significantly affect the carrying value of our bitcoin on our balance sheet. As of September 30, 2024, we held 1,018 bitcoins, which we acquired for $68.4 million during the quarter, inclusive of fees and expenses, with an aggregate value of $64.5 million due to an adjustment in their fair value of $3.9 million, and $6.7 million in cash, cash
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equivalents and restricted cash, compared to carrying no digital assets and having $56.0 million in cash, cash equivalents and short-term investments as of September 30, 2023.
Because we intend to purchase additional bitcoin in future periods and increase our overall holdings of bitcoin, we expect that the proportion of our total assets represented by our bitcoin holdings will increase in the future. As a result, and in particular with respect to the quarterly periods and full fiscal year with respect to which ASU 2023-08 will apply, and for all future periods, volatility in our earnings may be significantly more than what we experienced in prior periods.
The availability of spot bitcoin ETPs may adversely affect the market price of our common stock.
Although bitcoin and other digital assets have experienced a surge of investor attention since bitcoin was invented in 2008, until recently investors in the United States had limited means to gain direct exposure to bitcoin through traditional investment channels, and instead generally were only able to hold bitcoin through “hosted” wallets provided by digital asset service providers or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys. Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold bitcoin directly, as well as the potential reluctance of financial planners and advisers to recommend direct bitcoin holdings to their retail customers because of the manner in which such holdings are custodied, some investors have sought exposure to bitcoin through investment vehicles that hold bitcoin and issue shares representing fractional undivided interests in their underlying bitcoin holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net asset value, or NAV, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to bitcoin.
On January 10, 2024, the SEC approved the listing and trading of spot bitcoin ETPs, the shares of which can be sold in public offerings and are traded on U.S. national securities exchanges. The approved ETPs commenced trading directly to the public on January 11, 2024, with a trading volume of approximately $4.6 billion on the first trading day. To the extent investors view our common stock as providing exposure to bitcoin, it is possible that the value of our common stock may also have included a premium over the value of our bitcoin due to the prior scarcity of traditional investment vehicles providing investment exposure to bitcoin, and that the value declined due to investors now having a greater range of options to gain exposure to bitcoin and investors choosing to gain such exposure through ETPs rather than our common stock.
Although we are an operating company providing technology solutions to improve the clinical effectiveness and efficiency of healthcare providers, and we believe we offer a different value proposition than a passive bitcoin investment vehicle such as a spot bitcoin ETP, investors may nevertheless view our common stock as an alternative to an investment in an ETP, and choose to purchase shares of a spot bitcoin ETP instead of our common stock. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to bitcoin that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot bitcoin ETPs, we (i) do not seek for our shares of common stock to track the value of the underlying bitcoin we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Securities Exchange Act of 1934, as amended, or the Exchange Act, including Regulation M, and other securities laws, which enable spot bitcoin ETPs to continuously align the value of their shares to the price of the underlying bitcoin they hold through share creation and redemption, (iii) are a Delaware corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our bitcoin holdings or our daily NAV. Furthermore, recommendations by broker-dealers to buy, hold, or sell complex products and non-traditional ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to our common stock. Based on how we are viewed in the market relative to ETPs, and other vehicles that offer economic exposure to bitcoin, such as bitcoin futures ETFs and leveraged bitcoin futures ETFs, any premium or discount in our common stock relative to the value of our bitcoin holdings may increase or decrease in different market conditions.
As a result of the foregoing factors, availability of spot bitcoin ETPs on U.S. national securities exchanges could have a material adverse effect on the market price of our common stock.
Our bitcoin treasury strategy subjects us to enhanced regulatory oversight.
As noted elsewhere in these Risk Factors, several spot bitcoin ETPs have received approval from the SEC to list their shares on a U.S. national securities exchange with continuous share creation and redemption at NAV. Even though we are not, and do not
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function in the manner of, a spot bitcoin ETP, it is possible that we nevertheless could face regulatory scrutiny from the SEC or other federal or state agencies due to our bitcoin holdings.
In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our bitcoin through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our bitcoin from bad actors that have used bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in bitcoin by us may be restricted or prohibited.
We may consider issuing debt or other financial instruments that may be collateralized by our bitcoin holdings. We may also consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings. These types of bitcoin-related transactions are the subject of enhanced regulatory oversight. These and any other bitcoin-related transactions we may enter into, beyond simply acquiring and holding bitcoin, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.
Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX Trading, one of the world’s largest cryptocurrency exchanges, in November 2022. U.S. and foreign regulators have also increased, and are highly likely to continue to increase, enforcement activity, and are likely to adopt new regulatory requirements in response to FTX Trading’s collapse. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting bitcoin, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in bitcoin.
In addition, private actors that are wary of bitcoin or the regulatory concerns associated with bitcoin may in the future take further actions that may have an adverse effect on our business or the market price of our common stock.
Due to the currently unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, bitcoin trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in bitcoin trading venues and adversely affect the value of our bitcoin.
Bitcoin trading venues are relatively new and, in many cases, currently unregulated. Even if regulated, such venues may not be complying with such regulations. Furthermore, there are many bitcoin trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in bitcoin trading venues, including prominent exchanges that handle a significant volume of bitcoin trading and/or are subject to regulatory oversight, in the event one or more bitcoin trading venues cease or pause for a prolonged period the trading of bitcoin or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
In 2019 there were reports claiming that 80-95% of bitcoin trading volume on trading venues was false or non-economic in nature, with specific focus on currently unregulated exchanges located outside of the United States. The SEC also alleged as part of its June 2023, complaint that Binance Holdings Ltd. committed strategic and targeted “wash trading” through its affiliates to artificially inflate the volume of certain digital assets traded on its exchange. Such reports and allegations may indicate that the bitcoin market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the bitcoin market than is commonly understood. Any actual or perceived false trading in the bitcoin market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of our bitcoin. Negative perception, a lack of stability in the broader bitcoin markets and the closure, temporary shutdown or operational disruption of bitcoin trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the bitcoin ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in bitcoin and the broader bitcoin ecosystem and greater volatility in the price of bitcoin. For example, in 2022, each of Celsius Network, Voyager Digital, Three Arrows Capital, FTX Trading, and BlockFi filed for bankruptcy, following which the market prices of bitcoin and other digital assets significantly declined. In addition, in June 2023, the SEC announced enforcement actions against Coinbase, Inc., and
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Binance Holdings Ltd., two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of bitcoin and other digital assets. These were followed in November 2023, by an SEC enforcement action against Kraken, another large trading venue for digital assets. As the price of our common stock is affected by the value of our bitcoin holdings, the failure of a major participant in the bitcoin ecosystem could have a material adverse effect on the market price of our common stock.
The concentration of our bitcoin holdings enhances the risks inherent in our bitcoin treasury strategy.
As of September 30, 2024, we held an aggregate 1,018 bitcoins, which we acquired for $68.4 million, inclusive of fees and expenses, and we intend to purchase additional bitcoin and increase our overall holdings of bitcoin in the future. The concentration of our bitcoin holdings limits the risk mitigation that we could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our bitcoin acquisition strategy. Any future significant declines in the price of bitcoin would have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of bitcoin and adversely affect our financial condition and results of operations.
As a result of our bitcoin treasury strategy, the majority of our cash is now concentrated in our bitcoin holdings. Accordingly, the emergence or growth of digital assets other than bitcoin may have a material adverse effect on our financial condition. While bitcoin is the largest digital asset by market capitalization as of the date of this quarterly report on Form 10-Q, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining like the bitcoin network. For example, in late 2022, the ethereum network transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. The ethereum network has completed another major upgrade since then and may undertake additional upgrades in the future. If the mechanisms for validating transactions in ethereum and other alternative digital assets are perceived as superior to proof-of-work mining, those digital assets could gain market share relative to bitcoin.
Other alternative digital assets that compete with bitcoin in certain ways include “stablecoins,” which are designed to maintain a constant price because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an alternative to bitcoin and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms. As of the date of this quarterly report on Form 10-Q, two of the seven largest digital assets by market capitalization are U.S. dollar-backed stablecoins.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, bitcoin and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of bitcoin to decrease, which could have a material adverse effect on our financial condition, and operating results.
Our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the bitcoin markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our bitcoin at favorable prices or at all. For example, a number of bitcoin trading venues temporarily halted deposits and withdrawals in 2022. As a result, our bitcoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, bitcoin we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital
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raising transactions collateralized by our unencumbered bitcoin or otherwise generate funds using our bitcoin holdings, including in particular during times of market instability or when the price of bitcoin has declined significantly. If we are unable to sell our bitcoin, enter into additional capital raising transactions using bitcoin as collateral, or otherwise generate funds using our bitcoin holdings, or if we are forced to sell our bitcoin at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our bitcoin, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected.
Substantially all of the bitcoin we own is held in custody accounts at U.S.-based institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our bitcoin. Bitcoin and other blockchain-based cryptocurrencies and the entities that provide services to participants in the bitcoin ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
| ● | a partial or total loss of our bitcoin in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our bitcoin; |
| ● | harm to our reputation and brand; |
| ● | improper disclosure of data and violations of applicable data privacy and other laws; or |
| ● | significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure. |
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader bitcoin blockchain ecosystem or in the use of the bitcoin network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to bitcoin, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt, to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the bitcoin industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
We face risks relating to the custody of our bitcoin, including the loss or destruction of private keys required to access our bitcoin and cyberattacks or other data loss relating to our bitcoin
We hold our bitcoin with regulated custodians that have duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our bitcoin among our custodians, and our bitcoin holdings may be concentrated with a single custodian from time to time. In light of the significant amount of bitcoin we hold, we continually seek to engage additional custodians
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to achieve a greater degree of diversification in the custody of our bitcoin as the extent of potential risk of loss is dependent, in part, on the degree of diversification. If there is a decrease in the availability of digital asset custodians that we believe can safely custody our bitcoin, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our bitcoin, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected. In addition, holding our bitcoin with regulated custodians could affect the availability of receiving digital assets that may result from “forks” of the bitcoin blockchain if our custodians are unable to support or otherwise provide us with such digital assets, thereby reducing the amount of digital assets we may hold as a result. While our custodians carry insurance policies to cover losses for commercial crimes, cyber and cold storage, the policy limits vary per provider and would be shared among all of their customers, and subject to various limitations and exclusions (such as if a loss arises due to our failure to protect our login credentials and devices). The insurance that covers losses of our bitcoin holdings may cover only a small fraction of the value of the entirety of our bitcoin holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our bitcoin. Moreover, our use of custodians exposes us to the risk that the bitcoin our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such bitcoin. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our bitcoin.
Bitcoin is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the bitcoin is held. While the bitcoin blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the bitcoin held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the bitcoin held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a result of a cyberattack. The bitcoin and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
Regulatory change reclassifying bitcoin as a security could lead to our classification as an “investment company” under the 1940 Act and could adversely affect the market price of bitcoin and the market price of our common stock.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in the 1940 Act, and are not registered as an “investment company” under the 1940 Act as of the date of this quarterly report on Form 10-Q.
While senior SEC officials have stated their view that bitcoin is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead to our classification as an “investment company” under the 1940 Act, if the portion of our assets consists of investments in bitcoins exceeds 40% safe harbor limits prescribed in the 1940 Act, which would subject us to significant additional regulatory controls that could have a material adverse effect on our business and operations and may also require us to change the manner in which we conduct our business.
We monitor our assets and income for compliance under the 1940 Act and seek to conduct our business activities in a manner such that we do not fall within its definitions of “investment company” or that we qualify under one of the exemptions or exclusions provided by the 1940 Act and corresponding SEC regulations. If bitcoin is determined to constitute a security for purposes of the federal securities laws, we would take steps to reduce the percentage of bitcoins that constitute investment assets under the 1940 Act. These steps may include, among others, selling bitcoins that we might otherwise hold for the long term and deploying our cash in non-investment assets, and we may be forced to sell our bitcoins at unattractive prices. We may also seek to acquire additional non-investment assets to maintain compliance with the 1940 Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe harbor. If we were unsuccessful, and if bitcoin is determined to constitute a security for purposes of the federal securities laws, then we would have to register as an
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investment company, and the additional regulatory restrictions imposed by 1940 Act could adversely affect the market price of bitcoin and in turn adversely affect the market price of our common stock.
We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As bitcoin and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of bitcoin. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin. For example, see “Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty” elsewhere in these Risk Factors.
If bitcoin is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of bitcoin and in turn adversely affect the market price of our common stock. See “Regulatory change reclassifying bitcoin as a security could lead to our classification as an “investment company” under the 1940 Act, and could adversely affect the market price of bitcoin and the market price of our common stock” elsewhere in these Risk Factors. Moreover, the risks of us engaging in a bitcoin treasury strategy have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
Our bitcoin treasury strategy exposes us to risk of non-performance by counterparties
Our bitcoin treasury strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of bitcoin, a loss of the opportunity to generate funds, or other losses.
Our primary counterparty risk with respect to our bitcoin is custodian performance obligations under the various custody arrangements we have entered into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, SEC enforcement actions against other providers, or placement into receivership or civil fraud lawsuit against digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not adversely impacted our bitcoin (which was only recently acquired), legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held bitcoin will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our bitcoin holdings, we would become subject to additional counterparty risks. Although no such strategies are contemplated at this time, we will need to carefully evaluate market conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to implementing any such strategy, all of which could effect our ability to successfully implement and execute on any such future strategy. These risks, along with any significant non-performance by counterparties, including in particular the custodians with which we custody substantially all of our bitcoin, could have a material adverse effect on our business, prospects, financial condition, and operating results.
Our custodially-held bitcoin may become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.
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If our custodially-held bitcoin are considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such bitcoin and this may ultimately result in the loss of the value related to some or all of such bitcoin. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc. and Binance Holdings Ltd., the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company, have highlighted the counterparty risks applicable to owning and transacting in digital assets. Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, they have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of bitcoin, limit the availability to us of financing collateralized by bitcoin, or create or expose additional counterparty risks. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our bitcoin. Even if we are able to prevent our bitcoin from being considered the property of a custodian’s bankruptcy estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our bitcoin held by the affected custodian during the pendency of the insolvency proceedings. Any such outcome could have a material adverse effect on our financial condition and the market price of our common stock.
A temporary or permanent blockchain “fork” to bitcoin or other crypto assets could adversely affect our business.
Blockchain protocols, including bitcoin, are open source. Any user can download the software, modify it, and then propose that bitcoin or other blockchain protocols users and miners adopt the modification. When a modification is introduced and a substantial majority of users and miners consent to the modification, the change is implemented and the bitcoin or other blockchain protocol networks, as applicable, remain uninterrupted. However, if less than a substantial majority of users and miners consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork”, i.e., “split” of the impacted blockchain protocol network and respective blockchain, with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two parallel versions of the bitcoin or other blockchain protocol network, as applicable, running simultaneously, but with each split network’s crypto asset lacking interchangeability. A “hard fork” – where there is disagreement among the users about the rules of the network – can have a significant negative impact on value of the crypto asset.
The bitcoin has been subject to “forks” that resulted in the creation of new networks, including bitcoin cash ABC, bitcoin cash SV, bitcoin diamond, bitcoin gold and others. Some of these forks have caused fragmentation among platforms as to the correct naming convention for forked crypto assets. Due to the lack of a central registry or rulemaking body, no single entity has the ability to dictate the nomenclature of forked crypto assets, causing disagreements and a lack of uniformity among platforms on the nomenclature of forked crypto assets, and which results in further confusion to customers as to the nature of assets they hold on platforms, and which can negatively impact the value of the crypto assets. In addition, several of these forks were contentious and as a result, participants in certain communities may harbor ill will towards other communities. As a result, certain community members may take actions that adversely impact the use, adoption, and price of bitcoin, or any of their forked alternatives.
Furthermore, hard forks can lead to new security concerns. For instance, when the Ethereum and Ethereum Classic networks split in July 2016, replay attacks, in which transactions from one network were rebroadcast on the other network to achieve “double-spending,” plagued platforms that traded Ethereum through at least October 2016, resulting in significant losses to some crypto asset platforms. Similar replay attacks occurred in connection with the bitcoin cash and bitcoin cash SV network split in November 2018. Another possible result of a hard fork is an inherent decrease in the level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of the mining power of that network, thereby making crypto assets that rely on proof-of-work more susceptible to attack, as has occurred with Ethereum Classic.
We intend to recognize forked and airdropped assets consistent with our custodians. We may not immediately or ever have the ability to withdraw a forked or airdropped bitcoin by virtue of bitcoins that we hold with our custodians. Future forks may occur at any
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time. A fork can lead to a disruption of networks and our information technology systems, cybersecurity attacks, replay attacks, or security weaknesses, any of which can further lead to temporary or even permanent loss of our and our assets.
The due diligence procedures conducted by us and our liquidity provider to mitigate transaction risk may fail to prevent transactions with a sanctioned entity.
We execute trades through our U.S.-based liquidity providers, and rely on these third parties to implement controls and procedures to mitigate the risk of transacting with sanctioned entities. While we expect our third party service providers to conduct their business in compliance with applicable laws and regulations and in accordance with our contractual arrangements, there is no guarantee that they will do so. Accordingly, we are exposed to risk that our due diligence procedures may fail. If we are found to have transacted in bitcoin with bad actors that have used bitcoin to launder money or with persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in bitcoin by us may be restricted or prohibited.
Risks Related to Our Common Stock
Our executive officers, directors and significant stockholders, if they choose to act together, have the ability to substantially influence the outcome of all matters submitted to stockholders for approval.
Our executive officers, directors and significant stockholders beneficially own in the aggregate shares representing approximately 30.2% of our common stock as of September 30, 2024. If these stockholders choose to act together, they are able to substantially influence the outcome of all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, can impact the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:
| ● | delay, defer or prevent a change in control; |
| ● | entrench our management and the board of directors; or |
| ● | impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire. |
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, 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. Among other things, these provisions:
| ● | allow the authorized number of our directors to be changed only by resolution of our board of directors; |
| ● | allow for a classified board of directors; |
| ● | establish advance notice requirements for stockholders proposal that can be acted on at stockholder meeting and nominations to our board of directors; and |
| ● | limit who may call stockholder meetings. |
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
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Our amended and restated bylaws designate exclusive forums for the adjudication of certain disputes, which could limit our stockholders’ ability to bring claims in a judicial forum it finds favorable for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that a state or federal court located within the State of Delaware is the sole and exclusive forum for:
| ● | any derivative action or proceeding brought on our behalf; |
| ● | any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder of our company to us or our stockholders; |
| ● | any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, our charter or our bylaws, as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware; and |
| ● | any action asserting a claim governed by the internal affairs doctrine. |
Our amended and restated bylaws further provide that a federal district court of the United States is the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. These provisions further provide that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to these provisions.
These 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. If a court were to find any of these provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.
Our stock price has been and is likely to continue to be volatile. The stock market in general and the market for smaller medical device companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. With the adoption of our new bitcoin strategy, we expect to see additional volatility. As a result of this volatility, you may not be able to sell your common stock. The market price for our common stock may be influenced by many factors, including:
| ● | our bitcoin treasury strategy; |
| ● | the success of competitive products, services or technologies; |
| ● | regulatory or legal developments in the United States and other countries; |
| ● | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
| ● | the recruitment or departure of key personnel; |
| ● | actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; |
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | changes in the structure of healthcare payment systems; |
| ● | market conditions in the medical device sector; |
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| ● | general economic, industry and market conditions; and |
| ● | the other factors described in this “Risk Factors” section. |
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against these companies. Due to the potential volatility of our stock price, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our capital stock. We anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock will provide a return to stockholders.
General Risk Factors
Because we operate in an industry with significant product liability risk, and we may not be sufficiently insured against this risk, we may be subject to substantial claims against our product or services that we may provide.
The development, manufacture and sale, lease or use of products or provision of services in a medical setting entails significant risks of product liability or other negligence or malpractice claims. Although we maintain insurance to cover us in the event of liability claims, and as of the date of this quarterly report on Form 10-Q, no such claims have been asserted or threatened against us, our insurance may not be sufficient to cover all possible future liabilities regarding our product, or from performing tests with our product or other non-proprietary products. Accordingly, we may not be adequately protected from any liabilities, including any adverse judgments or settlements, we might incur in connection with the development, clinical testing, manufacture and sale, lease or use of our products or the provision of services. A successful product liability or negligence or medical malpractice claim or series of claims brought against us that result in an adverse judgment against or settlement by us in excess of any insurance coverage could seriously harm our financial condition or reputation. Moreover, even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which could have a material adverse effect on our business, financial condition and results of operations. In addition, product liability and other malpractice insurance is expensive and may not always be available to us on acceptable terms, if at all.
We may implement a product recall or voluntary market withdrawal or stop shipment of our product due to product defects or product enhancements and modifications, which would significantly increase our costs.
The manufacturing and marketing of QuantaFlo and any future products that we may develop involves an inherent risk that our products may prove to be defective. In that event, we may voluntarily implement a recall or market withdrawal or stop shipment or may be required to do so by a regulatory authority. A recall of QuantaFlo or one of our future products, or a similar product manufactured by another manufacturer, could impair sales of the products we market as a result of confusion concerning the scope of the recall or as a result of the damage to our reputation for quality and safety. Further any product recall, voluntary market withdrawal or shipment stoppage of our product could significantly increase our costs and have a material adverse effect on our business.
If we fail to properly manage our operations, our business could suffer.
Our operations have placed, and will continue to place, a significant strain on our management and on our operational and financial resources and systems. Failure to manage our operations effectively could cause us to over-invest or under-invest and result in losses or weaknesses. Additionally, our anticipated operations will increase the demands placed on our suppliers, resulting in an increased need for us to carefully monitor for quality assurance. Any failure by us to manage our operations effectively could have an adverse effect on our ability to achieve our development and commercialization goals.
An information security incident, including a cybersecurity breach, could have a negative impact on our business or reputation.
To meet business objectives, we rely on both internal information technology systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research and patient data that may be subject to legal protection. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the
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security and availability of these information technology systems and networks, and the confidentiality, integrity, and availability of our sensitive data. We continually assess these threats and make investments to increase internal protection, detection, and response capabilities, as well as ensure our third-party providers have required capabilities and controls, to address this risk. To date, we have not experienced any material impact to our business or operations resulting from information or cybersecurity attacks; however, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for us to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or FDIC, as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although we took steps to diversify our banking relationships and are not a borrower or party to any such instruments with SVB, Signature or any other financial institution currently in receivership, if any of our lenders or counterparties to any financial instruments (such as letters of credit) were to be placed into receivership, we may be unable to access such funds. In addition, if any of our customers, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.
Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of government securities with interest rates below current market interest rates, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect our company, the financial institutions with which we have credit agreements or arrangements directly, or the financial services industry or economy in general.
Fluctuations in insurance cost and availability could adversely affect our profitability or our risk management profile.
We hold a number of insurance policies, including product liability insurance, directors’ and officers’ liability insurance, and workers’ compensation insurance. If the costs of maintaining adequate insurance coverage increase significantly in the future, our operating results could be materially adversely affected. Likewise, if any of our current insurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity from commercial insurance providers. If we operate our business without insurance, we could be responsible for paying claims or judgments against us that would have otherwise been covered by insurance, which could adversely affect our results of operations or financial condition.
We operate in an intensely competitive and rapidly changing business environment, and there is a substantial risk our products or service offerings could become obsolete or uncompetitive.
The market for medical systems, equipment and other devices and services is highly competitive. We compete with many medical service companies in the United States and internationally in connection with our vascular testing product and products under development. We face competition from numerous companies in the diagnostic area, as well as competition from academic institutions, government agencies and research institutions. Most of our current and potential competitors have, and will continue to have, substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do. There can be no assurance that we will have sufficient resources to successfully
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commercialize QuantaFlo or any other future products, if and when they are approved for sale or license, or service offerings that we may develop. Our future success will depend largely upon our ability to anticipate and keep pace with developments and advances. Current or future competitors could develop alternative technologies or products or service offerings that are more effective, easier to use or more economical than what we or any potential licensee develop. If our technologies or products or service offerings become obsolete or uncompetitive, our related revenues would decrease. This would have a material adverse effect on our business, financial condition and results of operations.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.
We are subject to income and other taxes in the United States. Significant judgment is required in evaluating our provision for income taxes or in claiming tax credits or taking other tax positions. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain or if we were to be audited, the Internal Revenue Service may not agree with our tax positions. For example, there could be changes in the valuation of our deferred tax assets and liabilities or changes in the relevant tax, accounting, and other laws, regulations, principles and interpretations. Although we believe our tax estimates and practices are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation, or the effects of a change in tax policy in the United States, could have a material effect on our operating results in the period or periods for which that determination is made. In addition, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our earnings. Any new taxes could adversely affect our business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
We are currently a “smaller reporting company,” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.
We are a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and will remain a smaller reporting company for so long as either our annual revenues are less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter, or our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:
| ● | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; and |
| ● | reduced disclosure obligations regarding executive compensation. |
We have taken advantage of reduced reporting burdens in this quarterly report on Form 10-Q. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management has been and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we have incurred and will continue to incur increased costs, and our management has been and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices. Moreover, after we are no longer a smaller reporting company, we will incur additional significant legal, accounting and other expenses to address compliance and corporate governance. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, the currently applicable rules and regulations have already increased our legal and financial compliance costs and made some activities more time-consuming and costly. We will need to continue to dedicate internal resources, potentially engage outside consultants and continue
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steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting.
You may experience future dilution as a result of future equity offerings.
In order to raise additional capital or pursue strategic acquisition opportunities, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including, for example, under our “at-the-market” program pursuant to our registration statement on Form S-3 (333-280013), which was declared effective on August 13, 2024. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in such an offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.
The price per share at which we sell or issue additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price at which you purchased your shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Recent Sales of Unregistered Securities
None.
(b) Use of Proceeds
Not Applicable.
(c) Issuer Purchases of Equity Securities.
None
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
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Item 6. Exhibits.
Ex. No. |
| Exhibit Name |
| ||
| ||
32.1* |
| |
101.INS |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
| Inline XBRL Taxonomy Extension Schema |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase |
104 | The cover page from Semler Scientific's quarterly report on Form 10-Q for the three months ended September 30, 2024 is formatted in Inline XBRL and it is contained in Exhibit 101 |
# Indicates a management contract or any compensatory plan, contract or arrangement.
* These certifications are furnished to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 5, 2024 | SEMLER SCIENTIFIC, INC. | |
|
| |
| By: | /s/ Douglas Murphy-Chutorian |
|
| Douglas Murphy-Chutorian |
|
| Chief Executive Officer (Principal Executive Officer) |
|
|
|
| By: | /s/ Renae Cormier |
|
| Renae Cormier |
|
| Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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