UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FORM 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31 2017, 2022

OR

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 001-38389

Motus GI Holdings, Inc.

(Exact name of registrant as specified in its charter)

786 459 1831

(Registrant’s telephone number, including area code)code: (954)541-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] ☐ No [X] ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] ☐ No [X] ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  ] ☒ No [X]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] ☒ No [  ]☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] ☐ No [X] ☒

As of June 30, 2017,2022, the last business day of the registrant’s most recently completed second fiscal quarter, there was no established public market for the registrant’s Common Stock. The registrant’s Common Stock began trading on the NASDAQ Capital Market on February 14, 2018. Accordingly, the aggregate market value of the voting and non-voting common equityCommon Stock held by non-affiliates of the registrant computed by reference towas approximately $14.6 million based on the closing price of the registrant’s Common Stock as of the registrant’s most recently completed second fiscal quarter cannot be determined..on June 30, 2022.

The number of shares outstanding of the registrant’s Common Stock, par value of $0.0001 per share, as of March 1, 201827, 2023 was 15,574,752.4,778,873.

DOCUMENTS INCORPORATED BY REFERENCE

None.None.

Motus GI Holdings, Inc.

ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 20172022

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipateanticipated in our forward-looking statements. Please see “Part I—Item 1A—Risk Factors” for additional risks which could adversely impact our business and financial performance.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

Overview

We have developed the Pure-Vu System, a single-use medical device system (the “Pure-Vu system”),that has been cleared by the United StatesU.S. Food and Drug Administration (the “FDA”), that is intended to connect to standard colonoscopes to help facilitate intraprocedural cleaningthe cleansing of a poorly prepared colon by irrigating or cleaning the colongastrointestinal tract during colonoscopy and evacuating the irrigation fluid (water), feces and other bodily fluids and matter.to help facilitate upper gastrointestinal (“GI”) endoscopy procedures. The Pure-Vu system has been designed to integrateSystem is also CE marked in the European Economic Area (EEA) for use in colonoscopy. The Pure-Vu System integrates with standard and slim colonoscopes, as well as gastroscopes, to enable cleaningimprove visualization during the procedurecolonoscopy and upper GI procedures while preserving standardestablished procedural workflow and techniques. OurThrough irrigation and evacuation of debris, the Pure-Vu systemSystem is designed to provide better-quality exams. Challenges exist for inpatient colonoscopy and endoscopy, particularly for patients who are elderly, with comorbidities, or active bleeds, where the procedureability to cleansevisualize, diagnose and treat is often compromised due to debris, including fecal matter, blood, or blood clots. We believe this is especially true in high acuity patients, like GI bleeding where the existence of blood and blood clots can impair a physician’s view and removing them can be critical in allowing a physician the ability to identify and treat the source of bleeding on a timely basis. We believe use of the Pure-Vu System may lead to positive outcomes and lower costs for hospitals by safely and quickly improving visualization of the colon and upper GI tract, potentially enabling effective diagnosis and treatment without delay. In multiple clinical studies to date, involving the treatment of challenging inpatient and outpatient cases, the Pure-Vu System has consistently helped achieve adequate bowel cleanliness rates greater than 95% following a reduced prep regimen. We also believe that the technology may be useful in preparationthe future as a tool to help reduce user dependency on conventional pre-procedural bowel prep regimens. Based on our review and analysis of 2019 market data and 2021 projections for the U.S. and Europe, as obtained from iData Research Inc., we believe that during 2022 approximately 1.5 million inpatient colonoscopy areprocedures were performed in the U.S. and approximately 4.8 million worldwide. Upper GI bleeds occurred in the U.S. at a rate of approximately 400,000 cases per year in 2019, according to iData Research Inc. The Pure-Vu System has been assigned an ICD-10 code in the US. The system does not currently reimbursable throughhave unique codes with any private or governmental third-party payors in any other country butor for any other use; however, we may pursue reimbursement activities in the future, particularly in the outpatient colonoscopy market. We received 510(k) clearance in February 2022 from the FDA for our Pure-Vu EVS System and have commenced initial commercialization of this product.

Strategic Review and Restructuring

As previously announced in January 2023, we have initiated a process to explore a range of strategic and financing alternatives focused on maximizing stockholder value and accelerating the commercialization of the Pure-Vu System. We have engaged Lake Street Capital Markets LLC (“Lake Street Capital”) to advise us in this process. Potential strategic alternatives that we may consider are expected to include an acquisition, merger, reverse merger, other business combination, sale of assets, licensing and other strategic transactions.

To support these objectives, we commenced a strategic restructuring program aimed at capital preservation. We have reduced our quarterly cash expenditures by approximately 35% by eliminating approximately 45% of our workforce during the first quarter of 2023. In connection with the restructuring, we expect to incur a non-recurring charge of approximately $1.0 to $2.0 million in the first quarter of 2023. In addition, the non-management members of the Board agreed to defer their Board fees until a future date.

The restructuring is intended to position us to continue to explore all strategic alternatives, continue supporting our existing customers utilizing Pure-Vu EVS for colonoscopies, as well as targeting pipeline opportunities with contracted health systems. In addition, we intend to continue to advance our Pure-Vu EVS Gastro development program, which is designed for use during an Upper GI endoscopy to improve visualization by clearing debris and may help improve procedure times and outcomes especially in high acuity situations like an upper GI bleed. We intend to seek reimbursement through private or governmental third-party payorsU.S. regulatory approval for the Pure-Vu EVS Gastro device in the future.second half of 2023.

We intend to continue to evaluate and identify other areas of our business to enhance efficiencies and improve processes, with a goal to further lower our operating expenses and capital needs. There can be no assurance that this strategic review process will result in any changes to our current business plans or lead to any specific action or transaction. We do not currently promote a particular prep regimen asintend to discuss or disclose further developments during this is left up to the discretion of the physician since our current indication does not reference any preparation protocol. We will look to expand the Pure-Vu system indication to allow us to actively promote minimal prep capabilities directly to patients. We plan to initiate a clinical trial in 2018 that should facilitate approval of expanded labeling in 2019. To date, as part of our limited pilot launch, we have focused on collecting clinical data on the use of the Pure-Vu system. We do not expect to generate significant revenue from product salesstrategic review process unless and until the Board has approved a specific action or we expand our commercialization efforts.otherwise determine that further disclosure is appropriate.

Our business was spun out from the New Generation Technology (“NGT”) incubator based in Nazareth, Israel in 2011 to focus exclusively on the development of the Pure-Vu system. We initiated preclinical testing in 2011 and started clinical testing of the first prototype version of the Pure-Vu system in Europe in late 2012. In clinical studies performed in Europe and Israel from 2012 through the second quarter of 2017, the Pure-Vu system and earlier prototype versions have demonstrated effective cleaning in over 175 patients that followed a significantly reduced pre-procedural colonoscopy preparation regimen, as compared to current prep regimens.

Market Overview

Colonoscopies are one of the most frequently performed medical procedures with over 1520 million colonoscopies performed in the U.S. everyUnited States each year and closemore than 54 million worldwide, per 2019 iData Research Inc. Based on our review and analysis of this market data as well as 2021 projections for the U.S. and Europe, as obtained from iData Research Inc., we estimate that during 2023 approximately 1.5 million inpatient colonoscopy procedures in a hospital setting will be performed in the U.S. Hospital based colonoscopies are typically performed to 30 million worldwide. Inhelp diagnose and treat lower gastrointestinal (GI) bleeding, irritable bowel syndrome (IBS), inflammatory bowel disease (IBD), anemia or infection. A majority of total colonoscopies in the U.S., approximately 90% of the 15 million colonoscopies and worldwide are performed as out-patientoutpatient procedures (13.5 million) at an ambulatory endoscopy center or AEC, and/or hospital out-patientoutpatient departments, or HOPD, and 10% as in-patientwith the bulk of procedures (1.5 million) in hospitals. The veteran population represents approximately 250,000 colonoscopies performed annually. Approximately 60% of colonoscopies are performed to detect and prevent colorectal cancer or(CRC). According to the CDC (2018), approximately 31% of eligible patients are still not current with their CRC which is the second leading cause of cancer-related deathsscreening in the U.S. with approximately 140,000 new cases diagnosed and 50,000 deaths every year. Over the past few decades, CRC has been demonstrated to be one of the most preventable cancers if detected early through the use of colonoscopies. The remaining 40% of colonoscopies are performed to help diagnose and treat other gastrointestinal, or GI, conditions including irritable bowel syndrome, or IBS, inflammatory bowel disease, or IBD, anemia and lower GI bleeding.colonoscopy screening.

Despite the pervasiveness and effectiveness of colonoscopy, a key ongoing clinical challenge of the procedure is that patients are required to undergo a potent pre-procedure bowel preparation regimen to try to ensure that the colon is fully cleansed to enable clear visualization of the tissue. The regimens can be highly disruptive and uncomfortable for many patients. In fact, approximately 57% of patients cite not wanting to take the bowel preparation as the number one deterrent for the procedure. Further, it has been widely reported that approximately 23% of out-patients and it has been estimated that approximately 45% of in-patients present with inadequately prepped colons, resulting in a number of colonoscopies that yield poor diagnostic accuracy or failed colonoscopies that must be repeated. It has also been widely reported that patients requiring frequent colonoscopies, such as CRC survivors and other surveillance patients, account for approximately 21% of the out-patient colonoscopies performed annually in the U.S., and that patients with lower GI bleeding or poorly prepared colons represent approximately 45% of in-patient colonoscopies performed annually in the U.S. Another key problem is that approximately 35% of eligible patients are not current with their CRC screening in the U.S. based on current guidelines. One of the primary reasons patients fail to get a screening colonoscopy or to return for follow-up procedures is the unwillingness to undergo or dislike of the potent and unpleasant preparation required prior to the procedure.

Successful bowel preparation is one of the most important factors in delivering a thorough, high quality exam and is well documented to have a direct impact on the adenoma detection rate (ADR) (the, the rate of detecting pre-cancer anomalies in the colon tissue),tissue, which in turn predicts a decrease in CRC risk. An inadequately prepared colon can impact the diagnostic accuracy of the procedure and can lead to procedures having to be repeated earlier than the medical guidelines advise or can lead to failed procedures especially in the inpatient setting. Rescheduling the procedure is inconvenient to the patient (and many patients fail to come for their follow-up), creates inefficiencies in the provider’s workflow, and increases the length of hospital stay, each of which results in increased healthcare costs. The preparation regimen typically requires patients to be on a liquid diet for over 24 hours, drink up to four liters of a purgative, spend up to 12 hours prior to the exam periodically going to the bathroom to empty their bowels, and disrupting their daily activities, which could include missing work or other activities. The cleansing process is well known toregimens can be inconvenienthighly disruptive and uncomfortable for many patients. In fact, approximately 57% of patients cite not wanting to take the bowel preparation as the number one deterrent for the procedure, as noted by Harewood et al., American Journal of Gastroenterology (2002). Further, it is estimated by HRA Healthcare Research & Analytics (2015) that approximately 23% of outpatients present with inadequately prepped colons, resulting in a number of colonoscopies that yield poor diagnostic accuracy or failed colonoscopies that must be repeated. For inpatients, this figure jumps to approximately twenty three percent (23%)51% according to a recently published study by the Cleveland Clinic. It has also been reported that patients requiring frequent colonoscopies, such as CRC survivors and other surveillance patients, account for approximately 21% of patients arrivingthe outpatient colonoscopies performed annually in the U.S., per Lieberman D.A. et.al., American Society for Gastrointestinal Endoscopy (2005).

Inpatient Opportunity: improving efficiencies and shortening time to complete a successful colonoscopy

Inpatient colonoscopy is usually performed to diagnose the source of various gastrointestinal conditions such as lower GI bleeding or bowel pain. For an inpatient hospital stay, the Centers for Medicare & Medicaid Services, or CMS, uses a prospective payment system, or PPS, based upon the MS-DRG payment groupings, to pay for hospital services with the goal of encouraging efforts to minimize their costs. The DRG assignment is influenced by a combination of factors such as a patient’s sex, diagnosis at the time of discharge and procedures performed. Based on patient specific information, all hospital expenses for their care during an inpatient stay are packaged and assigned to one of over 700 MS-DRGs (“Medicare Severity – Diagnostics Related Groups”). According to Decision Driver Analytics, a reimbursement consulting agency, when a colonoscopy inadequately cleansed. is performed as the primary procedure (no other procedures or complicating diagnosis), MSDRGs 395, 394 or 393 would apply which pay between $3,861 (without complications or major comorbidities) and $9,421 (with major complications and comorbidities), which are average figures subject to adjustment. The National Inpatient Sample (“NIS”) and other literature sources note that the cost for a standard hospital bed averages $2,298 and the cost for an intensive care unit (“ICU”) bed averages $6,546 per day in the U.S, so reducing the length of stay can save the hospital significant expense.

An inadequately prepared coloninpatient colonoscopy is generally more problematic than an outpatient procedure due primarily to the acuity of the patient who often struggles to complete a satisfactory pre-procedural bowel prep, which can impact the diagnostic accuracylead to lower rates of successful completion of the procedure and cana higher frequency of repeat procedures. Inpatients are difficult to prep as shown by inadequate bowel prep rates. Published studies have found that the inpatient population experiences rates of insufficiently prepped colons at the time of colonoscopy as high as 55%. This has been shown to lead directly to procedures havingsignificantly longer hospital stays and other additional costs due to bethe need for repeated earlier thanpreps, repeated colonoscopies, and additional diagnostic procedures. This is exemplified in a recently published study by the medical guidelines advise or can lead to failed procedures especiallyCleveland Clinic that showed an inadequate preparation rate of 51% in the in-patient setting. Reschedulingstudy population of 8,819 inpatients. The study noted that the procedure is inconvenient to51% of the patient (and many patients fail to come for their follow-up), creates inefficienciesstudy population that were inadequately prepped stayed one day extra in the provider’s workflow, and increases the length ofhospital compared to patients with adequate preparation. Another study, from Northwestern University Hospital System, showed an average hospital stay extension of two days and cost increase of as much as $8,000 per patient as a result of challenges associated with bowel preparation. We believe the Pure-Vu System may improve outcomes and lower costs for hospitals by potentially reducing the in-patient, eachtime to a successful colonoscopy, minimizing delayed and incomplete procedures, and improving the quality of which results in increased healthcare costs.an exam.

Our Pure-Vu Solution

To address this unmet need, we have developed our FDA-cleared Pure-Vu system, which readily integrates with existing colonoscopes to cleanse poorly prepped colons during the colonoscopy procedure. The Pure-Vu system has been cleared by the FDA to help facilitate intra-procedural cleaning of a poorly prepared colon by irrigating or cleaning the colon and evacuating the irrigation fluid (water), feces and other bodily fluids and matter. We believe that the technology may be useful in the future as a tool to help reduce user dependency on conventional pre-procedural bowel prep regimens.

Our system consists of a workstation controller and a single-use, disposable sleeve that fits over most standard-size commercialstandard and slim colonoscopes. Together with the colonoscope, the Pure-Vu systemSystem performs rapid, effective, and efficient intra-procedural cleaning without compromising procedural workflow and techniques. The over-sleeve has an umbilical section that connects to a cartridge that mounts to the workstation and serves as the interface between the disposable over-sleeve andto the workstation. The workstation, through a series of peristaltic pumps activated by foot pedals, delivers an irrigation medium of air and water that creates a pulsed vortex inside the colon to break up fecal matter while simultaneously evacuating the colon content into waste receptacles already used in a standard colonoscopy procedure. The proprietary evacuationsmart sense suction (evacuation) system in the device has sensors built in that can detect the formation of a blockage and automatically clear it allowing the physician to remove significant debris from the patient. The Pure-Vu systemSystem has been clinically demonstrated to be capable of cleaning poorly prepared colons in minutes. We are building an extensivehave built and continue to extend our intellectual property portfolio designed to protect key aspects of the system, including the pulsed vortex irrigation and auto-purge functions.

The Pure-Vu System

In the out-patient setting, the Pure-Vu system could create the opportunity to improve patient satisfaction and enhance diagnostic quality. Additionally, in the in-patient hospital setting, the Pure-Vu system could create the opportunity to improve the time to prepare for and complete a successful colonoscopy.

Out-patient Opportunity: improving patient experience and reducing repeat procedures

The Pure-Vu system is currently cleared to help facilitate intra-procedural cleaning of a poorly prepared colon by irrigating or cleaningIn June 2019, the colon and evacuating the irrigation fluid (water), feces and other bodily fluids and matter, e.g., blood. In this context, users are able to address visualization concerns and complete endoscopic examinations when patients are found to be poorly prepared by standard colon preparation methods. We believe that our technology may be useful in the future as a tool to help reduce user dependency on conventional pre-procedural bowel prep regimens, and we are gathering data and intend to seek FDA clearance or approval for expanded claims.

The largest commercial market opportunity presented by the Pure-Vu system in relation to these expanded claims is in the out-patient setting offering patients an alternative to the arduous experience of having to drink large volumes of purgatives that result in significant discomfort, multiple visits to the bathroom over a many-hour period and disruption of daily activities. Market research conducted by The Nova Group, which was sponsored by us, indicates that 83% of patients are willing to pay an out-of-pocket premium, depending on the cost, for this type of technology and the ability to follow a “less-prep” regimen. According to The Nova Group market research, 29% of patients indicated they were willing to consider paying an out-of-pocket cost of up to $350, despite believing such cost to be expensive,510(k) premarket notification for the ability to follow a “less-prep” regimen, while 10% believed $350 to be an appropriate out-of-pocket price. Similarly, according to the same research, 58% of patients indicated they were willing to consider paying an out-of-pocket cost of up to $250, despite believing such cost to be expensive, for the ability to follow a “less-prep” regimen, while 20% believed $250 to be an appropriate out-of-pocket price. This research suggests that as the potential out-of-pocket cost of a “less-prep” regimen and examination is reduced, the percentage of patients willing to consider paying increases dramatically.

Physicians are also motivated to improve bowl preparation. Market research conducted by Healthcare Research & Analytics, which was sponsored by us, indicates, 99% of physicians understand ADR is influenced by bowl cleanliness and 68% believe ADR will be tied to reimbursement in the next three years. With increasing pressure on physician and facility reimbursement, most providers are incorporating ancillary services into their practices to supplement their revenue and increase profit. Incorporation of a “less-prep” regimen as an ancillary product into an out-patient GI practice is expected to provide an additional source of revenue and profit as well as help to differentiate the GI practice in an increasingly competitive marketplace. By offering a solution to those patients who either cannot tolerate the challenging preparation or desire a more tolerable prep, we believe the GI practice can increase their market share and improve patient satisfaction, a key quality metric being measured by payors. A “less-prep” regimen could also facilitate late afternoon and early evening procedures for those patients wishing to avoid disruption in their daily activities. Finally, with a “less-prep” regimen, the prep may no longer be as significant of a deterrent to receiving a colonoscopy, potentially increasing compliance to screening and ultimately increasing the early detection of CRC.

Based on published literature in several peer reviewed journals from 2010 to 2015 and surveys of physicians conducted in 2015, approximately 23% of patients can have an inadequate preparation, which may lead to repeat procedures earlier than the medical guidelines suggest and decrease the ADR negatively affecting the quality of the exam. If a physician has the ability to effectively cleanse the colon intra-procedurally, a “less-prep” regimen could provide the ability to turn a fair or poor preparation into an optimal preparation and achieve a high-quality colonoscopy. Further, increased cleanliness (which may be achieved through usesecond-generation (“Gen 2”) of the Pure-Vu system), as measured by the Boston Bowel Preparation Score, or BBPS, the most commonly used method for evaluating the quality of bowel preparation, is associated with an increase of adenoma detection, which in turn predicts a decrease in CRC risk.

In-patient Opportunity: improving efficienciesSystem was reviewed and shortening time to complete a successful colonoscopy

In-patient colonoscopy is usually performed to diagnose the source of various gastrointestinal conditions such as lower GI bleeding or bowel pain. For an in-patient hospital stay, the Centers for Medicare and Medicaid Services, or CMS, uses a prospective payment system, or PPS, based upon diagnostic related groups, or DRG, to pay for hospital services with the goal of encouraging providers to minimize their costs. The DRG assignment is influenced by a combination of factors such as a patient’s sex, diagnosis at the time of discharge and procedures performed. Based on patient specific information, all hospital expenses for their care during an inpatient stay are packaged and assigned to one of over 500 MS-DRGs. According to Decision Driver Analytics, a reimbursement consulting agency, when a colonoscopy is performed as the primary procedure (no other procedures or complicating diagnosis), DRGs 395, 394 or 393 would apply which pay between $3,861 (without complications or major comorbidities) and $9,421 (with major complications and comorbidities). The cost for just one night in the hospital averages $1,800, so reducing the length of stay can save the hospital significant expense.

An in-patient colonoscopy is more problematic than an out-patient procedure due primarily to poorer quality bowel prep which can lead to lower rates of successful completion of the procedure and a higher frequency of repeat procedures. In-patients are difficult to prep as exemplified by inadequate bowel prep rates, which have been reported in the literature as high as 45% for the in-patient setting. Managing these patients is a challenge often requiring significant healthcare provider resources to administer and monitor the prep. The poor bowel prep can be due to the patient’s condition as a more fragile patient population may be unable to tolerate the significant volume of fluid required, and the clear liquid diet required, to cleanse the colon. With these patients, a high volume of purgative can also lead to electrolyte imbalances. The Pure-Vu system is cleared by the FDA. We received the initial CE Certificate of Conformity, allowing us to affix the CE Mark to the Gen 2 Pure-Vu System in March 2020. We received a supplement to the initial CE Certificate of Conformity in January 2021.

On February 14, 2022, we announced the 510(k) clearance by the FDA for use as an aid to facilitateof our Pure-Vu EVS System. The Pure-Vu EVS offers usability advancements over the previous versions, including enhanced physician navigation and control, on-demand bedside loading, expanded cleansing in patients with poor bowel preparation. The impact of the Pure-Vu system on the duration of procedures has not been established. There iscapacity, and a need for a system that can shorten the time to successfully complete a colonoscopy by streamlining the process with effective and safe intra-procedural cleaning thus reducing healthcare costs.smaller workstation footprint.

We also implemented an improved manufacturing cost structure in 2022 that we believe better positions the Company to increase margins, and establish strategic relationships in the US and other more cost sensitive global markets over time.

Pre-Clinical and Clinical Data & Safety

In

The Pure-Vu System has been studied in multiple clinical studies performed in Europe and Israel, the Pure-Vu system and earlier prototype versions have demonstrated effective cleaning in over 175 patientsstudy subjects receiving a reduced prep regimen.regime as well as a study focused on the inpatient population. The first 83 patients used three different versions of the system. The prep regimen used in these patients varied from taking a 50% dose of the standard PEG based prep to as little as taking 20mg of over-the-counter Dulcolax® (bisocodyl). More recently, the commercial version of the Pure-Vu systemSystem was used in two multi-center clinical studies.studies in the EU and Israel, and also a single center study in the US. The first study involved 48 patients49 subjects and was completed in the second quarter of 2016. The second study was completed in June 2017 and involved 46 patients. Patientssubjects. The subjects in these studies had a restricted diet for 18-24 hours and received a split dose of 20mg of over-the-counter Dulcolax® (bisocodyl). PatientsThey did not take any liquid purgative traditionally prescribed for bowel preparation. The clinical data showing performance of the Pure-Vu systemSystem in these studies using the BBPS, is shown below. The clinical results from the 2016 study were presented at the United European Gastroenterology Week (“UEGW”) in October 2016.2016 and the second study was published in the peer review journal Endoscopy in 2018. The clinical results from the 2017 study were presented at the UEGW in October 2017, showing similar results, as shown below. This study has been published in Endoscopy, one of the top peer reviewed journals in the EU.

In addition, pre-clinical experience in a porcine animal model, which was usedThe third clinical study in the FDA submission,outpatient setting was alsopresented at the American College of Gastroenterology (“ACG”) Annual Meeting in October 2018. This study was performed in the United States and showed that the Pure-Vu System demonstrated safe and effective colonic cleaning in the per protocol analysis of 46 subjects receiving a reduced prep regimen. The study was initially designed to compare two different minimal bowel preparation regimens. Initially subjects were randomized to receive one of two minimal bowel preparations: three doses of 17 gr. MiraLAX each mixed in 8.5 oz. of clear liquids or two doses of 7.5 oz. magnesium citrate (MgC) each taken with 19.5 oz. of clear liquid. A study amendment early on replaced the MiraLAX arm, due to obvious inferior Boston Bowel Preparation Scale (“BBPS”), a validated assessment instrument, scoring from the outset. The replacement arm consisted of two doses of 5 oz. MgC taken with 16 oz. of clear liquid. All subjects were allowed to eat a low residue diet on the day prior and were asked to avoid seeds and nuts for five days prior to their procedure. Study objectives evaluated for each study arm included: (1) improvement of colon cleansing from presentation baseline to completion of the procedure (as assessed by the BBPS) through the use of the Pure-Vu System, (2) time required to reach the cecum, (3) total procedure time, and (4) safety. No significant differences were found between the three groups with regard to demographics or indication for colonoscopy. No serious adverse events related to the device were reported. The use of the Pure-Vu System enabled successful intraprocedural cleansing of the colon and ensured successful completion of all colonoscopies performed (100% success rate). Although there were only 46 subjects in the study, there was a highly significant difference in the study population (p value <0.0001) between the baseline preparation and that seen post cleansing with the Pure-Vu System. The use of the Pure-Vu System added some time to the procedure, but the total procedure time was approximately 25 minutes in this study.

REDUCE Study

The Reduce study (“Reliable Endoscopic Diagnosis Utilizing Cleansing Enhancement”), was first presented at Digestive Disease Week (“DDW”)(DDW) conference in May 2016. of 2019 and a full manuscript, titled “A multi-center, prospective, inpatient feasibility study to evaluate the use of an intra-colonoscopy cleansing device to optimize colon preparation in hospitalized subjects: the REDUCE study”, was published in the peer review journal BMC Gastroenterology in Q2 of 2021. The REDUCE study was a multi-center inpatient prospective trial designed to evaluate Pure-Vu System’s ability to consistently and reliably improve bowel preparation to facilitate a successful colonoscopy in a timely manner in patients who were indicated for a diagnostic colonoscopy. The study enrolled 95 hospitalized subjects on schedule regardless of their level of pre-procedural bowel preparation. The primary endpoint for the study was improvement of bowel preparation from baseline to post procedure as assessed by the Boston Bowel Preparation Scale (“BBPS”), which assesses the cleanliness of the each of the three segments of the colon on a 0 to 3 scale and requires a minimum score of 2 or better per segment to be considered adequately prepped.

For inpatients that received the Pure-Vu System, adequate bowel preparation improved from a baseline of 38% to 96% in segments evaluated. The analysis from the REDUCE study showed statistically significant improvement in every segment of the colon after Pure-Vu System use. The per segment BBPS improved from an average baseline of 1.74, 1.74 and 1.5 to 2.89, 2.91 and 2.86 respectively with a statistically significant p value of .001 for all three segments of the colon. The primary indication for patients enrolled in the study (68%) was a GI bleed. Acute GI bleeds can lead to hemodynamic instability and is a critical population to treat in an urgent fashion. Physicians were able to achieve a successful clinical outcome in 97% of subjects in the study.

The chart below shows the outcome of the primary endpoint using the BBPS both pre and post use of the Pure-Vu System in a side-by-side fashion. It can be seen from the data that the high cleansing level achieved with the Pure-Vu System is consistent across the various studies:

Current Additional Clinical Studies

In thisQ2 2022, we completed the EU study of subjects who have had a history of poor bowel preparation and were scheduled for either screening, diagnostic, or surveillance colonoscopy across two sites, including the Radboud University Medical Center (Netherlands) and GastroZentrum Lippe (Germany). The subjects underwent a low volume bowel preparation, with just 2x150ml picoprep. The subjects were also allowed to eat a low fiber diet for two days prior to the colonoscopy as opposed to the typical clear liquid diet the day before a colonoscopy. The subjects then received intra-procedural bowel cleansing with the Pure-Vu System. The primary endpoint for the study is improvement of the bowel preparation from baseline to post procedure as assessed by the Boston Bowel Preparation Scale (BBPS), which assesses the cleanliness of each of the three segments of the colon on a zero to three scale and requires a minimum score of two or better per segment to be considered adequately prepped. The results of the study were presented at the Digestive Disease Week meeting in May 2022 and showed a statistically significant improvement of subjects who were adequality prepped from a baseline of 31.8% to 97.7% after the use of Pure-Vu with a p-value of <0.0001.

Cost Effectiveness Analysis and Independent Studies

In 2021, we announced the publication of a sponsored Pure-Vu System® Cost Effectiveness Analysis in the Journal of Cost Effectiveness and Resource Allocation, which is titled, “Colonoscopy in poorly prepped colons. A cost effectiveness analysis comparing standard of care to a new cleansing technology.” This study suggests that, assuming a national average compliance rate for colonoscopy in the U.S. at 60%, as reported by the American Cancer Society in 2017, the use of Pure Vu has the potential to provide the US healthcare system lifetime savings of $833-$922 per patient depending on the insurer when compared to the standard of care. Sponsorship of analysis and development of the manuscript was provided by us.

In 2021, we also announced the presentation of results from an independent single-center study of the Pure-Vu System as an adjunct to colon cleansing in subjects with inadequate bowel preparation (IBP) in a poster presentation at the 2021 American College of Gastroenterology (ACG) Annual Scientific Meeting.

In the independent study, the animalsPure-Vu System was used in 40 subjects (14 inpatient procedures (35%) and 26 outpatient procedures (65%)) with IBP to complete the colonoscopy. The indication for colonoscopy was either diagnostic or colorectal cancer (CRC) screening/surveillance. Pure-Vu was used as an adjunct to IBP to allow completion of procedure in 37 subjects. In subjects with IBP, the mean BBPS score improved from 3.1 (range: 0-6) to 8.5 (range 5-9) after intra-procedural cleansing. Three subjects had active lower gastrointestinal bleeding (LGIB), and the Pure-Vu System was used without bowel preparation to promptly detect the etiology and possibly treat. When used in emergency colonoscopy without bowel preparation, procedures could be completed in all three subjects detecting and treating diverticular and post-polypectomy bleeding in one subject each and diagnosing severe right sided ischemic colitis in another. The study authors concluded the utility of the Pure-Vu System without prior bowel preparation in LGIB needs further study. Use of Pure-Vu System did not interfere with the performance of endoscopic interventions including biopsy, cold/hot snare polypectomy, or EMR. Besides minor mucosal trauma in two cases, no major complications were fastedobserved with the Pure-Vu System.

Further, at the ACG meeting in October 2022, results from normal feed followingan independent single center in the Day -2 morning meal. OnVA system were presented on the afternoonuse of Day -2,Pure-Vu EVS on 45 subjects over a 6-month period as either a rescue method for those with endoscopically visualized inadequate preparation or used initially with those subjects with high suspicion for being poorly prepped. The study showed an improvement from an average of 4.8 on the animals received a standard three (3) litersBBPS at baseline to 8.7 after the use of PEG-based colon preparation agent (Golytely®)Pure-Vu EVS (below 6 is considered inadequate with 9 being the top of the range). This data is presented below.The conclusion from the investigator stated, “Use of this intraprocedural cleansing device increases examination quality, extends surveillance intervals, improves resource utilization”.

We are planning to initiate post-market surveillance and clinical study programs that may involve registries, investigator sponsored studies and company sponsored studies to drive clinical and health economic data, to support product development, enhance our marketing efforts and facilitate new indications. The first of these studies was initiated in the fourth quarter of 2017 and will continue into 2018.

The Pure-Vu system is currently indicated to connect to standard colonoscopes to help facilitate intra-procedural cleaning of a poorly prepared colon by irrigating or cleaning the colon and evacuating the irrigation fluid (water), feces and other bodily fluids and matter. We do not currently promote a particular prep regimen as this is left up to the discretion of the physician since our current indication does not reference any preparation protocol. We will look to expand the Pure-Vu system indication to allow us to promote minimal prep capabilities directly to patients. We plan to initiate a clinical trial in 2018 that should facilitate approval of expanded labeling in 2019.

We received CE Mark approval in Europe in February 2018. We intend to establish relationships with strategic partners for Europe, Japan, China and other key markets outside the U.S. (“OUS”) to support the regulatory process and market entry. We anticipate entering OUS markets with our second-generation Pure-Vu system during the second half of 2019. We filed for and received special 510(k) clearance from the FDA in the fourth quarter of 2017 to adjust our labeling to simplify the process of removing the Pure-Vu system from a colonoscope and to support minor enhancements to the manufacturing of the system.

Intellectual Property

Our IP position comprises a portfolio covering highly innovative portfolio covering technologies rooted in systems and methods for cleaning body cavities with or without the use of an endoscope. Currently we have three (3) issued U.S.eighteen granted or allowed patents three (3) issued Japanese patents, one issued EU patent and 31 (11 in the U.S.), nineteen patents in Asia (Japan, China and Hong Kong), and ten patents in the EU, with patent protection until at least 2040. In addition, we have eleven pending patent applications in various regions of the world with a focus on the U.S., EU and Japan. Our earliest patent application filing dates go back to October 2007. We have also recently received notice of allowanceregistered trademarks for Motus GI and for the Pure-Vu trademarks from the USPTO. We are pursuing these marksSystem in the U.S., EU as well.and other international jurisdictions. We also have a pending trademark application in the U.S. to MICRO-PREP.

Our issuedportfolio of patents cover:

Our patent application portfolioapplications focuses on cleaning body cavities in a safe and efficient manner, insertion, and movement and steering of an endoscopic device within the body cavity in a predetermined direction,direction; coordinated positioning of an endoscope with a suction device and cleaning systems with automatic self-purging features. Our applications coverCoverage includes critical aspects of our system that we believe are key to effectively and efficiently cleancleaning the colon or other body cavities in the body.effectively and efficiently. These areasaspects include cleansing jet methodologies, sensing and control of evacuation to avoid clogging, designs for easy attachment to endoscopes and cleaning segments under water.

Our commercial success depends in part on our ability to obtain and maintain patent and other proprietary protection for Pure-Vu and to operate without infringing the proprietary right of others and to prevent others from infringing our proprietary rights. We strive to protect our intellectual property through a combination of patents and trademarks, as well as through the confidentiality provisions in our contracts. With respect to the Pure-Vu system,System, we endeavor to obtain and maintain patent protection in the United States and internationally on allidentified and potentially patentable aspects of the system. We cannot be sure that the patents will be granted with respect to any patent applications we may own or license in the future, nor can we be sure that our existing patents or any patents we may own or license in the future will be useful in protecting our technology.

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, significant aspects of our proprietary technology platform are based on unpatented trade secrets and know-how. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party.third-party. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

We also plan to continue to seek trademark protection in the United States and outside of the United States where available and when appropriate. We intend to use these registered marks in connection with our research and development as well as our product candidates.

Our FormationCompetition

In connection with our formation in September 2016, we sold an aggregate of 1,650,000 shares of our common stock, par value $0.0001 per shares (the “Common Stock”) for an aggregate of $82,500 ($0.05 per share).

The Share Exchange Transaction

Effective on December 1, 2016, Motus GI Medical Technologies Ltd., an Israeli Company (“Opco”), and the holders of all issued and outstanding shares of capital stock of Opco (the “Opco Stockholders”), entered into a share exchange agreement (the “Share Exchange Agreement”) with us. Pursuant to the terms of the Share Exchange Agreement, as a condition of and contemporaneously with the initial closing (the “Initial Closing”) of the private placement offering of units we conducted from December 2016 to February 2017 (the “2017 Private Placement”), the Opco Stockholders sold to us, and we acquired, all of the issued and outstanding shares of capital stock of Opco (the “Share Exchange Transaction”) and Opco became our direct wholly-owned subsidiary. Pursuant to the Share Exchange Transaction (i) the Opco Stockholders received an aggregate of 4,000,000 shares of our Common Stock in exchange for all of the issued and outstanding shares of capital stock of Opco, (ii) the Convertible Notes (as defined below) and the Convertible Note Warrants (as defined below) were exchanged for our securities, as described below, and (iii) all of the issued and outstanding options to purchase or otherwise acquire shares of Opco capital stock that were outstanding and unexercised as of immediately prior to the Initial Closing were substituted for 125,730 options to acquire shares of our Common Stock pursuant to our 2016 Equity Incentive Plan at exercise prices ranging from $2.38 to $2.52 (see “Part III—Item 11—Executive Compensation—2016 Equity Incentive Plan”).

The Share Exchange Transaction was treated as a recapitalization of Opco for financial accounting purposes and the historical financial statements of Opco are our financial statements as a result of the Share Exchange Transaction.

2017 Private Placement and Exchange of Convertible Notes

In connection with the 2017 Private Placement we issued an aggregate of 3,080,671 units, at a purchase price of $5.00 per unit, with each unit (a “Unit”) consisting of (i) three-quarter (3/4) of a share of our Common Stock, and (ii) one-quarter (1/4) of a share of our convertible preferred stock, par value $0.0001 (the “Series A Convertible Preferred Stock”), for gross proceeds of approximately $15.4 million, comprised of an aggregate of 2,310,504 shares of our Common Stock and 770,168 shares of Series A Convertible Preferred Stock to investors in the 2017 Private Placement.

In addition, from June 2015 through November 2016, pursuant to the terms of a convertible note agreement, as amended (the “CNA”), Opco issued convertible notes (the “Convertible Notes”) in an aggregate amount of approximately $14.6 million (inclusive of accrued interest through December 22, 2016, the date of the Initial Closing) to certain investors, including related parties of us and Opco. As part of the 2017 Private Placement, at the Initial Closing, the holders of the Convertible Notes (the “Convertible Holders”) exchanged their Convertible Notes (the “Exchange of Convertible Notes”), together with accrued and unpaid interest thereon at a rate of 10% per annum, for Units of the 2017 Private Placement, at a conversion price of $4.50 per Unit. As a result, upon consummation of the Initial Closing, the Convertible Notes were exchanged for an aggregate of 3,243,768 Units representing (i) 2,432,808 shares of our Common Stock (inclusive of shares of our Common Stock resulting from the accrued and unpaid interest of the Convertible Notes through the date of the Initial Closing) and (ii) 810,960 shares of our Series A Convertible Preferred Stock (inclusive of shares of Series A Convertible Preferred Stock resulting from the accrued and unpaid interest of the Convertible Notes through the date of the Initial Closing).

Exchange of Convertible Note Warrants

In connection with, and pursuant to the terms of, the CNA, each Convertible Holder also received a seven (7) year warrant (the “Convertible Note Warrants”) to purchase preferred A shares of Opco (the “Preferred A Shares of Opco”), nominal value NIS 0.01 per share, with an exercise price per share of $1.00 (the “Convertible Note Warrant Exercise Price”). Each Convertible Note Warrant entitled the holder to purchase that number of shares of Preferred A Shares of Opco equal to thirty-three percent (33%) of the principal amount of the Convertible Note in connection with which it was issued. Convertible Note Warrants to purchase an aggregate 4,536,188 shares of Preferred A Shares of Opco with an exercise price of $1.00 were issued in connection with the CNA. At the Initial Closing, the holders of the Convertible Note Warrants exchanged their Convertible Note Warrants for five (5) year warrants (the “Exchange Warrants”) to purchase an aggregate 907,237 shares of our Common Stock at an exercise price of $5.00 per share, such amount being equal to thirty-three percent (33%) of the principal amount of the Convertible Notes divided by $5.00.

Initial Public Offering

On February 16, 2018, we completed our initial public offering of 3,500,000 shares of our Common Stock at a public offering price of $5.00 per share, with gross proceeds of $17.5 million (the “IPO”). Simultaneously with the closing of our IPO, all 1,581,128 previously outstanding shares of our Series A Convertible Preferred Stock were converted, on a one-to-one basis, into an aggregate of 1,581,128 shares of our Common Stock. No shares of our Series A Convertible Preferred Stock remain outstanding as a result of such conversion. Additionally, at the closing of our IPO, we issued warrants to certain of our former Series A Convertible Preferred Stock holders, pursuant to an amendment to our registration rights agreement entered into with the investors in our 2017 Private Placement (the “Registration Rights Agreement”) and an amendment to our Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate of Designation”), to purchase 1,095,682 shares of our Common Stock (the “Ten Percent Warrants”). The Ten Percent Warrants are exercisable for our Common Stock at an exercise price of $5.00. The Ten Percent Warrants are exercisable any time on or after the 180 day anniversary of the completion of our IPO, have a five year term, and provide for cashless exercise. Certain related parties received Ten Percent Warrants, see “Part III—Item 13—Certain Relationships and Related Transactions, and Director Independence—Ten Percent Warrants – Related Party Participation.” Certain related parties purchased shares of our Common Stock in our IPO, see “Part III—Item 13—Certain Relationships and Related Transactions, and Director Independence—Participation in Initial Public Offering.”

On March 12, 2018, we completed the sale of an additional 56,000 shares of our Common Stock at a price of $5.00 per share, pursuant to a partial exercise of the underwriters 30-day option to purchase up to an additional 525,000 shares of our Common Stock in connection with the IPO (the “Partial IPO Over-Allotment Exercise”), with gross proceeds of $280,000.

Competition

We do not believe that there are currently any direct competitors in the market, nor any known competing medical device under development, using similar technology to our technology. Currently the major colonoscope manufacturers (i.e., Olympus Corp, Pentax Fuji)Medical, Fujifilm Medical) as well as some smaller equipment manufacturers (i.e., Medivators, Erbe) sell ana lesser powered irrigation pump that can pump fluid through the auxiliary water jet or working channel of a colonoscope. The onlyPotentially competitive is an intra-procedural device in the market, Cantel Medical’s Jet Prep, and another product inunder development similar to Cantel Medical’s Jet Prep,by Medjet Ltd.’s MedJet, go MedJet’s device goes through the working channel of a scope, and areis used mostly for spot cleaning a small amount of debris and dodoes not have the capability to fully clean the colon of large amounts of fecal matter. The Jet Prep and MedJet productsproduct also requirerequires the physician to remove it from the working channel during the procedure if they need to remove significant debris, polyps or take a biopsy, impacting the workflow of the procedure. There is also a device under development by a company named OTTek Ltd. The device is called the FIOT (Flow in Over Tube). The tube is noted as being able to create a channel between the endoscope and the inside of the over tube to facilitate the removal of debris. The competitive products mentioned are not currently separately reimbursed by private or government payors. There are over ten different preparation regimens used prior to colonoscopy today. Some are prescription medications and others are over-the-counter. Typically, the over-the-counter regimens are not indicated for colonoscopy prep but for issues of motility, such as constipation, but are still widely prescribed by physicians for colonoscopy prep. Depending on the insurance a patient has, the prescription prep may be covered in part but many of them require the patient to pay out-of-pocket.

The medical device and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have indirect competitors in a number of jurisdictions,sectors, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have.Motus GI. Currently, the colonoscopy market is dominated by Olympus Corp, who controls a majority of the market, with Pentax Medical and FujiFilm Medical taking most of the rest of the U.S. colonoscope market. Boston Scientific, Medtronic US Endoscopy, MedivatorsGI Solutions, Conmed Corporation, Steris, Ambu A/S, and other smaller players sell ancillary devices and accessories into the marketplace as well. These established competitors may invest heavily to quickly discover and develop novel devices that could make our Pure-Vu systemSystem obsolete or uneconomical. ThereThese include but are alsonot limited to capsule endoscopy, systems such as the PillCam^TM from Medtronic and the Endocapsule 10 from Olympus, These systems, however, require at least the same level of prep as conventional colonoscopies, cannot remove polyps, and therefore, cannot be used to obtain biopsies to detect cancer, so may be less useful for colonoscopy as compared to visualization of the small bowel. Another visualization technique is the virtual colonoscopy where a radiologist uses ausing CT scan to obtain 2D and 3D images of the colon. Virtual colonoscopiesscans, etc. These technologies may require the same level of prep as conventional colonoscopies and if a polyp or abnormality is detected, the patient may still need to undergo a colonoscopy. Other screening tests for colon cancer specifically include fecal occult blood tests and DNA stool tests such as the Cologuard test from Exact Sciences. However, Cologuard is not a replacement for diagnostic colonoscopies or surveillance colonoscopies in high riskhigh-risk individuals and has a lower specificity than standard colonoscopies. While none of these testing alternatives may ever fully replace the colonoscopy, over time, they may take market share away from conventional colonoscopies for specific purposes and may lower the potential market opportunity for us.

Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including new competitive entrants, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to the Pure-Vu system.System. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

Research and Development

We incurred expenses of approximately $4.3 million and $3.1 million, respectively, during the years ended December 31, 2017 and 2016 for research and development activities. These expenses include cash and non-cash expenses relating to the development of our development and clinical programs for the Pure-Vu system. We have research and development capabilities in electrical and mechanical engineering with laboratories in our facility in Israel for development and prototyping, and electronics design and testing. We also use consultants and third partythird-party design houses to complement our internal capabilities.

We have received, and may receive in the future, grants from the Government of the State of Israel through the IsraelIsraeli National Authority for Technological Innovation Authority of the Ministry of Economy and Industry (the “IIA”) (formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry (the “OCS”)), for the financing of a portion of our research and development expenditures pursuant to the Israeli Law for the Encouragement of Research, Development and Technological Innovation in Industry 5744-1984 (the “Research Law”), and the Industry Law 5744-1984 (formerly knownregulations previously promulgated thereunder, as well as the Encouragement of Industrial ResearchIIA’s rules and Development Law, 5744-1984), referredbenefit tracks which apply to ascompanies receiving IIA funding (collectively, including the Research Law, and related regulations.the “IIA Regulations”).

As of December 31, 2017,2022, we had received grants from the IIA in the aggregate amount of $1.33$1.3 million and had a contingent obligation to the IIA up to an aggregate amount of approximately $1.37 million.$1.4 million (assuming no increase, per the IIA Regulations, as described below). As of December 31, 2017,2022, we paid a minimal amount to the IIA. We may apply for additional IIA grants in the future. However, as the funds available for IIA grants out of the annual budget of the State of Israel are subject to the pre-approval of the IIA and have been reduced in the past and may be further reduced in the future, we cannot predict whether we will be entitled to – or approved for – any future grants, or the amounts of any such grants.grants (if approved).

In exchange for these grants, we are required to pay royalties to the IIA of 3% to 3.5%4% (which may be increased under certain circumstances) from our revenues on sales of products and services based on technologygenerated (in any fashion) from know-how developed using IIA grants,grants(and any derivatives of such IIA funded know-how), up to an aggregate of 100% (which may be increased under certain circumstances) of the U.S. dollar-linked value of the grant, plus interest at the rate of 12-month LIBOR.

The terms of the Israeli government participationIIA Regulations also require that products developed with IIA grants be manufactured in Israel at a rate (scope) which will not be less than the rate of manufacturing and added value in Israel that were set forth in the relevant grant applications submitted to the IIA. Furthermore, the IIA Regulations require that the technologyknow-how resulting from research and development according to an IIA-approved plan, not being the product developed thereunderwithin the framework of such approved plan, and any right deriving therefrom may not be transferred outside of Israel (including by way of certain licenses), unless prior approval is received from the IIA, which we intend to applyIIA. We received a general approval for but may not be granted. Even if such approval is granted, thetransfer. The transfer outside of Israel of manufacturing which is connected with the IIA-funded know-howknowhow at a greater scope than the scope set forth in the general approval will result in a higher royalty repayment rate and may further result in increased royalties (up to three times the aggregate amount of the IIA grants plus interest thereon), as well as in a higher royalty repayment rate.. In addition, the transfer outside of Israel of IIA-funded know-howknowhow may trigger additional payments to the IIA (up to six times the aggregate amount of the IIA grants plus interest thereon). Even following the full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Research Law.IIA Regulations. The foregoing restrictions and requirements for payment may impair our ability to transfer or sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any IIA-funded product or technologyknow-how outside of Israel.

Furthermore, companies that receive IIA funding are generally required to ensure that all rights in the IIA-backed product are retained by them. This means that, generally, all know-how which is derived from the research and development conducted pursuant to an IIA approved plan, and every right derived from it, must be owned by the recipient of the IIA funding from the date such know-how is generated. Companies that receive IIA funding are further subject to reporting requirements and other technical requirements, which are intended to allow the IIA to ensure that the IIA Regulations are being complied with.

If we fail to comply with any of the conditions and restrictions imposed by the Research Law,IIA Regulations, or by the specific terms under which we received the grants, we may be required to refund any grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal charges.

A significant amendment to the Research Law entered into effect on January 1, 2016 (the “Amendment”), under which the IIA, a statutory government corporation, was established, which replaced the OCS. Under the Amendment, the IIA is authorized to establish rules concerning the ownership and exploitation of IIA/OCS-funded know-how (including with respect to restrictions on transfer of manufacturing activities and IIA-funded know-how outside of Israel), which may differ from the restrictive laws, regulations and guidelines as currently in effect (and which shall remain in effect until such rules have been established by the IIA). Recently published rules of the IIA have generally adopted the principal provisions and restrictions specified in the Research Law prior to the Amendment. It is anticipated that additional rules will be published by the IIA and we cannot predict or estimate the changes (if any) that may be made to this legislation (including with respect to the acquisition of an IIA-funded entity or the transfer of manufacturing or ownership of IIA-funded technology outside of Israel).

For additional information, see “Part I—Item 1A—Risk Factors—Risks Related to Our Operations in Israel.”

Manufacturing and Supply

We have established relationships with research facilities, contract manufacturing organizations, or CMO’s,CMOs, and our collaborators to manufacture and supply our product for our limited pilotinitial U.S. market launch targeting early adopter hospitals and for our broader commercialization. Currently, the workstation and loading fixture component of our Pure-Vu systemSystem is manufactured by Sanmina Corporation at their facilities in Israel. We may enter into a formal supply agreementagreements for the manufacture of the workstation component and loading fixture of our Pure-Vu systemSystem with Sanmina Corporation as we continue to establish higher volume capabilities and our commercialization efforts grow. The disposable portion of the Pure-Vu EVS is manufactured by Sterling Industries in their Michigan, U.S. facility. We entered into a supply agreement with Sterling Industries in Q2 of 2021. The disposable portion of our Gen 2 Pure-Vu systemSystem is manufactured by Polyzen, Inc., at their facilities in North Carolina, U.S., pursuant to a supply agreement we entered into with Polyzen, Inc. in September 2017. Both Sterling Industries and Polyzen use Medacys in Shenzhen, China as key sub-supplier for the injection molded parts in the Pure Vu disposables. These manufacturing suppliers have extensive experience in medical devices and in dealing with regulatory bodies.bodies and other competent entities. These suppliers have ISO 13485 approvedcertified quality systems. We have an agreement in place with a third partythird-party logistics provider in the U.S. who is ISO 13485 certified and specializes in medical devices and equipment. They will provide warehousing, shipping and back office support to meet our commercial needs.

For additional information, see “Part I—Item 1—Business—Research and Development” above, and “Part I—Item 1A—Risk Factors—Risks Related to Our Operations in Israel.”

U.S. Market Entry Strategy

Our initial launch strategy in the United States is focused on the acute care hospital market. We have been building clinical champions amongst key Gastroenterologists, and other GI and nursing floor leadership and staff. Additionally, we articulate the clinical and economic value of the Pure-Vu System technology to key members of hospital administration. After a pre-defined product evaluation period, we seek to work within the Value Analysis Committee approval process, currently utilized within most U.S. hospitals and integrated delivery networks (IDNs). Following successful implementation at the flagship location within an IDN, we then seek to gain further expansion of the Pure-Vu System within other network hospital locations. On September 29, 2022, the Company announced that it has officially been recognized as a sole source provider and small business by the Veterans Health Administration (VHA). The VHA is the largest integrated health care system in the U.S., and provides care to over nine million veterans. The special designation will provide the Company with direct access to the VHA’s procurement arm, thereby streamlining the purchasing and contracting process. As we continue to grow our network expansion, we continue to support our customers with robust training on the effective use of our Pure-Vu System technology through our training and in-servicing programs.

We have initiated a limited pilot launch in the U.S. market. Initial evaluation cases have been performed at eight centers showing cleansing capabilities similarIn addition to our clinical trial experience. This pilot phase is expected to run through 2018 with the primary objectives of expanding our clinical evidence, developing a practice integration model and creating key reference centers in both the AEC and hospital in-patient settings. We intend to work with the initial accounts to perform clinical studies to gather data for seeking expanded indications for use (such as from the FDA) and to optimize the prep for various populations including patients that have problems tolerating the prep and in-patients. For example, we expect to initiate post-market in-patient studies in the first half of 2018 to examine the ability to improve outcomes and address lower GI bleeds using the Pure-Vu system, and expect results for these trials in the fourth quarter of 2018 and second quarter of 2019, respectively. We also expect to initiate an in-patient study for the veteran population, and expect results from this trial in the second half of 2019. For out-patients, we expect to initiate trials to support reimbursement later this year with results from these trials anticipated in the second half of 2019.

We are working with a third partythird-party logistics provider specializing in medical devices to provide front and back office support to successfully fulfill customer orders. Additionallyorders, our commercial organization is putting in place the infrastructurehas implemented a robust customer relationship management tool to track account progress and help provide accurate forecasting for operations. We anticipate the sales cycle to be in the range of approximately six to twelve months. DuringTiming of hospital capital budget availability may impact this anticipated cycle. Our primary focus is on gaining system placements in the acute care hospital market, driving utilization of our limited pilot market entry, we will refine our commercialization strategy and tactics prior to our full market launch which is expected in 2019. Our full market launch will focus on launching our second generation Pure-Vu system platform (lower cost of goods, added features, and additional size for “slim” scopes),System disposable sleeve, growing the top line revenues and appropriately scaling the commercial organizationorganization.

Market Expansion Opportunities

While our time, effort and expanding our clinical indications for use. We expect to develop strategic relationships to pursue OUS marketing opportunities and to initiate salesattention are primarily focused on driving adoption in the EUU.S. hospital market, we have identified several follow-on market expansion opportunities that are currently being evaluated, including the upper GI endoscopy and targeted outpatient markets, as described below.

Upper GI Endoscopy Market

In 2021, we announced that we received 510(k) clearance from the FDA for a version of the Pure-Vu System that is compatible with gastroscopes used during upper gastrointestinal (GI) endoscopy procedures to remove blood, blood clots and debris in order to provide a clear field-of-view for the endoscopist. The device is designed to integrate with therapeutic gastroscopes to enable safe and rapid cleansing during the procedure, while preserving established procedural workflow and techniques.

Upper GI bleeds occurred in the U.S. at a rate of approximately 400,000 cases per year in 2019, according to iData Research Inc. Approximately 50% of these patients have blood and Japan, Chinablood clots that impair a physician’s view during the procedure, thereby making it difficult to rapidly identify the bleeding source. We believe removing adherent blood clots from the field of view is a significant need in allowing a physician the ability to identify and treat the bleed source. The mortality rate of this condition can reach up to approximately 13%, as noted in Thad Wilkins, MD, et al., American Family Physician (2012).

The Company has conducted a controlled series of Upper GI initial pilot procedures in the US market, which is intended to inform the development of a Pure-Vu EVS version of the Upper GI solution for eventual submission to FDA for marketing approval in the US. The Company successfully completed multiple pre-clinical tests in both porcine and cadaver models to evaluate Pure-Vu EVS platform for use in upper GI bleeding with multiple U.S. physicians. The results of these tests show that the Gastro version of Pure-Vu EVS can effectively break up and suction blood and blood clots, as well as frees up a gastroscope’s working channel for other Asian marketstherapeutic tools. By eliminating the need to utilize existing irrigation and suction through the working channel of the gastroscope, physicians can use tools in 2020.tandem with Pure-Vu EVS. For example, the use of snares to break up large clots and then immediately suction out the smaller pieces using the large Pure-Vu EVS smart sense suction channel. In addition, during cases with significant bleeding, Pure-Vu EVS allows the physician to clean the area of interest and immediately apply therapy to achieve hemostasis, since the physician can have their therapeutic device prepositioned in the gastroscope’s working channel and deliver it before the blood flow covers the area of interest after cleansing.

EmployeesThe Company plans on conducting additional pre-clinical and clinical tests for Pure-Vu EVS Gastro device in the first half of 2023. The results of these tests are expected to support submission of a 510(K) application to the U.S. Food and Drug Administration (FDA) in the second half of 2023.

High Medical Need Outpatient Market

Our targeted Outpatient market focused on those patients at risk for inadequate prep presents a large potential commercial market opportunity for the Pure-Vu System. Based on our review and analysis of 2019 market data and 2021 projections for the U.S. and Europe, as obtained from iData Research Inc., and estimates from HRA Healthcare Research & Analytics - Market Research, May 2015, we believe there are ~4.7M targeted outpatient colonoscopies performed in the U.S. each year and ~11.7M worldwide. These colonoscopy patients can often times have an inadequate preparation, which may lead to repeat procedures earlier than the medical guidelines suggest. We believe use of the Pure-Vu System has the potential to reduce the need for such repeat procedures if used for patients at risk for inadequate prep in the outpatient colonoscopy market. We may seek to obtain reimbursement coverage for this market through exploration of programs with both private and public payers focused on new technology platforms.

Additionally, if we choose to explore either market, we may be able to leverage our existing hospital and physician relationships developed through our inpatient colonoscopy sales force to facilitate such expansion.

In 2021, the Center for Medicare and Medicaid Services (“CMS”) granted the Pure-Vu System a permanent ICD-10 code for inpatient uses. This coding effort is part of a broader strategy to potentially obtain reimbursement for certain inpatient and outpatient procedures where the Pure-Vu System can help facilitate visualization of inadequately prepared colons in high medical need patients.

Employees

As of December 31, 2017,2022, we had 3943 full time employees and 6 part time employees. All of our employees are engaged in administration, finance, clinical, R&D,research and development, engineering, regulatory or sales and marketing functions. We believe our relations with our employees are good. We anticipate that the number of employees will grow as we scale our commercial capabilities. In addition, we utilize and will continue to utilize consultants, clinical research organizations and third parties to perform our pre-clinical studies, clinical studies, manufacturing and regulatory functions.

Under Israeli law, we and our employees in Israel are subject to Israeli protective labor provisions includinggoverning certain matters such as the length of the workday, minimum wages for employees, annual leave, sick pay, determination of severance pay and advance notice of termination of employment, as well as the procedures for hiring and dismissing employees and equal opportunity and anti-discrimination laws. While none of our employees in Israel is party to any collective bargaining agreements, expansion orders issued by the Israeli Ministry of Economy and Industry may make certain industry-wide collective bargaining agreements applicable to us. These agreements affect matters such as the length of the workday and week, recuperation pay, travel expenses and pension rights. We have never experienced labor-related work stoppages and believe that our good and positive relationships with our employees are a significant part of our operations and that we maintain a good and positive relationship with our employees.operations.

Israeli law generally requires the payment of severance compensationpay by employers upon the retirement, death or dismissal of an employee. We fund our ongoing Israeli severance obligations by making monthly payments to the employees’ respective insurance policies. All of our current employees in Israel have agreed, as part of their employment agreements, that, upon termination of their employment, they will be entitled to receive only the amounts accrued in the insurance policies with respect to severance pay.

Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the U.S. Social Security Administration. These amounts also include payments for national health insurance.

Regulatory Matters

Government Regulation

Our business is subject to extensive federal, state, local and foreign laws and regulations, including those relating to the protection of the environment, health and safety. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations. In addition, these laws and their interpretations are subject to change, or new laws may be enacted.

Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. We discuss below the statutes and regulations that are most relevant to our business.

U.S. Food and Drug Administration regulation of medical devices.

The FDCA and FDA regulations establish a comprehensive system for the regulation of medical devices intended for human use. Our products include medical devices that are subject to these, as well as other federal, state, local and foreign, laws and regulations. The FDA is responsible for enforcing the laws and regulations governing medical devices in the United States.

The FDA classifies medical devices into one of three classes (Class I, Class II, or Class III) depending on their level of risk and the types of controls that are necessary to ensure device safety and effectiveness. The class assignment is a factor in determining the type of premarketing submission or application, if any, that will be required before marketing in the United States.

Unless it is exempt from premarket review requirements, a medical device must receive marketing authorization from the FDA prior to being commercially marketed, distributed or sold in the United States. The most common pathways for obtaining marketing authorization are 510(k) clearance and PMA.

510(k) pathway

The 510(k) review process compares a new device to a legally marketed device. Through the 510(k) process, the FDA determines whether a new medical device is “substantially equivalent” to a legally marketed device (i.e., predicate device) that is not subject to PMA requirements. “Substantial equivalence” means that the proposed device has the same intended use as the predicate device, and the same or similar technological characteristics, or if there are differences in technological characteristics, the differences do not raise different questions of safety and effectiveness as compared to the predicate, and the information submitted in the 510(k) demonstrates that the proposed device is as safe and effective as the predicate device.

To obtain 510(k) clearance, a company must submit a 510(k) application containing sufficient information and data to demonstrate that its proposed device is substantially equivalent to a legally marketed predicate device. These data generally include non-clinical performance testing (e.g., software validation, animal testing electrical safety testing), but may also include clinical data. Typically, it takes three to twelve months for the FDA to complete its review of a 510(k) submission; however, it can take significantly longer and clearance is never assured. During its review of a 510(k), the FDA may request additional information, including clinical data, which may significantly prolong the review process. After completing its review of a 510(k), the FDA may issue an order, in the form of a letter, that finds the device to be either (i) substantially equivalent and states that the device can be marketed in the United States, or (ii) not substantially equivalent and states that device cannot be marketed in the United States. Depending upon the reasons for the not substantially equivalent finding, the device may need to be approved through the PMA pathway (discussed below) prior to commercialization.

After a device receives 510(k) clearance, any modification that could significantly affect the safety or effectiveness of the device, or that would constitute a major change in its intended use, including significant modifications to any of our products or procedures, requires submission and clearance of a new 510(k) or approval of a PMA. The FDA relies on each manufacturer to make and document this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. Modifications meeting certain conditions may be candidates for a streamlined FDA review known as Special 510(k) review, which the FDA intends to process within 30 days of receipt. If a device modification requires the submission of a 510(k), but the modification does not affect the intended use of the device or alter the fundamental technology of the device, then summary information that results from the design control process associated with the cleared device can serve as the basis for clearing the application. A Special 510(k) allows a manufacturer to declare conformance to design controls without providing new data. When a modification involves a change in material, the nature of the “new” material will determine whether a traditional or Special 510(k) is necessary. An Abbreviated 510(k) is another type of 510(k) that is intended to streamline the review of data through the reliance on one or more FDA-recognized consensus standards, special controls established by regulation, or FDA guidance documents. In most cases, an Abbreviated 510(k) includes one or more declarations of conformity to an FDA-recognized consensus standard. We may also make minor product enhancements that we believe do not require new 510(k) clearances. If the FDA disagrees with our determination regarding whether a new 510(k) clearance was required for these modifications, we may need to cease marketing and/or recall the modified device. The FDA may also subject us to other enforcement actions, including, but not limited to, issuing a warning letter or untitled letter to us, seizing our products, imposing civil penalties, or initiating criminal prosecution.

Premarket approval pathway

Unlike the comparative standard of the 510(k) pathway, the PMA approval process requires an independent demonstration of the safety and effectiveness of a device. PMA is the most stringent type of device marketing application required by the FDA. PMA approval is based on a determination by the FDA that the PMA contains sufficient valid scientific evidence to ensure that the device is safe and effective for its intended use(s). A PMA application generally includes extensive information about the device including the results of clinical testing conducted on the device and a detailed description of the manufacturing process.

After a PMA application is accepted for review, the FDA begins an in-depth review of the submitted information. FDA regulations provide 180 days to review the PMA and make a determination; however, in reality, the review time is normally longer (e.g., 1-3 years). During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the data supporting the application and provide recommendations to the FDA as to whether the data provide a reasonable assurance that the device is safe and effective for its intended use. In addition, the FDA generally will conduct a preapproval inspection of the manufacturing facility to ensure compliance with QSR, which imposes comprehensive development, testing, control, documentation and other quality assurance requirements for the design and manufacturing of a medical device.

Based on its review, the FDA may (i) issue an order approving the PMA, (ii) issue a letter stating the PMA is “approvable” (e.g., minor additional information is needed), (iii) issue a letter stating the PMA is “not approvable,” or (iv) issue an order denying PMA. A company may not market a device subject to PMA review until the FDA issues an order approving the PMA. As part of a PMA approval, the FDA may impose post-approval conditions intended to ensure the continued safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution, and requiring the collection of additional clinical data. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including withdrawal of the approval.

Most modifications to a PMA approved device, including changes to the design, labeling, or manufacturing process, require prior approval before being implemented. Prior approval is obtained through submission of a PMA supplement. The type of information required to support a PMA supplement and the FDA’s time for review of a PMA supplement vary depending on the nature of the modification.

Clinical trials

Clinical trials of medical devices in the United States, including clinical studies that assess new or modified uses for already marketed medical devices, are governed by the FDA’s Investigational Device Exemption (“IDE”) regulation. This regulation places significant responsibility on the sponsor of the clinical study including, but not limited to, choosing qualified investigators, monitoring the trial, submitting required reports, maintaining required records, and assuring investigators obtain informed consent, comply with the study protocol, control the disposition of the investigational device, submit required reports, etc.

Clinical trials of significant risk devices (e.g., implants, devices used in supporting or sustaining human life, devices of substantial importance in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health) require FDA and Institutional Review Board (“IRB”) approval prior to starting the trial. FDA approval is obtained through submission of an IDE application. Clinical trials of non-significant risk (“NSR”), devices (i.e., devices that do not meet the regulatory definition of a significant risk device) only require IRB approval before starting. The clinical trial sponsor is responsible for making the initial determination of whether a clinical study is significant risk or NSR; however, a reviewing IRB and/or FDA may review this decision and disagree with the determination.

An IDE application must be supported by appropriate data, such as performance data, animal and laboratory testing results, showing that it is safe to evaluate the device in humans and that the clinical study protocol is scientifically sound. There is no assurance that submission of an IDE will result in the ability to commence clinical trials. Additionally, after a trial begins, the FDA may place it on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to an unacceptable health risk.

As noted above, the FDA may require a company to collect clinical data on a device in the post-market setting.

The collection of such data may be required as a condition of PMA approval. The FDA also has the authority to order, via a letter, a post-market surveillance study for certain devices at any time after they have been cleared or approved.

Similar requirements may be applicable in other countries and jurisdictions, including in the European Economic Area or EEA (which includes the 27 EU Member States as well as Iceland, Liechtenstein and Norway) and in the United Kingdom.

Pervasive and continuing FDA regulation

After a device is placed on the market, regardless of its classification or premarket pathway, numerous additional FDA requirements generally apply. These include, but are not limited to:

The FDA enforces these requirements by inspection and market surveillance. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include, but is not limited to, the following sanctions:

We are subject to either announced or unannounced device inspections by the FDA, as well as other regulatory agencies overseeing the implementation of and compliance with applicable state public health regulations. These inspections may include our suppliers’ facilities.

International

International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. In order to market our products in other countries, we must obtain regulatory approvals or certifications and comply with extensive safety and quality regulations in otherthose countries. The time required to obtain approval byor certification to market our products in a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. The European Union/Medical device manufacturers intending to market medical devices in the European Economic Area (the “EU/EEA”“EEA”), requiresare required to affix the CE Mark to their medical devices, often after the intervention of a Notified Body and the issuing of a CE conformity mark in order to market medical devices.Certificate of Conformity. Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE Certificates of Conformity or FDA clearance or approval, although others, such as Brazil, Canada and Japan require separate regulatory filings.

The EU Medical Devices Regulation (Regulation 2017/745 of the European Parliament and of the Council of April 5, 2017 on medical devices), or “EU MDR”, sets out the basic regulatory framework currently applicable to medical devices in the EEA. The EU MDR became applicable on May 26, 2021, repealing the prior Council Directive 93/42/EEC, or the “EU MDD”, which had been regulating medical devices in the EEA for the past over 20 years. This represented a major change in the regulatory landscape of medical devices in the EEA. The EU MDR sets out certain transitional provisions that allow for medical devices covered by the repealed EU MDD (called “legacy devices”) to still be marketed in the EEA for a certain period of time.

In the EU and the EEA, medical devices are currently required to comply with the essential requirementsGeneral Safety and Performance Requirements (or “GSPR”) in Annex I of the EU Medical Devices Directive.MDR (for legacy devices, this corresponds to the Essential Requirements of Annex I of the EU MDD). Compliance with these requirements would entitleGSPR is a prerequisite for us to be able to affix the CE conformity markMark to our medical devices, without which they cannot be commercialized in the EU and EEA. To demonstrate compliance with the essential requirementsGSPR and obtain the right to affix the CE conformity markMark, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Except forIn the EEA medical devices are classified into four different risk classes: Class I (which is further divided into (i) devices that are placed on the market in sterile condition, (ii) have a measuring function, (iii) are reusable surgical instruments, and (iv) all others), IIa, IIb and III.

Apart from low risk medical devices (Class I)I if they have no measuring function, are not sterile, and are not reusable surgical instruments), where the manufacturer can issue a CEan EU Declaration of Conformity based on a self-assessment of the conformity of its productsthe devices with the essential requirements of the Medical Devices Directive,GSPR, a conformity assessment procedure requires the intervention of a Notified Body, which is an organization accredited atby the European Commissioncompetent authority of an EEA Member State to conduct conformity assessments. The Notified Body would typically audit and examine the products’ technical documentation and the quality management system for the manufacture, design and final inspection of our medical devices before issuing a certification demonstrating compliance withCE Certificate of Conformity. After receiving the essential requirements. Based on this certificationCE Certificate of Conformity from the Notified Body upon successful completion of the conformity assessment, we can draw up a CEan EU Declaration of Conformity which allows us to affix the CE Mark to our products.

Under the EU MDR, confirmation of conformity with relevant GSPR under the normal conditions of intended use of the device, and the evaluation of the undesirable side-effects and of the acceptability of the benefit-risk-ratio, shall be based on clinical data providing sufficient clinical evidence, including where applicable post-market data. Manufacturers are required to specify and justify the level of clinical evidence necessary to demonstrate conformity with the relevant GSPR. This level of clinical evidence must be appropriate in view of the characteristics of the device and its intended purpose.

Besides its involvement in the initial conformity assessment procedure, the Notified Body is required to carry out an annual audit (surveillance audit) and is also required to randomly perform unannounced audits at least once every five years. The quality management system and technical documentation of manufacturers will be required to be recertified periodically, as CE Certificates of Conformity issued by a Notified Body remain valid only for the period indicated in them, in no case exceeding five years.

The conduct of clinical studies in the EEA is governed by detailed regulatory obligations. These include the requirement of prior authorization by the Competent Authorities of the country in which the study takes place and the requirement to obtain a positive opinion from the relevant competent Ethics Committee. The conduct of clinical studies (called “clinical investigations” under the EU MDR) is now mandatory for implantable devices and Class III medical devices (with certain exemptions).

The EU MDR also provides various requirements relating to post-market surveillance and vigilance, including the obligation for manufacturers to implement a post-market surveillance system, in a manner that is proportionate to the risk class and appropriate for the type of device. Once a device is on the EEA market, manufacturers must comply with certain vigilance requirements, such as the reporting serious incidents and field safety corrective actions (even those occurring outside the EEA) to the relevant competent authorities.

Further, the advertising and promotion of our products in the EU and the EEA is subject to the EU MDR, to the national laws of individual EU and EEA Member States, implementing the EU Medical Devices Directive, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other EU and EEA Member State laws and industry codes governing the advertising and promotion of medical devices. These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

The EU MDR, when compared with the EU MDD, imposes increased compliance obligations for us to access and then remain on the EEA market. Our current CE Certificate of Conformity is valid until May 27, 2024 in accordance with Article 120 of the EU MDR. This means that, if we want to keep selling our product in the EEA without interruption, we need to obtain a new CE Certificate of Conformity under the EU MDR before such expiry date. There are currently a relatively small number of Notified Bodies that have been accredited to conduct conformity assessments under the EU MDR. This may significantly delay our conformity assessment procedures in the future.

On February 16, 2023, the European Parliament adopted a legislative proposal for the amendment of the EU MDR, which is expected to modify the current transitional provisions of Article 120 of the EU MDR allowing an extension in the validity of certain CE Certificates of Conformity until 26 May 2026, 31 December 2027 and 31 December 2028 (depending on the risk classification of the devices and subject to certain conditions). The Council of the European Union still needs to formally accept the Parliament’s position, after which the amendment will be published in the Official Journal of the European Union following the signature of the act. This amendment to the EU MDR may have an impact in our current CE Certificate of Conformity, by extending its validity beyond May 27, 2024.

Brexit

The UK withdrew from the EU on January 31, 2020 (the withdrawal is commonly referred to as “Brexit”). Brexit has created significant uncertainty concerning the future relationship between the UK and the EU. On December 24, 2020, the EU and UK reached an agreement in principle on the framework for their future relationship, the “EU-UK Trade and Cooperation Agreement”. The Agreement primarily focuses on ensuring free trade between the EU and the UK in relation to goods, but does not specifically address medical devices. After the UK’s withdrawal from the EU, Great Britain (England, Scotland and Wales) is treated by the EU as a third country. Northern Ireland continues, with regard to EU regulations, to follow the EU regulatory rules. In light of the fact that the CE marking process is set out in EU law, which no longer applies in the UK, the UK has devised a new route to market culminating in a UK Conformity Assessed (UKCA) mark to replace the CE Mark. The route to market and the UKCA marking requirements are based on the requirements of the EU MDD. Northern Ireland continues to be covered by the regulations governing CE Marks. As part of the Agreement, the EU and the UK have agreed to continue to recognize declarations of conformity based on a self-assessment in the other territory.

Since January 1, 2021, the Medical Devices (EU Exit) Regulations 2020 introduced a number of changes to how medical devices are placed on the Great Britain’s market. The CE marking will continue to be recognized in Great Britain until July 2024, and certificates issued by Notified Bodies designated in the EEA will continue to be valid for the Great Britain market until July 2024. From July 2024, when the future UK Medical Device Regulations are expected to become applicable, manufacturers will have to obtain the UKCA mark to place a medical device on the Great Britain market. There are certain transition periods for existing CE and UKCA marked devices.

Other Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services (“CMS”), other divisions of the Department of Health and Human Services, the Department of Justice, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair completioncompetition laws.

The distribution of medical device products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of medical device products.

Third-Party Payor Coverage and Reimbursement

Our Pure-Vu systemSystem and the procedure to cleanse the colon in preparation for colonoscopy are not currently separately reimbursable through private or governmental third-party payors in any country. Significant uncertainty exists as to whether coverage and separate reimbursement of the Pure-Vu systemSystem will develop; but we sought new technology payments from Medicare under the hospital Inpatient and Outpatient Prospective Payment Systems and were denied in 2021. We intend to seek separate reimbursement for future versions of the system through private or governmental third-party payors in the future. In both the United States and foreign markets, our ability to commercialize the Pure-Vu systemSystem successfully, and to attract commercialization partners for the Pure-Vu system,System, depends in part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as the Medicare and Medicaid programs, managed care organizations, and private health insurers. Medicare is a federally funded program managed by the CMS, through local contractors that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise uninsured, thatand it is both federally and state funded and managed by each state. The federal government sets general guidelines for Medicaid and each state creates specific regulations or other guidelines that govern its individual program. Each payor, whether governmental or private, has its own process and standards for determining whether it will cover and reimburse a procedure or particular product. Private payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMSMedicare coverage and reimbursement is usually a significant gating issue for successful introduction of a new product. The competitive position of the Pure-Vu systemSystem will depend, in part, upon the extent of coverage and adequate reimbursement for such product and for the procedures in which such product is used. Prices at which we or our customers seek reimbursement for the Pure-Vu systemSystem can be subject to challenge, reduction or denial by the government and other payors.

In the event we do receive approval for third-party or government reimbursement for our product, the marketability of such product may suffer if the government and commercial third-party payors fail to provide adequate coverage and reimbursement. An emphasis on cost containment measures in the United States has increased and we expect it will continue. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

State and federal healthcare reform measures may be adopted in the future, any of which may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

In addition, in some foreign countries, the proposed pricing for a medical device must be approved before it may be lawfully marketed. The requirements governing medical device pricing vary widely from country to country. For example, the European UnionEEA provides options for its member statesMember States to restrict the range of medicinal productsmedical devices for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.medical devices. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of any of our product candidatesmedical devices to other available therapies in order to obtain or maintain reimbursement or pricing approval. Other EEA countries allow companies to fix their own prices for medical devices, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new devices. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

In recent years, a number of EEA countries have introduced so-called health technology assessments (HTA). HTA measures the added value of a new health technology, in our case a medical device, compared to existing ones. HTA’s assessment include cost implications for the patient and its impact on the organization of healthcare systems in the administration of treatment. An EU Regulation on HTA entered into force in January 2022 and will be applied three years later (January 2025). It offers the possibility for EEA countries’ HTA bodies to conduct Joint Clinical Assessments of new high-risk medical devices.

Historically, products launched in the European Union do not follow price structures of the United States and generally tend to be priced significantly lower. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of our productsmedical devices is unavailable or limited in scope or amount, our revenues from sales by us or our strategic partners and the potential profitability of any of our product candidatesmedical devices in those countries would be negatively affected.

Other Healthcare Laws and Compliance Requirements

Healthcare providers, physicians, and third partythird-party payors will play a primary role in the recommendation and use of our current products and any future products for which we may obtain marketing approval. Our future arrangementsapproval for which payment is or may become available under any federal health care program. Arrangements with third party payors, healthcare providers and physicians maywill expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any device for which we obtain marketing approval.products. In the United States, our activities are potentially subject to regulation by variousrestrictions under applicable federal state and local authorities in addition to the FDA, including the CMS, other divisions of the United States Department of Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. The applicablehealthcare laws and regulations include, but are not limited to, the federal Anti-Kickback Statute, the False Claims Act, and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).following:

Interactions between medical devices manufacturers and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct developed at both EEA level and in the individual EEA Member States. The provision of benefits or advantages to physicians to induce or encourage the recommendation, endorsement, purchase, supply, order or use of medical devices is generally prohibited in the EEA. Breach of these laws could result in substantial fines and imprisonment. Payments made to physicians in certain EEA Member States also must be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, their competent professional organization, and/or the competent authorities of the individual EEA Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information, which are applicable to “business associates”—independent contractorscertain persons or agents of HIPAA covered entities that create, receive, maintain or obtaintransmit protected health information in connection with providing a specified service or performing a function on behalf of a covered entity.

Further, the legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing amount of focus on privacy and data security issues with the potential to affect our business. Congress and state legislatures also have been considering and enacting new legislation relating to privacy and data protection. For example, in California, the California Consumer Privacy Act (“CCPA”) created new transparency requirements and granted California residents several new rights with regard their personal information. In addition, in November 2020, California voters approved the California Privacy Rights Act (“CPRA”) ballot initiative which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (“CPPA”). The amendments introduced by the CPRA go into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA. Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection with certain types of incidents. These claims may result in significant liability and potential damages. We implemented processes to manage compliance with the CCPA and continue to assess the impact of the CPRA, and other state legislation, on our business as additional information and guidance becomes available.

The Federal Trade Commission (“FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (“FTC Act”). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers’ personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act. While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.

EEA Member States and other jurisdictions where we operate have adopted data protection laws and regulations, which impose significant compliance obligations. For example, the General Data Protection Regulation (or “GDPR”) imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, especially in the case of sensitive personal data (such as health data from clinical investigations) and safety reporting. The GDPR also imposes strict rules on the transfer of personal data out of the EEA, including to the U.S., and fines and penalties for failure to comply with the requirements of the GDPR and the related national data protection laws of the EEA countries, which can go to up to €20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher. The obligations under the GDPR may therefore be onerous and adversely affect our business, financial condition, results of operations and prospects.

Switzerland has adopted similar restrictions. These obligations and restrictions concern, in particular, the consent of the individuals to whom the personal data relate, the information provided to the individuals, the transfer of personal data out of the EEA or Switzerland, security breach notifications, security and confidentiality of the personal data, as well as substantial potential fines for breaches of the data protection obligations.

Data protection authorities from the different EU Member States may interpret the GDPR and applicable related national laws differently and impose requirements additional to those provided in the GDPR. In addition, guidance on implementation and compliance practices may be updated or otherwise revised, which adds to the complexity of processing personal data in the EU. When processing personal data of subjects in the EU, we must comply with the applicable data protection laws. In particular, when we rely on third party service providers processing personal data of subjects in the EU, we must enter into suitable agreements with these providers and receive sufficient assurances that the providers meet the requirements of the applicable data protection laws, particularly the GDPR which imposes specific and relevant obligations.

Although there are legal mechanisms to allow for the transfer of personal data from the EEA to the US, decisions of the European Court of Justice have increased uncertainty around compliance with EU privacy law requirements. As a result of the decision in the Schrems case (Case C-362/14 Maximillian Schrems v. Data Protection Commissioner), it was no longer possible to rely on the safe harbor certification as a legal basis for the transfer of personal data from the EU to entities in the US.

However, in March 2022, the European Commission and the U.S. announced that they have agreed in principle on a new Trans-Atlantic Data Privacy Framework, as a successor arrangement to the EU-U.S. Privacy Shield. On December, 13 2022, the European Commission adopted a draft adequacy decision for the EU-U.S. Data Privacy Framework. This draft decision follows the signature of a US Executive Order by President Biden on October, 7 2022, along with the regulations issued by the U.S. Attorney General Merrick Garland. These two instruments implemented into U.S. law the agreement in principle announced by President von der Leyen and President Biden in March 2022. The draft adequacy decision, which reflects the assessment by the European Commission of the U.S. legal framework has now been published and transmitted to the EDPB for its opinion. The draft decision concludes that the U.S. ensures an adequate level of protection for personal data transferred from the EU to U.S. companies. The two sides are now expected to finalize the details of this agreement in principle and translate it into legal texts that will form the basis of a draft adequacy decision to be proposed by the European Commission.

Furthermore, following the UK’s exit from the EU, the UK became a third country to the EEA in terms of personal data transfers. The EC has adopted an Adequacy Decision concerning the level of personal data protection. However, personal data transfers from the EEA to the UK may nevertheless be at a greater risk than before because an Adequacy Decision may be suspended.

Following the Schrems II decision, the Swiss Federal Data Protection and Information Commissioner, or the FDPIC, also announced that the Swiss-U.S. Privacy Shield does not provide adequate safeguards for the purposes of personal data transfers from Switzerland to the U.S. While the FDPIC does not have authority to invalidate the Swiss-U.S. Privacy Shield regime, the FDPIC’s announcement casts doubt on the viability of the Swiss-U.S. Privacy Shield as a future compliance mechanism for Swiss-U.S. data transfers.

Compliance with data transfer obligations involves documenting detailed analyses of data access and protection laws in the countries in which data importers are located, which can be costly and time-consuming. Data importers must also expend resources in analyzing their ability to comply with transfer obligations, including implementing new safeguards and controls to further protect personal data. If we or our vendors fail to comply with applicable data privacy laws, or if the legal mechanisms we or our vendors rely upon to allow for the transfer of personal data from the EEA, the UK, or Switzerland to other countries not considered by the European Commission to provide an adequate level of data protection are not considered adequate, we could be subject to government enforcement actions and significant penalties against us, and our business could be adversely impacted if our ability to transfer personal data outside of the EEA, UK, or Switzerland is restricted, which could adversely impact our operating results.

The landscape of laws regulating personal data is constantly evolving, and compliance with these laws requires a flexible privacy framework and substantial resources, and compliance efforts will likely be an increasing and substantial cost in the future.

Current and future legislation

In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any collaborators, may receive for any approved products.

WithIn the new AdministrationEEA and Congress,as mentioned above, the EU MDR imposes increased compliance obligations for us to access and then remain on the EEA market. It introduced substantial changes to the obligations applicable to medical device manufacturers and Notified Bodies in the EEA. As a result, there will likely be additional administrative or legislative changes, including modification, repeal, or replacement of all, or certain provisions of, the Affordable Care Act, which may impact reimbursement for medical devices. On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilitiesare less Notified Bodies available to conduct conformity assessments under the Affordable Care ActEU MDR, which has significantly increased the time needed for companies to waive, defer, grant exemptionsaccess the EEA market. Moreover, as the EU MDR only started to apply from or delayMay 2021, a number of guidance documents is still not available to guide manufacturers and Notified Bodies. The EU Regulation on health technology assessments (HTA) that entered into force in January 2022 and that will be applied three years later (January 2025) may also impact in the implementationfuture the pricing and reimbursement of any provision of the Affordable Care Act that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress has attempted several times to repeal and replace the Affordable Care Act, yet to date no complete repeal has occurred. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the Affordable Care Act. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. Litigation and legislation over the Affordable Care Act are likely to continue, with unpredictable and uncertain results.our product.

Additional laws and regulations governing international operations

If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate, or to any employee of a public international organization, for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.controls.

Compliance with the FCPA is expensive and difficult,resource-intensive, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the medical device and pharmaceutical industry,industries, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. In recent years, there has been a trend of increasing government investigations and litigations against companies operating in our industry, both in the United States and around the world. We may become involved in government investigations that arise in the ordinary course of our business.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

Our business activities outside of the U.S. are also subject to anti-bribery or anti-corruption laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct or rules of other countries in which we operate, including the U.K. Bribery Act of 2010.

Post-Marketing Regulations

Following clearance or approval of a new product, a company and the product are subject to continuing regulation by the FDA and other foreign, federal and state regulatory authorities, including, among other things, monitoring and recordkeeping activities, reporting to applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting for uses or in patient populations not described in the product’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such off-label uses. Modifications or enhancements to the products or labeling or changes of site of manufacture are often subject to the approval of the FDA and other regulators or subject of review by a Notified Body in the EU, which may or may not be received or may result in a lengthy review process.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years from the date of our initial public offering in February 2018, which would be at the end of the current fiscal year, ending December 31, 2023, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. We intend to take advantage of these reporting exemptions described above until we are no longer an “emerging growth company.” Under the JOBS Act, “emerging growth companies” can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

Corporate and Available Information

We are a Delaware corporation formed in September 2016 under the name Eight-Ten Merger Corp. In November 2016, we changed our name to Motus GI Holdings, Inc. We are the parent company of Motus GI Medical Technologies Ltd., an Israeli corporation, and Motus GI, LLC (formerly Motus GI, Inc.), a Delaware corporation.limited liability company. Motus GI, Inc. was converted from a Corporation into a Limited Liability Company effective January 1, 2021.

Our principal executive offices are located at 1301 East Broward Boulevard, 3rd Floor, Ft. Lauderdale, FL 33301. Our phone number is (954) 541-8000 and our web address is www.motusgi.com. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.

We will make available free of charge on or through the Investor Relations link on our website, free of charge,www.motusgi.com, access to press releases and investor presentations, as well as all materials that we file electronically with the SEC, including our Annual Reportannual report on Form 10-K, Quarterly Reportsquarterly reports on Form 10-Q, Current Reportscurrent reports on Form 8-K and any amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically filefiling such materialmaterials with, or furnish itfurnishing them to, the SEC. Our SEC reports can be accessed throughDuring the Investors section of our internet website. Further, a copy ofperiod covered by this Annual Report on Form 10-K, is located atwe made all such materials available through our website as soon as reasonably practicable after filing such materials with the SEC’s Public Reference Rooms at 100 F Street, N.E., Washington, D. C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.SEC. The SEC maintains aan Internet website, www.sec.gov, that contains reports, proxy and information statements and other information regarding our filings athttp://www.sec.gov.that we file electronically with the SEC.

“Motus GI,” “Pure-Vu,” and our other registered or common law trademarks, service marks or trade names appearing herein are the property of Motus GI Holdings, Inc. Some trademarks referred to in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

An investment in our Common Stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all other information in this Annual Report on Form 10-K and our other reports filed with the Securities and Exchange Commission. The risks set forth below are not the only ones facing us. Additional risks and uncertainties may exist that could adversely impact our business, operations and financial conditions. If any one or more of the following risks actually materialize, our business, financial condition, reputation, operations and/or future prospects suffer. In such event, the value of our Common Stock could decline, and you could lose all or a substantial portion of the money that you pay for our Common Stock.

SUMMARY

The following summarizes key risks and uncertainties that could materially adversely affect us. You should read this summary together with the more detailed description of each risk factor contained below.

Risks relating to our strategic alternative process, including risks related to:

Risks relating to our financial position and need for capital, including risks relating to:

Risks related to government regulation and third-party reimbursement, including risks related to:

Risks related to our business operations, including risks related to:

Risks related to our intellectual property rights, including risks related to:

General risks, including risks related to:

Risks related to our capital stock, including risks related to:

Risks related to our operations in Israel, including risks related to:

Risks Related to our Strategic Alternative Process

We may not be successful in identifying and implementing any strategic business combination or other transaction.

We have engaged Lake Street to assist us in seeking a strategic transaction to benefit our shareholders. We continue to evaluate various potential strategic options for us, including a merger, reverse merger, sale or other strategic transaction. However, there can be no assurance that we will be able to identify a counterparty willing to move forward with us or, if we do, successfully consummate any particular strategic transaction. The biotech industry is a competitive industry and thus there are numerous competitors of ours for strategic transactions with a limited number of parties seeking a transaction on terms that would be beneficial to our shareholders. The process of evaluating these strategic options may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business and may diminish or delay any future distributions to our stockholders. Any delays in identifying a potential counterparty will cause our cash balance to continue to deplete, which could make us less attractive as a strategic counterparty. Our existing outstanding indebtedness with Kreos may also impact the interest of potential third parties and may negatively impact our ability to consummate a strategic transaction. The continued review of our strategic options may also create continued uncertainty for our employees and this uncertainty may adversely affect our ability to retain key employees necessary to maintain our ongoing operations or to execute any potential strategic options, which could have a material adverse effect on our business. Further, the market capitalization of our company is below the value of our cash and cash equivalents. Potential counterparties in a strategic transaction involving our company may place minimal or no value on our remaining assets. As a result, we may not be able to execute on a strategic transaction before our cash position gets reduced, as a result of running a public company, to the point that we will need to pursue the winding down and dissolution of the company.

Any strategic transactions that we may consummate in the future could have negative consequences.

Any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affect our business and decrease the value of our company. There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, be successfully consummated, lead to increased stockholder value, or achieve the results hoped for. Any failure of such potential transaction to achieve the anticipated results could significantly impair the ability of a shareholder to realize any benefit from any future strategic transaction.

If we are successful in completing any strategic transaction, we may be exposed to other operational and financial risks.

The negotiation and consummation of any strategic transaction may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including:

● increased near-term and long-term expenditures;

● our ability to service our outstanding indebtedness;

● exposure to unknown liabilities;

● higher than expected acquisition or integration costs;

● incurrence of substantial additional debt or dilutive issuances of equity securities to fund future operations;

● write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;

● increased amortization expenses;

● difficulty and cost in combining the operations and personnel of any acquired business with our operations and personnel;

● impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;

● inability to retain key employees of our company or any acquired business; and

● possibility of future litigation.

Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.

If a strategic transaction is not consummated, our Board may decide to file for bankruptcy protection or pursue a dissolution and liquidation of our remaining assets. In such an event, as a result of our outstanding indebtedness, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such bankruptcy or liquidation as well as the amount of cash that will need to be reserved for our current debts, including repayment of amounts under our Loan Agreement (as defined below), and commitments and contingent liabilities and there may not be any cash or other assets to distribute to our stockholders.

There can be no assurance that a strategic transaction will be completed. If a strategic transaction is not completed, our Board may decide to file for bankruptcy protection or pursue a dissolution of the company and liquidation of all of our remaining assets. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations and service our outstanding indebtedness. The process of bankruptcy or liquidation may be lengthy and we cannot make any assurances regarding the timing of completing such a process. If our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, including repayment of the indebtedness under our Loan Agreement, which debt is secured by our assets, prior to making any distributions in liquidation to our stockholders. There can be no assurance as to the amount of available cash that will be available to distribute to stockholders, if any, after paying our debts and other obligations and setting aside funds for reserves, nor as to the timing of any such distribution. Our financial commitments and contingent liabilities would include: (i) repayment of our outstanding indebtedness under our Loan Agreement; (ii) personnel costs, including severance; (iii) contractual obligations to vendors and clinical study sites; (iv) non-cancelable lease obligations; and (v) potential litigation against us.

As a result of the requirement to reserve for contingencies, a portion of our assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain. In addition, we may be subject to litigation or other claims related to a bankruptcy or dissolution and liquidation. If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a bankruptcy, liquidation, dissolution or winding up.

We may become involved in securities class action litigation that could divert management’s attention and harm the company’s business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action litigation has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as discontinuations of clinical programs. These events may also result in investigations by the SEC. We may be exposed to such litigation or investigation even if no wrongdoing occurred. Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect our business and cash resources and our ability to consummate a potential strategic transaction or the ultimate value our stockholders receive in any such transaction.

Risks Related to Our Financial Position and Need for Capital

There is substantial doubt about our ability to continue as a going concern, which will affect our ability to obtain future financing and may require us to curtail our operations.

Our financial statements as of December 31, 20172022 were prepared under the assumption that we will continue as a going concern. The independent registered public accounting firm that audited our 20172022 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt in our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern depends on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. We cannot assure you, however, that we will be able to achieve any of the foregoing. See Note 2 to our Consolidated Financial Statements for further details.

We have incurred substantial operating losses in each year since our inception and expect to continue to incur substantial losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

We expect to incur substantial expenses without corresponding revenues unless and until we expand our commercialization efforts. To date, as part of our limitedinitial U.S. market launch targeting early adopter hospitals, we have generated limited revenue from our Pure-Vu system,System, but we do not expect to generate significant revenue from product sales unless and until we expand our commercialization efforts for the Pure-Vu System, which we expect will take a number of years and is subject to significant uncertainty. We expect to incur significant marketing expenses in the United States, Europe and elsewhere, and there can be no assurance that we will generate significant revenues or ever achieve profitability. Our net loss for the years ended December 31, 20172022 and December 31, 20162021 was approximately $13.2$18.6 million and $8.0$19.0 million, respectively. As of December 31, 2017,2022, we had an accumulated deficit of approximately $39.1$141.4 million.

Our indebtedness to Kreos Capital VI (Expert Fund) LP may limit our flexibility in operating our business and adversely affect our financial health and competitive position. Our obligations to Kreos Capital VI (Expert Fund) LP are secured by substantially all of our assets. If we default on these obligations, Kreos Capital VI (Expert Fund) LP could foreclose on our assets, which could have a materially adverse effect on our business.

In July 2021, we entered into an Agreement for the Provision of a Loan Facility with Kreos Capital VI (Expert Fund) LP (the “Loan Agreement”). All obligations under the Loan Agreement are secured by a first priority security interest on substantially all of our personal property assets, including our material intellectual property and equity interests in our subsidiaries. As a result, if we default on any of our obligations under the Loan Agreement, Kreos Capital VI (Expert Fund) LP could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

In order to service this indebtedness and any additional indebtedness we may incur in the future, we will need to generate cash from our operating activities. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control. If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, either when they mature, or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our business operations and financial condition and we may need to file for bankruptcy protection.

The Loan Agreement restricts our ability, among other things, in each case subject to certain exceptions, to:

In addition, we are required under the Loan Agreement to comply with various undertakings. The undertakings and restrictions and obligations in the Loan Agreement, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. Our ability to comply with these undertakings may be affected by events beyond our control, and we may not be able to meet those undertakings.

If we breach any of the undertakings or default on any of our obligations under the Loan Agreement all of the outstanding indebtedness under the Loan Agreement could become immediately due and payable, and/or Kreos Capital VI (Expert Fund) LP could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

If our indebtedness under the Loan Agreement were to be accelerated, there can be no assurance that our assets would be sufficient to repay in full that indebtedness. In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, Kreos Capital VI (Expert Fund) LP will be entitled to receive payment in full from the proceeds of the collateral which secures our indebtedness before the holders of other indebtedness or holders of our Common Stock receive any distribution with respect thereto.

Our cash orand cash equivalents will only fund our operations for a limited time and we will need to raise additional capital in order to support our development and commercialization efforts.

We are currently operating at a loss and expect our operating costs will increase significantly as we incur costs associated with commercialization activities related to our Pure-Vu system. OurSystem. The independent registered public accounting firm has expressedthat audited our 2022 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt aboutin our ability to continue as a going concern in their report on our financial statements.concern. At December 31, 2017,2022, we had a cash and cash equivalents balance of approximately $6.9$14.0 million. Based on

We will need to raise additional capital or generate substantial revenue in order to support our current business plan, we believe the net proceeds of approximately $15.2 million from our IPO completed in February 2018,development and additional net proceeds of approximately $250,000 from the Partial IPO Over-Allotment Exercise completed in March 2018, together with our cash and cash equivalents balance as of December 31, 2017, will be sufficient to meet our anticipated cash requirements through approximately the second quarter of 2019.commercialization efforts.

If our available cash balances are insufficient to satisfy our liquidity requirements, including due to risks described herein, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. We will need to raise additional capital, and we may also consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities, or for other reasons, including to:

Our present and future funding requirements will depend on many factors, including:

We do not currentlyExcept for our Loan Agreement with Kreos Capital VI (Expert Fund) LP and our Equity Distribution Agreement (as defined below) with Oppenheimer & Co. Inc. (“Oppenheimer”), we have anyno arrangements or credit facilities in place as a source of funds, and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all, and if we are not successful in raising additional capital, we may not be able to continue as a going concern. We may seek additional capital through a combination of private and public equity offerings (which, in limited circumstances, may require the prior written consent of Oppenheimer pursuant to our Equity Distribution Agreement), debt financings (which, except for limited circumstances, would require the prior written consent of Kreos Capital VI (Expert Fund) LP pursuant to our Loan Agreement), and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, that could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to our then existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back or eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. In addition, if we are unable to secure sufficient capital to fund our operations, we might have to enter into strategic collaborations that could require us to share commercial rights to the Pure-Vu systemSystem with third parties in ways that we currently do not intend or on terms that may not be favorable to us. If we choose to pursue additional indications and/or geographies for the Pure-Vu systemSystem or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital sooner than expected.

Future capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations.

If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced and these stockholders may experience substantial dilution. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those of our Common Stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Effective on December 1, 2016, Motus GI Medical Technologies LTD, and the holders of all issued and outstanding shares of capital stock of Motus GI Medical Technologies LTD (the “LTD Stockholders”), entered into a share exchange agreement (the “Share Exchange Agreement”) with us. Pursuant to the terms of the Share Exchange Agreement, as a condition of and contemporaneously with the initial closing (the “Initial Closing”) of the 2017 Private Placement, the LTD Stockholders sold to us, and we acquired, all of the issued and outstanding shares of capital stock of Motus GI Medical Technologies LTD (the “Share Exchange Transaction”) and Motus GI Medical Technologies LTD became our direct wholly-owned subsidiary. As a result of the Share Exchange Transaction, our ability to utilize our federal net operating loss carryforwards and federal tax creditcredits may be limited under Sections 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The limitations apply if an “ownership change,” as defined by Code Section 382, occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50 percentage points over their lowest ownership percentage at any time during the applicable testing period (typically three years). In addition, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change” and, consequently, Code Section 382 limitations. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

U.S. federal income tax reform could adversely affect us.

On December 22, 2017, President Trump signed into law the statute originally named the “Tax Cuts and Jobs Act” (the “2017 Tax Act”) which enacts a broad range of changes to the Code. The 2017 Tax Act, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating losses, allows for the expensing of certain capital expenditures, and puts into effect a number of changes impacting operations outside of the United States including, but not limited to, the imposition of a one-time tax on accumulated post-1986 deferred foreign income that has not previously been subject to tax, and modifications to the treatment of certain intercompany transactions. Our net deferred tax assets and liabilities will be revalued at the newly enacted U.S. corporate rate, and the impact will be recognized in our tax expense in 2017, the year of enactment. We continue to examine the impact this tax legislation may have on our business. The impact of this tax legislation on holders of our Common Stock is uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our Common Stock.

Risks Related to Government Regulation and Third-Party Reimbursement

We are subject to complex and costly regulation.

Our product, and any products we may develop in the future, are subject to regulation by the FDA and other national, supranational, federal and state governmental authorities.authorities (both domestic and foreign). It can be costly and time-consuming to obtain regulatory clearance, and/approval, or approvalcertification to market a new or modified medical device or other product. Clearance and/or approval might not be granted on a timely basis, if at all. Regulations are subject to change as a result of legislative, administrative or judicial action, which may further increase our costs or reduce sales. Unless an exception applies, the FDA requires that the manufacturer of a new medical device or a new indication for use of, or other significant change in, an existing medical device obtain either FDA 510(k) pre-market clearance or pre-market approval before that product can be marketed or sold in the United States. Modifications or enhancements to a product that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, labeling, packaging, or manufacturing process may also require a new 510(k) clearance or possibly premarket approval. The FDA has indicated that it intends to continue to enhance its pre-market requirements for medical devices. Although we cannot predict with certainty the future impact of these initiatives, it appears that the time and cost to get medical devices to market could increase significantly.

In addition, we are subject to regulations that govern manufacturing practices, product labeling and advertising, and adverse-event reporting that apply after we have obtained clearance or approval to sell a product.product, and we also must take into account newly emerging risks associated with medical devices such as cybersecurity vulnerabilities. Our failure to maintain clearance for our Pure-Vu system,System, to obtain clearance or approval for new or modified products, or to adhere to regulations for manufacturing, labeling, advertising or adverse event reporting could adversely affect our results of operations and financial condition. Further, if we determine a product manufactured or marketed by us does not meet our specifications, published standards or regulatory requirements, we may seek to correct the product or withdraw the product from the market, which could have an adverse effect on our business. Many of our facilities and procedures, and those of our suppliers are subject to ongoing oversight, including periodic inspection by governmental authorities. Compliance with production, safety, quality control and quality assurance regulations can be costly and time-consuming.

The sales and marketing of medical devices is under increased scrutiny by the FDA and other enforcement bodies.bodies, as well as by the competent authorities in foreign jurisdictions, such as EEA Member States. If our sales and marketing activities fail to comply with FDA or foreign regulations or guidelines, or other applicable laws, we may be subject to warningsregulatory inquiries, warning letters, or enforcement actions from the FDA, or other enforcement bodies.bodies and foreign competent authorities.

We may be unable to obtain or maintain governmental approvals or certifications to market our Pure-Vu systemSystem outside the United States and the European UnionEconomic Area countries.

To be able to market and sell our Pure-Vu systemSystem in other countries, we must obtain regulatory approvals or certifications and comply with the regulations of those countries. These regulations, including the requirements for approvals or certifications and the time required for regulatory review, vary from country to country. Many non-European markets, including major markets in South America and Asia Pacific, have allowed for expedited regulatory review and approval based on an existing CE Mark. WeCertificate of Conformity. The first-generation and second-generation of our Pure-Vu System have received CE Certificate of Conformity, allowing us to affix the CE Mark approvaland market it in Europe in February 2018, andthe EEA. We intend to target countries with a regulatory approval process with similar requirements to CE Mark.the EEA. However, obtaining and maintaining foreign regulatory approvals areor certifications is complex and expensive and subject to delays, and management cannot be certain that we will receive and be able to maintain regulatory approvals or certifications in any foreign country in which we plan to market our Pure-Vu systemSystem or in the time frame in which we expect.

Modifications to our product may require new 510(k) clearance or may require us to cease marketing or recall the modified products until approvals are obtained.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or possibly premarket approval. Changes that do not rise to this level of significance, including certain manufacturing changes, may be made without FDA clearance upon documentation in the manufacturer’s files of the determination of the significance of the change. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with the manufacturer’s determination. If the FDA disagrees with any determination that we may make in the future and requires us to seek new 510(k) clearance for modifications to any previously approved or cleared products for which we have concluded that new approvals are unnecessary, we may be required to cease marketing or distribution of our products or to recall the modified product until we obtain approval, and we may be subject to significant regulatory fines or penalties. We intend inIn the future we may seek to expand the indication for which the Pure-Vu systemSystem is cleared or approved to allow us to actively promote the product and a less-prep regimen to patients. We planThis would require us to perform aone or more clinical trial that shouldtrials to facilitate the approval of such expanded labeling, however, if this trial issuch trials are unsuccessful or the FDA denies our expanded labeling, our revenues willmay be adversely affected.

In the European Union/European Economic Area (the “EU/EEA”),EEA, we will be required to inform the Notified Body that carried out the conformity assessment of the medical devices we market or sell in the EEA of any planned changes to our quality management system or changes to our devices which could affect compliance with the essential requirementsGSPR set forth in the EU Medical Devices DirectiveMDR, the safety and performance of the device or the devices’ intended purpose.its conditions prescribed for use. The Notified Body will then assess the changes and, verify whether they affect the products’ conformity with the essential requirements set forth in the EU Medical Devices Directive or the conditions for the use of the device. Ifif the assessment is favorable, the Notified Body will issue a newsupplement to the CE Certificate of Conformity or an addendum toConformity. The Notified Body may also determine that the existingplanned changes require a new conformity assessment. For devices covered by CE CertificateCertificates of Conformity attesting compliance with the essential requirements set forth inissued under the EU Medical Devices Directive. If it is not, weMDD (“legacy devices”), no significant changes in design or intended purpose are allowed after the date of application of the EU MDR (May 25, 2021). Any proposed changes to our products may not be ableoblige us to marketundertake future clinical and selltechnical procedures and provide information in addition to that provided to support the product in the EEA.initial conformity assessment.

If our product malfunctions, or causes or contributes to a death or a serious injury, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. If we fail to report these events to the FDA within the required timeframes, or at all, the FDA could take enforcement action against us. Any such adverse event involving our product also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results. Similar strict regulatory requirements concerning safety reporting and post-market surveillance obligations apply in the EEA.

Our Pure-Vu systemSystem may in the future be subject to product recalls. A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, including a third-country authority, or the discovery of serious safety issues with our products, could have a significant adverse impact on us.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is reasonable probability that the device would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. The FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated. A government-mandated or voluntary recall by us or a distributor could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues. A recall of our products would divert managerial and financial resources and have an adverse effect on our reputation, results of operations and financial condition, which could impair our ability to produce our product in a cost-effective and timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear other costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA or another third-country competent authority. We may initiate voluntary recalls that we determine do not require notification of the FDA or another third-country competent authority. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls.

We are also required to follow detailed recordkeeping requirements for all firm-initiated medical device corrections and removals. In addition, in October 2014, the FDA issued guidance intended to assist the FDA and industry in distinguishing medical device recalls from product enhancements. Per the guidance, if any change or group of changes to a device addresses a violation of the Federal Food, Drug and Cosmetic Act (the “FDCA”), that change would generally constitute a medical device recall and require submission of a recall report to the FDA. Similar strict regulatory requirements concerning medical device recall and related reporting obligations apply in the EEA.

Our Pure-Vu systemSystem is not currently separately reimbursable through private or governmental third-party payors, which could limit market acceptance.

Our Pure-Vu systemSystem and the procedure to cleanse the colon in preparation for colonoscopy are not currently separately reimbursable through private or governmental third-party payors in any country. We sought new technology payments from Medicare under the hospital Inpatient and Outpatient Prospective Payment Systems and were denied in 2021. We intend to seek separate reimbursement through private or governmental third-party payors infor future versions of the future,system, however coverage and reimbursement may not be available for any product that we commercialize and, even if available, the level of reimbursement may not be satisfactory. The commercialization of our Pure-Vu systemSystem depends on prospective patients’ ability to cover the costs of the procedure, and/or physicianphysician/hospital willingness to subsidize all or some of the costs of the procedure. We believe that a substantial portion of individuals who are candidates for the use of the Pure-Vu systemSystem worldwide do not have the financial means to cover its cost. Moreover, healthcare providers may be reluctant to make the initial investment in the system. A general regional or worldwide economic downturn could negatively impact demand for our Pure-Vu system.System. In the event that medically eligible patients deem the costs of our procedure to be prohibitively high or consider alternative treatment options to be more affordable, or healthcare providers deem the cost of the system to be too high, our business, results of operations and financial condition would be negatively impacted.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

There have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any collaborators, may receive for any approved products.

For example, in March 2010, the Affordable Care Act was enacted. The Affordable Care Act has substantially changed the way healthcare is financed by both governmental and private insurers and has significantly affected the health care industry. Certain provisions of the Affordable Care Act have been subject to judicial challenges as well as efforts to modify or invalidate them or to alter their interpretation and implementation. For example, the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, included a provision that eliminated the tax-based shared responsibility payment for individuals who fail to maintain minimum essential coverage under Section 5000A of the Internal Revenue Code of 1986, commonly referred to as the “individual mandate,” effective January 1, 2019. Additional legislative changes, regulatory changes, and judicial challenges related to the Affordable Care Act remain possible, but the nature and extent of such potential changes or challenges are uncertain at this time. The implications of the Affordable Care Act, and efforts to modify or invalidate the Affordable Care Act or its implementing regulations, or portions thereof, and the uncertainty surrounding any other modification related to the Affordable Care Act or any other health care reform measure for our business and financial condition, if any, are not yet clear. It is possible that the Affordable Care Act as well as its possible modification or invalidation, in whole or in part or another health care reform measure could negatively impact our business.

If we or our sales personnel or distributors do not comply with fraud and abuse laws, including anti-kickback laws for any products approved in the U.S., or with similar foreign laws where we market our products, we could face significant liability.

There are numerous federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims, and physician transparency laws. Our relationships with physicians and surgeons, hospitals and our independent distributors are subject to scrutiny under these laws. ViolationsIf our operations are found to be in violation of any of these laws are punishable byor any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal and civil sanctions, including significant fines, damages and monetary penalties, and in some instances, imprisonment and exclusion from participation in federal and stategovernment healthcare programs, includingdamages, fines and the Medicare, Medicaidcurtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and Veterans Administration health programs.our financial results. The risk of our being found in violation of these laws is increased by the fact that their provisions are open to a variety of evolving interpretations and enforcement discretion. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. For a fuller discussion of the applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations applicable to our business, see Item 1 “Description of Business - Other Healthcare Laws and Compliance Requirements.”

Many foreign countries have enacted similar laws addressing fraud and abuse in the healthcare sector. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance requirements in multiple jurisdictions increases the possibility that a healthcare company may run afoul of one or more of the requirements.

We may become liable for significant damages or be restricted from selling our products if we engage in inappropriate promotion of our Pure-Vu system.System.

Our promotional materials and training methods for our Pure-Vu systemSystem must comply with FDA and other foreign applicable laws and regulations, including the prohibition of the promotion of the “off-label” use of our Pure-Vu system,System, including by using our Pure-Vu systemSystem in a way not approved by the FDA.FDA or not consistent with the intended purpose for which Pure-Vu System is CE marked in the EEA. The Pure-Vu systemSystem is currently indicated to connect to standard colonoscopes to facilitate intra-procedural cleaning of a poorly prepared colon by irrigating or cleaning the colon and evacuating the irrigated fluid, feces and other bodily fluids and matter. We do not currently promote a particular prep regimen as this is left up to the discretion of the physician since our current indication does not reference any preparation protocol. Healthcare providers may use our products off-label, as the FDA doesor the competent authorities in the EEA Member States do not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA or a competent authority in an EEA Member State determines that our promotional materials, training or marketing efforts constitute promotion of an off-label use, it could request that we modify our training or promotional materials or marketing efforts or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties. Although we do not intend to engage in any activities that may be considered off-label promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged, directly or indirectly, in off-label promotion. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in substantial damage awards against us and harm our reputation.

The failure to comply with anti-corruption laws could materially adversely affect our business and result in civil and/or criminal sanctions.

The U.S. Foreign Corrupt Practices Act (FCPA) and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Because of the predominance of government-administered healthcare systems in many jurisdictions around the world, many of our customer relationships outside of the U.S. are with governmental entities and are therefore potentially subject to such laws.

Global enforcement of anti-corruption laws has increased in recent years, including investigations and enforcement proceedings leading to assessment of significant fines and penalties against companies and individuals. Our international operations create a risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents, or distributors. We maintain policies and programs to implement safeguards to educate our employees and agents on these legal requirements, and to prevent and prohibit improper practices. However, existing safeguards and any future improvements may not always be effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we could be held responsible. In addition, regulators could seek to hold us liable for conduct committed by companies in which we invest or that we acquire. Any alleged or actual violations of these regulations may subject us to government scrutiny, criminal or civil sanctions and other liabilities, including exclusion from government contracting, and could disrupt our business, adversely affect our reputation and result in a material adverse effect on our business, results of operations, financial performancecondition and cash flows.

Laws and regulations governing international business operations could adversely impact our business.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Bureau of Industry and Security at the U.S. Department of Commerce (BIS), administer certain laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, in conducting activities, transacting business with or making investments in certain countries, governments, entities and individuals subject to U.S. economic sanctions. Our international operations subject us to these laws and regulations, which are complex, restrict our business dealings with certain countries, governments, entities, and individuals, and are constantly changing. Further restrictions may be adversely affected by medical device tax provisions in the healthcare reform laws.

The Patient Protection and Affordable Care Act (the “Affordable Care Act”) imposes, among other things, an excise tax of 2.3% on any entity that manufacturesenacted, amended, enforced or imports medical devices offered for sale in the United States, although this tax has been suspended for calendar years 2016, 2017, 2018 and 2019. It is unclear at this time if the moratorium will be further extended. We anticipate that primarily all of our sales of our Pure-Vu system in the United States will be subject to this 2.3% excise tax after December 31, 2019. Additionally, Congress could terminate the moratorium or further change the law related to the medical device taxinterpreted in a manner that materially impacts our operations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment. We have established policies and procedures designed to assist with our compliance with such laws and regulations. However, there can be no assurance that our policies and procedures will prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect us.our reputation, business, financial condition, results of operations and cash flows.

Risks Related to Our Business Operations

Our Pure-Vu systemSystem is currently our sole product and we are completely dependent on the successful marketing and sale of this product. There is no assurance that we will be able to develop any additional products.

Our Pure-Vu systemSystem is currently our sole product and we are completely dependent on the success of this product. We may fail to successfully commercialize our product. Successfully commercializing medical devices such as ours is a complex and uncertain process, dependent on the efforts of management, distributors, outside consultants, physicians and general economic conditions, among other factors. Any factors that adversely impact the commercialization of our Pure-Vu system,System, including, but not limited to, competition or acceptance in the marketplace, will have a negative impact on our business, results of operations and financial condition. We cannot assure you that we will be successful in developing or commercializing any potential enhancements to our Pure-Vu systemSystem or any other products. Our inability to successfully commercialize our Pure-Vu systemSystem and/or successfully develop and commercialize additional products or any enhancements to our Pure-Vu systemSystem which we may develop would have a material adverse effect on our business, results of operations and financial condition.

We are a medical technology company with a limited operating history.

We are a medical technology company with a limited operating history. We received clearance from the FDA, and a Certificate of Conformity which allows us to affix the CE Mark approval in Europe,the EEA, for our first generation and second generation Pure-Vu systemSystem and have recently initiated a limited pilot launch that will run through 2018. We plan to then move into a fullbegan commercialization in fourth quarter of 2019, with the first commercial placements of our second generation Pure-Vu System as part of our initial U.S. market launch during 2019.targeting early adopter hospitals. We expect that sales of our Pure-Vu systemSystem will account for substantially all of our revenue for the foreseeable future. However, we have limited experience in selling our products and we may be unable to successfully commercialize our Pure-Vu systemSystem for a number of reasons, including:

Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to:

If we cannot successfully execute any one of the foregoing, our business may not succeed and your investment will be adversely affected.

The Pure-Vu systemSystem may not be accepted by physicians and patients.

Our Pure-Vu systemSystem for use during colonoscopy screenings to clean the colon through irrigation and evacuation of bowel contents is a new technology and may be perceived as more invasive than current colonoscopy screening procedures, and patients may be unwilling to undergo the procedure. Moreover, patients may be unwilling to depart from the current standard of care. In addition, physicians tend to be slow to change their medical treatment practices because of perceived liability risks arising from the use of new products. Physicians may not recommend or prescribe our Pure-Vu systemSystem until there is long-term clinical evidence to convince them to alter their existing treatment methods, there are recommendations from prominent physicians that our Pure-Vu systemSystem is safe and efficient and separate reimbursement or insurance coverage is available. We cannot predict when, if ever, physicians and patients may adopt the use of our Pure-Vu system.System. If our Pure-Vu systemSystem does not achieve an adequate level of acceptance by patients, physicians and healthcare payors, we may not generate significant product revenue and we may not become profitable.

If we are not able to successfully commercialize our Pure-Vu system,System, the revenue that we generate from its sales, if any, may be limited.

The commercial success of our Pure-Vu systemSystem will depend upon its acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance of our Pure-Vu systemSystem will depend on a number of factors, including:

If our Pure-Vu systemSystem does not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our Pure-Vu systemSystem may require significant resources and may never be successful.

We currently have a limited sales and marketing organization. If we are unable to secure a sales and marketing partner and/or establish satisfactory sales and marketing capabilities, we may not successfully commercialize our Pure-Vu system.System.

At present, we have limited sales or marketing personnel. In order to commercialize devices that are approved for commercial sales, we must either collaborate with third parties that have such commercial infrastructure and/or continue to develop our own sales and marketing infrastructure. If we are not successful entering into appropriate collaboration arrangements, recruiting sales and marketing personnel or in building a sales and marketing infrastructure, we will have difficulty successfully commercializing our Pure-Vu system,System, which would adversely affect our business, operating results and financial condition.

We may not be able to enter into collaboration agreements on terms acceptable to us or at all. In addition, even if we enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. If we elect to establish a sales and marketing infrastructure we may not realize a positive return on this investment. In addition, we will have to compete with established and well-funded medical device companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize our Pure-Vu systemSystem without strategic partners or licensees include:

Our Pure-Vu systemSystem may cause adverse side effects that prevent its widespread adoption or that may necessitate its withdrawal from the market.

Our Pure-Vu systemSystem is currently believed to have the same side effects as a standard colonoscopy, such as inducing trauma to the colon’s mucosa or, in rare cases, perforation of the colon. With more extensive use, the Pure-Vu systemSystem may be found to cause additional undesirable and unintended side effects or show a higher rate of side effects than a standard colonoscopy that may prevent or limit its commercial adoption and use. Even upon receiving clearance from the FDA, CE Certificates of Conformity by a Notified Body in the EEA and approvals from other regulatory authorities, our products may later exhibit adverse side effects that prevent widespread use or necessitate withdrawal from the market. The manifestation of such side effects could cause our business to suffer.

We rely on the proper function, availability and security of our information technology systems to operate our business and a cyber-attack or other breach or disruption of these systems could have a material adverse effect on our business and results of operations.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The form and function of such systems may change over time as our business needs change. The nature of our business involves the receipt and storage of personal and financial information regarding our customers. We use our information technology systems to manage or support a variety of business processes and activities, including sales, shipping, billing, customer service, procurement and supply chain, manufacturing and accounts payable. In addition, we use enterprise information technology systems to record, process, and summarize transactions and other financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Any failure by us to maintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions, disruptions or shutdowns, could result in the unauthorized access to customer data, theft of intellectual property or other misappropriation of assets or the loss of key data and information, or otherwise compromise our confidential or proprietary information and disrupt our operations. If our information technology systems are breached or suffer severe damage, disruption or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may be materially and adversely affected. With the ever-changing threat landscape, and while we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.

If our efforts to maintain the privacy and security of our customer, employee, supplier or Company information are not successful, we could incur substantial additional costs and become subject to litigation, enforcement actions and reputational damage.

Our business, like that of most medical device companies, involves the receipt, storage and transmission of customer information and payment and reimbursement information, our employees, our suppliers and our Company. Our information systems are vulnerable to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deceiving our employees, business acquisitions, or third-party service providers. Hardware, software or applications we develop or obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information and device security. Hardware or software applications developed by our business acquisitions may face risks associated with defects and vulnerabilities in their systems, or difficulties with the integration of the acquisitions into our information systems. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. The ever-evolving threats mean we must continually evaluate and adapt our systems and processes, and our efforts may not be adequate to safeguard against all data security breaches, misuse of data or sabotage of our systems. Any future significant compromise or breach of our data security, whether external or internal, or misuse of customer, employee, supplier or Company data, could result in additional significant costs, lost sales, fines, lawsuits and damage to our reputation. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs. Further, many of our employees are working remotely in response to the COVID-19 pandemic and related government actions, which could expose us to greater risks related to cybersecurity and our information systems.

If we do not convince gastroenterologists that our products are attractive alternatives to the currently marketed medical devices and suitable for use in addressing bowel preparation or cleansing, we will not be commercially successful.

If we are not successful in convincing gastroenterologists of the merits of our products or educating them on the use of our products, they may not use our products and we will be unable to fully commercialize our products or reach profitability. Gastroenterologists may be hesitant to change their medical treatment practices for the following reasons, among others:

In addition, we believe recommendations and support of our products by influential gastroenterologists are important for market acceptance and adoption. If we do not receive support from such gastroenterologists or long term data does not show the benefits of using our products, gastroenterologists may not use our products. In such circumstances, we may not be able to grow our revenues or achieve profitability.

If we are unable to train gastroenterologists and their clinical staff on the safe and appropriate use of our products, we may be unable to achieve revenue growth or profitability.

An important part of our sales process includes the ability to train gastroenterologists and their clinical staff on the safe and appropriate use of our products. We have very limited experience in training and retaining qualified independent gastroenterologists to perform the colon cleansing procedure using our Pure-Vu system.System. If we are unable to attract gastroenterologists to our training programs, it may lead to a higher rate of injury, negative publicity and an increased risk of product liability, which would adversely affect our growth or profitability.

There is a learning process involved in gastroenterologists and their clinical staff becoming proficient in the use of our products. It is critical to the success of our commercialization efforts to train a sufficient number of gastroenterologists and to provide them with adequate instruction in the use of our Pure-Vu system.System. This training process may take longer than expected and may therefore affect our ability to increase sales. Following completion of training, we expect to rely on the trained gastroenterologists to advocate the benefits of our products in the broader marketplace. Convincing gastroenterologists to dedicate the time and energy necessary for adequate training is challenging, and we cannot assure you we will be successful in these efforts. If gastroenterologists and their clinical staff are not properly trained, they may misuse or ineffectively use our products. Such uses may result in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us, any of which would have a material adverse effect on our business, results of operations and financial condition.

We may face competition from other medical device companies in the future and our operating results will suffer if we fail to compete effectively.

The medical device industries are intensely competitive and subject to rapidly evolving technology and intense research and development efforts. We have competitors in a number of jurisdictions that have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel devices or procedures that could make our Pure-Vu systemSystem obsolete or uneconomical. Any new product that competes with a cleared medical device may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors could force us to lower prices or could result in reduced sales, including increased use of alternatives to colonoscopies such as capsule endoscopy systems, virtual colonoscopies using a CT scan, and other similar screening tests for colon cancer. While none of these testing alternatives may ever fully replace the colonoscopy, over time, they may take market share away from conventional colonoscopies for specific purposes and may lower the potential market opportunity for us. In addition, new devices developed by others could emerge as competitors to our Pure-Vu system.System. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

Our products face the risk of technological obsolescence, which, if realized, could have a material adverse effect on our business.

The medical device industry is characterized by rapid and significant technological change. There can be no assurance that third parties will not succeed in developing or marketing technologies and products that are more effective than ours or that would render our technology and products obsolete or noncompetitive. Additionally, new, less invasive surgical procedures and medications could be developed that replace or reduce the importance of current procedures that use or could use our products. Accordingly, our success will depend in part upon our ability to respond quickly to medical and technological changes through the development of new products. Product development involves a high degree of risk, and we cannot assure you that our new product development efforts will result in any commercially successful products.

If defects are discovered in our products, we may incur additional unforeseen costs, hospitals may not purchase our products and our reputation may suffer.

Our products incorporate mechanical parts, any of which can contain errors or failures, especially when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after commercial shipment. Because our products are designed to be used to perform medical procedures, we expect that our customers will have an increased sensitivity to such defects. We cannot provide any assurances that our products will not experience component aging, errors or performance problems in the future. If we experience flaws or performance problems, any of the following could occur:

Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to commercialize our Pure-Vu systemSystem in foreign markets for which we intend to rely on collaborations with third parties. If we commercialize our Pure-Vu systemSystem in foreign markets, we would be subject to additional risks and uncertainties, including:

Foreign sales of our Pure-Vu systemSystem could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.

We are, and will be, completely dependent on third parties to manufacture our Pure-Vu system,System, and our commercialization of our Pure-Vu systemSystem could be halted, delayed or made less profitable if those third parties fail to obtain or maintain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of our Pure-Vu systemSystem device components or fail to do so at acceptable quality levels or prices.

We do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture our Pure-Vu system,System, as well as the other related device components for high volume commercial purposes. We do have capability to produce limited units for use in our clinical trials,studies, if required. As a result, we are obligated to rely on contract manufacturers for the commercial supply of our product. We currently rely on twoseveral manufacturing partners to manufacture and produce the components of our Pure-Vu System, and the loss of the services of these manufacturers howeveror an adverse change in the manufacturer’s business or our relationship could have a material adverse effect on our business. Our primary reliance on these manufacturers for all or substantially all of our manufacturing needs involves several risks, including the potential inability to obtain an adequate supply of components and limited control over pricing, quality and timely delivery of the components. In addition, replacing these manufacturers may be difficult and could result in an inability or delay in obtaining the components for our Pure-Vu System. As a result, if such a disruption were to occur we may be unable to fulfill customer orders or orders for trials, and our operating results may fluctuate from period to period, particularly if a disruption occurs near the end of a fiscal period. However, we anticipate engaging additional manufacturers for the production of the components of our Pure-Vu systemSystem as we expand our commercialization efforts.

The facilities used by our contract manufacturers to manufacture the Pure-Vu systemSystem must be compliant with FDA Quality System Regulation requirements and registered with the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with current Good Manufacturing Practices (“cGMPs”) for manufacture of medical devices, as issued in the Quality System Regulation (21 CFR Part 820). These cGMPs regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to the Pure-Vu system.System. If our contract manufacturers cannot successfully manufacture products that conform to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our products or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to maintain regulatory approval for or market the Pure-Vu system.System.

Our contract manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements. We will not have control over our contract manufacturers’ compliance with these regulations and standards. Failure by any of our contract manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure to market the Pure-Vu system,System, delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. In addition, we will not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain any of these standards could adversely affect our ability to maintain regulatory approval for or market our Pure-Vu system.System.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, and we may not be able to locate alternative manufacturers or enter into favorable agreements with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these manufacturers, or any alternate manufacturers, experience any significant difficulties in their respective manufacturing processes for our product or should cease doing business with us, we could experience significant interruptions in supply or may not be able to create or maintain a commercial supply. Were we to encounter manufacturing issues, our ability to produce sufficient commercial supply might be negatively affected. Our inability to coordinate the efforts of our third party manufacturing partners or the lack of capacity available at our third party manufacturing partners, could impair our ability to supply our Pure-Vu systemSystem at required levels. If we face these or other difficulties with our manufacturing partners we could experience significant interruptions in the supply of our products if we decided to transfer the manufacture to one or more alternative manufacturers in an effort to deal with the difficulties.

Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical components and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of our Pure-Vu system,System, increase our cost of goods sold and result in lost sales.

The manufacture of our Pure-Vu system,System, and the technology developed thereunder, is subject to certain Israeli government regulations which may impair our ability to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel.

We have received, and may receive in the future, grants from the Government of the State of Israel through the IIA for the financing of a portion of our research and development expenditures pursuant to the Research Law, and related regulations.IIA Regulations.

The terms of the Israeli government participationIIA Regulations also require that products developed with IIA grants be manufactured in Israel at a rate (scope) which will not be less than the rate of manufacturing and added value in Israel that were set forth in the relevant grant applications submitted to the IIA. Furthermore, the IIA Regulations require that the technologyknow how resulting from research and development according to an IIA-approved plan, not being the product developed thereunderwithin the framework of such approved plan, and any right deriving therefrom may not be transferred outside of Israel (including by way of certain licenses), unless prior approval is received from the IIA, which we intend to applyIIA. We received approval for but may not be granted. Even if such approval is granted, the transfer of manufacturing of the sleeves outside of Israel. The transfer outside of Israel of manufacturing which is connected with the IIA-funded know-howknowhow will result in a higher royalty repayment rate and may further result in increased royalties (up to three times the aggregate amount of the IIA grants plus interest thereon), as well as in a higher royalty repayment rate. . In addition, the transfer outside of Israel of IIA-funded know-howknowhow may trigger additional payments to the IIA (up to six times the aggregate amount of the IIA grants plus interest thereon). Even following the full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Research Law.IIA Regulations. The foregoing restrictions and requirements for payment may impair our ability to transfer or sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any IIA-funded product or technologyknow how outside of Israel.

Furthermore, companies that receive IIA funding are, generally required to ensure that all rights in the IIA-backed product are retained by them. This means that, generally, all knowhow which is derived from the research and development conducted pursuant to an IIA approved plan, and every right derived from it, must be owned by the recipient of the IIA funding from the date such knowhow is generated. Companies that receive IIA funding are further subject to reporting requirements and other technical requirements, which are intended to allow the IIA to ensure that the IIA Regulations are being complied with.

If we fail to comply with any of the conditions and restrictions imposed by the Research Law,IIA Regulations, or by the specific terms under which we received the grants, we may be required to refund any grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal charges.

For additional information, see “Part I—Item 1A—Risk Factors—Risks Related to Our Operations in Israel.”

Risks Relating to Our Intellectual Property Rights

We may be unable to protect our intellectual property rights or may infringe on the intellectual property rights of others.

We rely on a combination of patents, trademarks, copyrights, trade secrets and nondisclosure agreements to protect our proprietary intellectual property. Our efforts to protect our intellectual property and proprietary rights may not be sufficient. We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that these patents will remain valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that are similar to those developed or licensed by us.

Competitors also may harm our sales by designing products that mirror the capabilities of our products or technology without infringing our intellectual property rights. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.

We may in the future be a party to patent litigation and administrative proceedings that could be costly and could interfere with our ability to sell our Pure-Vu system.System.

Litigation related to infringement and other intellectual property claims, with or without merit, is unpredictable, can be expensive and time consuming and can divert management’s attention from our core business. If we lose this kind of litigation, a court could require us to pay substantial damages, and prohibit us from using technologies essential to our Pure-Vu system,System, any of which would have a material adverse effect on our business, results of operations and financial condition. If relevant patents are upheld as valid and enforceable and we are found to infringe, we could be prevented from selling our Pure-Vu systemSystem unless we can obtain a license to use technology or ideas covered by such patents or are able to redesign our Pure-Vu systemSystem to avoid infringement. We do not know whether any necessary licenses would be available to us on satisfactory terms, if at all, or whether we could redesign our Pure-Vu systemSystem or processes to avoid infringement.

Competing products may also appear in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit, we could be prevented from marketing our Pure-Vu systemSystem in one or more foreign countries.

We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.

As is commonplace in our industry, we employ and plan to employ individuals who were previously employed at other medical device companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject in the future to claims that our employees or prospective employees are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations) or claims that our employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

General Company-Related Risks

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As of December 31, 2017,2022, we had 3943 full time employees and 6 part time employees. As our marketing and commercialization plans and strategies develop, we will need to expand the size of our employee and consultant base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize the Pure-Vu systemSystem and any other future product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage our future growth.

Our success will depend in part on our ability to manage our operations as we advance our product candidatesproducts through clinical trialsstudies and to expand our development, or regulatory and commercial capabilities or contract with third parties to provide these capabilities for us. Failure to achieve any of these goals could have a material adverse effect on our business, financial condition or results of operations.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees would adversely impact our business prospects.

We depend on key members of our management team. The loss of the services of Tim Moran, our Chief Executive Officer, Mark Pomeranz, our President and Chief ExecutiveOperating Officer, Andrew Taylor, our Chief Financial Officer or any member of our senior management team, could harm our ability to execute our commercial strategy for our Pure-Vu systemSystem and the strategic objectives for our company. In connection with the Share Exchange Transaction, weWe entered into an employment agreementagreements with our Chief Executive Officer, President and Chief Operating Officer, and Chief Financial Officer, but this agreement isthese agreements are terminable by Mr. Pomeranzthe employees on short or no notice at any time without penalty. We also entered into an employment agreementor with our Chief Financial Officer, and this agreement is also terminable by Mr. Taylor on short or no notice at any time withoutlimited penalty. In addition, we do not maintain, and have no current intention of obtaining, “key man” life insurance on any member of our management team.

Recruiting and retaining qualified scientific and commercial personnel, including sales and marketing executives and field personnel, is also critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous medical device and pharmaceutical companies for similar personnel and based on our company profile. We also experience competition for the hiring of scientific personnel from universities and research institutions. If we fail to recruit and then retain these personnel, we may not be able to effectively execute our commercial strategy for the Pure-Vu system.System.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of the Pure-Vu system.System.

We are, and may be in the future, subject to product liability claims and lawsuits, including potential class actions, alleging that our products have resulted or could result in an unsafe condition or injury. Any product liability claim brought against us, with or without merit, could be costly to defend and could result in settlement payments and adjustments not covered by or in excess of insurance. In addition, we may not be able to obtain insurance on terms acceptable to us or at all because insurance varies in cost and can be difficult to obtain. Our failure to successfully defend against product liability claims or maintain adequate insurance coverage could have an adverse effect on our results of operations and financial condition.

Exchange rate fluctuations between the U.S. dollar and the Israeli New Shekel (the “NIS”) and inflation may negatively affect our earnings and we may not be able to hedge our currency exchange risks successfully.

The U.S. dollar is our functional and reporting currency. However, a significant portion of our operating expenses, including personnel and facilities related expenses, are incurred in NIS. As a result, we are exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or, if the NIS instead devalues relative to the U.S. dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. Given our general lack of currency hedging arrangements to protect us from fluctuations in the exchange rates of the NIS and other foreign currencies in relation to the U.S. dollar (and/or from inflation of such foreign currencies), we may be exposed to material adverse effects from such movements. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the U.S. dollar.

We may acquire other businesses or form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

We may pursue acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our intellectual property and industry experience to expand our offerings or distribution. We have no history of acquiring other companies or with forming strategic partnerships. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in the issuance of equity securities, incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our financial condition, results of operations, and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may experience losses related to investments in other companies, which could have a material negative effect on our results of operations and financial condition. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, or joint venture.

To finance any acquisitions or joint ventures, we may choose to issue shares of our Common Stock as consideration, which would dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our Common Stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration.

Global or regional pandemics, including outbreaks of communicable diseases, may materially and adversely affect our business, financial condition, revenues, and results of operations.

We may face risks related to health epidemics or outbreaks of communicable diseases. For example, the recent outbreak around the world of the highly transmissible and pathogenic coronavirus COVID-19. The outbreak of such communicable diseases could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries.

The continued impact resulting from the COVID-19 outbreak where we and our business partners have operations, or the perception that such an outbreak could occur, and the measures taken by our business partners, including restrictions with respect to business or hospital procedures, restrictions with respect to our access to our business partners, and/or restrictions imposed by the regulatory bodies or governments of countries or regions affected, could adversely affect our business, financial condition, revenues, and results of operations.

For example, the COVID-19 outbreak, or other similar outbreaks, could have an adverse effect on the overall productivity of our workforce and we may be required to take extraordinary measures to ensure the safety of our employees and those of our business partners. These measures could require that our employees refrain from traveling to their normal workplace for extended periods of time, which we have already experienced in certain locations as a result of the COVID-19 outbreak, which in turn could result in a decrease in our commercial activities, or result in higher costs or other inefficiencies.

Any serious disruption with our suppliers or customers due to such outbreaks could impair our ability to meet and/or generate demand for our product, which may negatively impact our revenue, financial condition and commercial operations. Such outbreaks could also result in delays in or the suspension of our business partners manufacturing operations.

Additionally, our business may be harmed if, in connection with an outbreak, our customers seek to limit or prevent access by our sales and clinical support teams to their facilities, which we have already experienced in certain locations as a result of the COVID-19 outbreak, or if our customers postpone elective procedures while their resources are diverted to addressing such an outbreak, or if capital spending by hospitals is curtailed or delayed in connection with such an outbreak, which we have already experienced as a result of the COVID-19 outbreak. An outbreak may also result in restrictions on domestic and international travel, which could have a negative impact on our customer engagement efforts, including through the cancellation or postponement of third-party conferences, trade shows and similar events, each of which we have already experienced as a result of the COVID-19 outbreak.

In addition to the risks identified above, we may face the risk of a resurgence of an outbreak, including a resurgence of the ongoing COVID-19 outbreak, in locations where we and our business partners have operations that were initially showing signs of improvement from such outbreak. Such resurgence may result in the recurrence of each of the risks and restrictions identified above, as well as new or unforeseen risks or restrictions imposed by our business partners, including with respect to our business partners operations or procedures and/or our access to such business partners, or imposed by the regulatory bodies and/or governments of countries or regions affected, all of which could adversely affect our business, financial condition, revenues, and results of operations.

Further, in our operations as a public company, prolonged government disruptions, global pandemics and other natural disasters or geopolitical actions could affect our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Risks Related to our Capital Stock

Our officers, directors, and principal stockholders exercise significant control over our Company, and will control our company for the foreseeable future, including the outcome of matters requiring stockholder approval.

Our officers, directors, entities controlled by our officers and directors, and principal stockholders who beneficially own more than 5% of our Common Stock, in the aggregate, beneficially own shares representing approximately 55.95% of our outstanding capital stock as of March 1, 2018. As a result, such entities and individuals have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our certificate of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those entities and individuals. These individuals also have significant control over our business, policies and affairs as officers and directors of our company.

Our quarterly operating results may be subject to significant fluctuations.

To date, as part of our limitedinitial U.S. market launch, we have generated limited revenue from our Pure-Vu system,System, but we do not expect to generate significant revenue from product sales unless and until we expand our commercialization efforts for the Pure-Vu System, which we expect will take a number of years and areis subject to significant uncertainty, and accordingly we may experience significant fluctuations in our quarterly operating results in the future. The rate of market acceptance of our Pure-Vu systemSystem could contribute to this quarterly variability. Our limited operating history complicates our ability to project quarterly revenue and any future revenue generated from sales of our Pure-Vu systemSystem may fluctuate from time to time. In addition, our expense levels are based, in part, on expectation of future revenue levels. A shortfall in expected revenue, if any, could, therefore, result in a disproportionate decrease in our net income. As a result, our quarterly operating results may be subject to significant fluctuations.

An active trading market for our Common Stock may not be sustained.

Prior to the closing of our IPO on February 16, 2018, there had been no public market for our Common Stock. Although our Common Stock is listed on the NASDAQ Capital Market, the market for our shares has demonstrated varying levels of trading activity. Furthermore, the current level of trading may not be sustained in the future. The lack of an active market for our Common Stock may impair investors’ ability to sell their shares at the time they wish to sell them or at a price that they consider reasonable, may reduce the fair market value of their shares and may impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire additional intellectual property assets by using our shares as consideration.

A sale of a substantial number of shares of our Common Stock in the public market could cause the market price of our Common Stock to drop significantly, even if our business is doing well.

Our stock price could decline as a result of sales of a large number of shares of our Common Stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

In addition, in the future, we may issue additional shares of Common Stock or other equity or debt securities convertible into Common Stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

If we fail to regain compliance with the requirements for continued listing on Nasdaq, our common stock could be delisted from trading, which would adversely affect the liquidity of our common stock and our ability to raise additional capital.

The Nasdaq Capital Market’s rules for listed companies requires us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock. In order to maintain our listing on Nasdaq, we must satisfy the continued listing requirements of Nasdaq for inclusion in the Nasdaq Capital Market, including among other things, a minimum stockholders’ equity of $2.5 million and a minimum bid price for our Common Stock of $1.00 per share.

On January 4, 2023, we received a letter from the Nasdaq Stock Market notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement for continued listing under Nasdaq Listing Rule 5550(b)(1), which requires us to maintain stockholders’ equity of at least $2,500,000. On February 21, 2023, we submitted a plan to regain compliance and on March 9, 2023, the Staff notified the Company (the “Letter”) that it would be granted an extension until July 3, 2023, to demonstrate compliance with Listing Rule 5550(b)(1) to meet the continued listing requirements of The Nasdaq Capital Market, conditioned upon achievement of certain milestones included in a plan of compliance previously submitted to Nasdaq, including a plan to raise additional capital.

We intend to regain compliance with the applicable continued listing requirements of The Nasdaq Capital Market prior to the end of the compliance period set forth in the abovementioned letter. However, until Nasdaq has reached a final determination that we have regained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of our common stock on Nasdaq. In the event we fail to regain compliance within the compliance period, we would have the right to a hearing before an independent panel. The hearing request would halt any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing. The delisting of our common stock from Nasdaq would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of our common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to us, if at all.

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our Common Stock, the price of our Common Stock could decline.

The trading market for our Common Stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our Common Stock could decline if one or more equity analysts downgrade our Common Stock or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

Our share price may be volatile, which could subject us to securities class action litigation and our stockholders could incur substantial losses.

The market price for our Common Stock may be volatile and subject to wide fluctuations in response to factors including the following:

In particular, the market prices of early commercial-stage companies like ours have been highly volatile due to factors, including, but not limited to:

These and other market and industry factors may cause the market price and demand for our Common Stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their shares of Common Stock and may otherwise negatively affect the liquidity of our Common Stock. In addition, the stock market in general, and NASDAQ Capital Markets and emerging growth companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

Pursuant to the terms of our outstanding Royalty Payment Rights Certificates and our outstanding Placement Agent Royalty Payment Rights Certificates, we may be obligated to pay significant royalties.

Pursuant to the terms of the Royalty Payment Rights Certificates (as defined in “Part II—III—Item 5—Market for Registrant’s Common Equity,13—Certain Relationships and Related Stockholder MattersTransactions, and Issuer Purchases of Equity Securities—Recent Sales of Unregistered Securities—2017 Private Placement”Director Independence— Royalty Payment Rights Certificates - Related Party Participation”) which were issued in connection with the conversion of all of our outstanding shares of Series A Convertible Preferred Stock upon the consummation of our IPO, we may be required to make certain royalty payments. After we generate sales of the current and potential future versions of the Pure-Vu system,System, including disposables, parts, and services, in excess of $20 million since our inception, then we will be required to pay to the holders of our Royalty Payment Rights Certificates a royalty equal to (i) three percent (3%) of our net sales, if any, in any calendar year, not in excesssubject to a royalty cap amount per calendar year of $30 million per year.million. Additionally, after we receive any proceeds from the licensing of the current and potential future versions of the Pure-Vu systemSystem in excess of $3.5 million since our inception, then we will be required to pay to the holders of the Royalty Payment Rights Certificates a royalty equal to 5% of our licensing proceeds, if any, in any calendar year, not in excesssubject to a royalty cap amount per calendar year of $30 million per year.million. The royalties will be payable up to the later of (i) the latest expiration date for our current patents (which is currently October 2026)March 2038), or (ii) the latest expiration date of any pending patents as of the date of the Initial Closinginitial closing of the 2017 Private Placement that may be issued in the future.

Additionally, pursuantPursuant to the terms of theour Placement Agent Royalty Payment Rights Certificates (as defined in “Part II—Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Recent Sales of Unregistered Securities—2017 Private Placement”) issued in connection with the 2017 Private Placement, we will be required to pay the holders of the Placement Agent Royalty Payment Rights Certificates, in the aggregate, 10% of the amount of payments paid to the holders of the Royalty Payment Rights Certificates.

We are an “emerging growth company,” and will be able take advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our Common Stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an “emerging growth company,” we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years from the date of our initial public offering in February 2018, which would be at the end of the current fiscal year, ending December 31, 2023, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

We intend to take advantage of these reporting exemptions described above until we are no longer an “emerging growth company.” Under the JOBS Act, “emerging growth companies” can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

We cannot predict if investors will find our Common Stock less attractive if we choose to rely on these exemptions. If some investors find our Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

We will incur significantly increased costs and devote substantial management time as a result of operating as a public company particularly after we are no longer an “emerging growth company.”

As a newly public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we are required to comply with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, after we no longer qualify as an “emerging growth company,” as defined under the JOBS ACT we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We have not yet completed the process of compiling the system and processing documentation needed to comply with such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. In that regard, we currently do not have an internal audit function, and we will need to hire or contract for additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our company.