Special Note Regarding Forward-Looking Statements This report contains forward-looking statements about the Company's future results, financial condition, and operations, identifiable by specific forward-looking terminology - This report contains forward-looking statements about the Company's future results, financial condition, and operations, identifiable by words such as "anticipate," "expect," "plan," and "will."9 - These statements are based on current expectations and projections, but are subject to substantial risks and uncertainties detailed in the "Risk Factors" section"10 - Key forward-looking statements cover areas like expected future growth, market potential, demand forecasting, market acceptance, reimbursement, third-party performance, regulatory developments, cash flow breakeven, R&D, product performance, sales and marketing impact, organizational culture, competition, economic conditions, and intellectual property"1114 Part I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited interim condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, prepared under GAAP and SEC rules for interim reporting, providing a snapshot of the company's financial position and performance for periods ended June 30, 2025 and 2024 Condensed Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $22,857 | $13,430 | $9,427 | 70.2% | | Short-term investments | $39,284 | $39,325 | $(41) | -0.1% | | Accounts receivable | $13,554 | $12,851 | $703 | 5.5% | | Inventory | $16,346 | $13,381 | $2,965 | 22.2% | | Total current assets | $93,742 | $81,339 | $12,403 | 15.2% | | Total assets | $106,114 | $94,647 | $11,467 | 12.1% | | Accounts payable | $4,721 | $2,954 | $1,767 | 59.8% | | Accrued liabilities | $9,740 | $9,787 | $(47) | -0.5% | | Total current liabilities | $17,143 | $15,156 | $1,987 | 13.1% | | Long-term debt | $58,616 | $59,525 | $(909) | -1.5% | | Total liabilities | $86,676 | $86,634 | $42 | 0.05% | | Total stockholders' equity | $19,438 | $8,013 | $11,425 | 142.6% | | Accumulated deficit | $(546,190) | $(530,950) | $(15,240) | 2.9% | Condensed Statements of Operations and Comprehensive Loss Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------------ | :----- | :----- | :----- | :------- | | Revenue | $23,520 | $19,256 | $4,264 | 22.1% | | Cost of goods sold | $5,388 | $5,122 | $266 | 5.2% | | Gross profit | $18,132 | $14,134 | $3,998 | 28.3% | | Sales and marketing expenses | $12,043 | $9,756 | $2,287 | 23.4% | | Research and development expenses | $6,845 | $6,065 | $780 | 12.9% | | General and administrative expenses | $6,068 | $4,543 | $1,525 | 33.6% | | Total operating expenses | $24,956 | $20,364 | $4,592 | 22.5% | | Loss from operations | $(6,824) | $(6,230) | $(594) | 9.5% | | Net loss and comprehensive loss | $(8,651) | $(7,514) | $(1,137) | 15.1% | | Net loss per share, basic and diluted | $(0.26) | $(0.26) | $0.00 | 0.0% | Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------------ | :----- | :----- | :----- | :------- | | Revenue | $46,044 | $37,380 | $8,664 | 23.2% | | Cost of goods sold | $10,570 | $9,903 | $667 | 6.7% | | Gross profit | $35,474 | $27,477 | $7,997 | 29.1% | | Sales and marketing expenses | $23,046 | $19,789 | $3,257 | 16.5% | | Research and development expenses | $14,285 | $11,849 | $2,436 | 20.6% | | General and administrative expenses | $10,114 | $9,614 | $500 | 5.2% | | Total operating expenses | $47,445 | $41,252 | $6,193 | 15.0% | | Loss from operations | $(11,971) | $(13,775) | $1,804 | -13.1% | | Net loss and comprehensive loss | $(15,240) | $(16,439) | $1,199 | -7.3% | | Net loss per share, basic and diluted | $(0.47) | $(0.58) | $0.11 | -19.0% | Condensed Statements of Stockholders' Equity - Total Stockholders' Equity increased from $8,013 thousand as of January 1, 2025, to $19,438 thousand as of June 30, 202522 - Key changes in H1 2025 included a net loss of $(15,240) thousand, $69,384 thousand from a follow-on offering, a $(49,546) thousand repurchase of common stock, and $5,854 thousand in stock-based compensation22 - Total Stockholders' Equity decreased from $20,654 thousand as of January 1, 2024, to $9,885 thousand as of June 30, 2024, primarily due to net losses24 Condensed Statements of Cash Flows Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Net cash used in operating activities | $(9,568) | $(11,428) | $1,860 | -16.3% | | Net cash (used in) provided by investing activities | $(205) | $5,633 | $(5,838) | -103.6% | | Net cash provided by financing activities | $19,200 | $581 | $18,619 | 3204.7% | | Net increase (decrease) in cash and cash equivalents | $9,427 | $(5,214) | $14,641 | -280.8% | | Cash, cash equivalents and restricted cash, end of period | $22,979 | $12,966 | $10,013 | 77.2% | - Net cash provided by financing activities significantly increased in H1 2025, driven by $69.7 million from a follow-on offering and $58.6 million from the MidCap Term Loan, partially offset by a $49.5 million stock repurchase and $60.5 million CRG Term Loan repayment27 Notes to Unaudited Interim Condensed Financial Statements 1. The Company - NeuroPace, Inc. is a medical device company focused on treating drug-resistant focal epilepsy with its RNS System, commercialized in the U.S. since 201432 - The At-the-Market (ATM) equity offering program was terminated in February 2025, with $38.3 million remaining unused33 - A follow-on offering in February 2025 generated $69.7 million in net proceeds, with $49.5 million used to repurchase shares from KCK Ltd34 - As of June 30, 2025, the Company had an accumulated deficit of $546.2 million and $62.1 million in cash, cash equivalents, and short-term investments35 - Management believes current liquidity will fund operations for at least the next 12 months, and the Company was in compliance with all MidCap Credit Agreement covenants as of June 30, 2025, with trailing 12-month RNS System revenue of $71.6 million363739 2. Summary of Significant Accounting Policies - The unaudited interim condensed financial statements conform to GAAP and SEC rules for interim reporting, with certain disclosures condensed or omitted4041 - Estimates, particularly for inventory provisions, require significant judgment, and actual results may materially differ42 - The Company's contract liabilities (deferred revenue) were $0.7 million as of June 30, 2025, with $1.6 million in remaining performance obligations expected to be recognized by March 20264950 - NIH grant funding for Lennox-Gastaut Syndrome research provided $0.1 million in H1 2025, a decrease from $1.0 million in H1 20245153 - The Company is evaluating the impact of new accounting pronouncements, including ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Expense Disaggregation), and ASU 2025-05 (Credit Losses for Accounts Receivable)575861 3. Fair Value Measurements Financial Assets at Fair Value (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :-------------- | :---------------- | | Money market funds, included in cash and cash equivalents | $21,660 | $13,349 | | Fixed income mutual fund, included in short-term investments | $39,284 | $39,325 | | Total | $60,944 | $52,674 | - All financial assets measured at fair value are classified as Level 1, based on quoted prices in active markets6467 - The Company recognized less than $0.1 million in unrealized losses from short-term investments in H1 2025, compared to $0.1 million in unrealized gains in H1 202469 4. Balance Sheet Components Inventory (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :--------------- | :-------------- | :---------------- | :----- | :------- | | Raw materials | $6,314 | $4,248 | $2,066 | 48.6% | | Work-in-process | $1,501 | $1,778 | $(277) | -15.6% | | Finished goods | $8,531 | $7,355 | $1,176 | 16.0% | | Total | $16,346 | $13,381 | $2,965 | 22.2% | Property and Equipment, net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------ | :-------------- | :---------------- | :----- | :------- | | Machinery, equipment, furniture and fixtures | $4,862 | $4,659 | $203 | 4.4% | | Computer equipment and software | $1,932 | $1,932 | $0 | 0.0% | | Leasehold improvements | $2,435 | $2,435 | $0 | 0.0% | | Less: Accumulated depreciation | $(8,073) | $(7,974) | $(99) | 1.2% | | Property and equipment, net | $1,156 | $1,052 | $104 | 9.9% | Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :-------------- | :---------------- | :----- | :------- | | Payroll and related expenses | $7,082 | $8,178 | $(1,096) | -13.4% | | Inventory purchases | $665 | $575 | $90 | 15.6% | | Professional fees | $562 | $50 | $512 | 1024.0% | | Interest payable | $442 | $0 | $442 | N/A | | Other | $989 | $984 | $5 | 0.5% | | Total accrued liabilities | $9,740 | $9,787 | $(47) | -0.5% | 5. Commitments and Contingencies - The Company's non-cancelable operating lease for its Mountain View facilities was amended in August 2022 to extend through June 2030, with an option to extend to June 203575 Maturities of Operating Lease Liabilities as of June 30, 2025 (in thousands) | Year | Amount | | :------------------------ | :----- | | 2025 (remaining six months) | $1,471 | | 2026 | $3,031 | | 2027 | $3,122 | | 2028 | $3,215 | | 2029 | $3,312 | | Thereafter | $1,705 | | Total undiscounted lease payments | $15,856 | | Total operating lease liability | $12,903 | - The exclusive distribution agreement with DIXI Medical USA Corp. for Stereo EEG products expires on September 30, 2025, and the Company notified DIXI Medical of its intent not to renew80 - The Company is not involved in any pending legal proceedings that are believed to have a material adverse effect on its business, financial condition, or cash flows85 6. Debt - The CRG Term Loan, initially $50.0 million borrowed in September 2020, was fully repaid in June 2025 for $61.9 million, including principal, interest, and a reduced backend fee of $4.5 million (8%)8896 - A $0.5 million loss on debt extinguishment was recorded due to the CRG Term Loan repayment96 - In June 2025, the Company entered into the MidCap Credit Agreement, securing a $60.0 million term loan (MidCap Term Loan) and a $15.0 million revolving credit facility (Revolver), maturing June 4, 20309798 - The MidCap Term Loan bears interest at 30-day SOFR plus 5.5% (2.0% SOFR floor) and is subject to prepayment premiums and a 2% exit fee9899 Future Minimum Payments for MidCap Term Loan as of June 30, 2025 (in thousands) | Year | Amount | | :------------------------ | :----- | | 2025 (remaining six months) | $2,945 | | 2026 | $6,124 | | 2027 | $6,124 | | 2028 | $6,140 | | 2029 | $6,124 | | Thereafter | $64,244 | | Total | $91,701 | 7. Common Stock - The Company is authorized to issue 200,000,000 shares of $0.001 par value common stock104 - No dividends were declared as of June 30, 2025, or December 31, 2024104 Common Stock Reserved for Future Issuance (Shares) | Plan | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | Shares available for future grant (2021 Plan) | 2,690,819 | 2,201,012 | | Outstanding options (2021 Plan) | 2,284,737 | 1,987,784 | | Outstanding options (2023 Inducement Plan) | 380,424 | 380,424 | | Outstanding restricted stock units (2021 Plan) | 1,590,869 | 1,480,338 | | Common stock available for ESPP | 710,239 | 475,416 | | Total | 7,657,088 | 6,524,974 | 8. Stock-Based Incentive Compensation Plans Stock Option Activity (Six Months Ended June 30, 2025) | Metric | Number of Shares | Weighted Average Exercise Price | | :-------------------------- | :--------------- | :------------------------------ | | Balances as of January 1, 2025 | 2,368,208 | $6.01 | | Granted | 474,472 | $11.16 | | Exercised | (122,972) | $4.32 | | Cancelled | (54,547) | $11.62 | | Balances at June 30, 2025 | 2,665,161 | $6.89 | | Vested and exercisable at June 30, 2025 | 1,680,932 | $5.18 | - The Employee Stock Purchase Plan (ESPP) had 710,239 shares available for purchase as of June 30, 2025, and issued 66,627 shares in H1 2025110 Restricted Stock Units Activity (Six Months Ended June 30, 2025) | Metric | Number of Shares Underlying Outstanding Restricted Stock Units | Weighted Average Grant Date Fair Value | | :-------------------------- | :------------------------------------------------ | :------------------------------------- | | Unvested, January 1, 2025 | 1,480,338 | $8.92 | | Granted | 717,958 | $12.18 | | Vested | (515,459) | $9.48 | | Cancelled | (91,968) | $8.93 | | Unvested, June 30, 2025 | 1,590,869 | $10.21 | Total Stock-Based Compensation Expense (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total stock-based compensation | $3,228 | $2,548 | $5,854 | $5,088 | - Total unrecognized stock-based compensation expense was $20.5 million as of June 30, 2025, to be amortized over a weighted average remaining period of 2.6 years113 9. Income Taxes - No federal or state income tax provision or benefit was recorded due to net losses incurred since inception, with net deferred tax assets fully offset by a valuation allowance115 - The Company is evaluating the effects of the recently signed One Big Beautiful Bill Act (OBBBA) but does not expect a material impact on current year financial statements117119 10. Net Loss per Share Attributable to Common Stockholders Net Loss per Share Attributable to Common Stockholders (Basic and Diluted) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $(0.26) | $(0.26) | | Six Months Ended June 30 | $(0.47) | $(0.58) | - Potentially dilutive securities were excluded from the diluted net loss per share calculation due to the Company's net loss, resulting in basic and diluted net loss per share being the same120 11. Segment Information - The Company operates as one operating and reportable segment, with all long-lived assets based in the United States121 - Nearly all revenue is generated from sales in the United States, with $0.4 million in non-U.S. revenue for the six months ended June 30, 2025121 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis covers the Company's financial condition and results of operations, including revenue, expenses, liquidity, capital resources, accounting policies, JOBS Act impact, RNS System, R&D, and recent financing activities Overview - NeuroPace's RNS System is the only commercially available brain-responsive neuromodulation system for drug-resistant focal epilepsy, showing 82.0% median seizure reduction at 36 months post-implant124125 - The NAUTILUS study for generalized epilepsy met its primary safety endpoint, and the Company plans to file for expanded FDA indication in H2 2025126 - As of June 30, 2025, the Company had an accumulated deficit of $546.2 million and $62.1 million in cash, cash equivalents, and short-term investments, expecting continued net losses in the near term129130 Collaborations and Partnerships - The exclusive distribution agreement with DIXI Medical for Stereo EEG products will expire on September 30, 2025, with the Company notifying its intent not to renew in March 2025132 - The collaboration agreement with Rapport Therapeutics, Inc. to leverage RNS System data for biomarker monitoring in clinical trials was extended through the end of 2027133134 Factors Affecting Our Performance - Commercial success depends on increasing clinician, hospital, and patient awareness and acceptance of the RNS System, requiring significant investment in training, education, and marketing135 - The Company aims to improve gross margin by leveraging manufacturing capacity to spread fixed costs over increased RNS System production volume and investing in efficiencies138 - Continued investment in R&D, including clinical studies and AI-enabled software tools, is planned to improve the RNS System and expand its addressable market139 - Gross margin variability is expected due to the extended replacement cycle of newer RNS devices and changes in the product mix between RNS System and DIXI Medical products141 Components of Our Results of Operations - Revenue is primarily derived from RNS System sales to hospitals, fluctuating with procedure volume and mix, and also includes sales of DIXI Medical products (expiring Sept 2025) and services to Rapport142143144 - Cost of goods sold includes materials, personnel, manufacturing overhead, inventory adjustments, and DIXI product costs; gross margin is expected to increase long-term with production volume146148 - Operating expenses (sales and marketing, R&D, general and administrative) are expected to increase in absolute dollars due to additional personnel, market penetration efforts, new product development, and public company compliance150151152 Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 - Revenue increased by $4.3 million (22%) to $23.5 million, driven by higher RNS System unit sales and DIXI Medical product sales156 - Gross margin improved from 73.4% to 77.1%, primarily due to lower fixed costs per RNS System unit from increased production volume157 - Sales and marketing expenses rose by $2.3 million (23%) to $12.0 million, mainly due to increased personnel-related expenses and sales/marketing costs158159 - Net loss increased by $1.1 million (15%) to $(8.7) million, partly due to a $0.5 million loss on extinguishment of the CRG Term Loan155163 Comparison of the Six Months Ended June 30, 2025 and 2024 - Revenue increased by $8.7 million (23%) to $46.0 million, driven by higher RNS System unit sales and DIXI Medical product sales165 - Gross margin improved from 73.5% to 77.0%, primarily due to lower fixed costs per RNS System unit from increased production volume166 - Sales and marketing expenses increased by $3.3 million (16%) to $23.0 million, mainly due to higher personnel-related expenses and increased sales/marketing costs167 - Net loss decreased by $1.2 million (-7%) to $(15.2) million, despite increased R&D expenses due to higher personnel costs and reduced grant funds164168 Liquidity and Capital Resources - As of June 30, 2025, the Company had $62.1 million in cash, cash equivalents, and short-term investments, with $58.6 million outstanding under the MidCap Term Loan172 - A February 2025 follow-on offering generated $69.7 million in net proceeds, with $49.5 million used to repurchase shares from KCK Ltd173 - The At-the-Market (ATM) equity program was terminated in February 2025, after raising $0.2 million net proceeds in January 2025174 - The CRG Term Loan was fully repaid in June 2025 using proceeds from the new MidCap Term Loan178 - The MidCap Term Loan, a $60.0 million facility, was secured in June 2025, maturing June 4, 2030, and includes a $15.0 million revolving credit facility179180 - Future minimum payments for the MidCap Term Loan total $91.7 million, with $6.1 million due within twelve months, and operating lease liabilities total $15.9 million183 - The Company expects existing cash to fund operations for at least 12 months but may require additional financing for continued growth and R&D185186 Summary Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(9,568) | $(11,428) | | Net cash (used in) provided by investing activities | $(205) | $5,633 | | Net cash provided by financing activities | $19,200 | $581 | | Net increase (decrease) in cash and cash equivalents | $9,427 | $(5,214) | Critical Accounting Policies and Estimates - There were no material changes to the Company's critical accounting policies during the three months ended June 30, 2025196 JOBS Act Accounting Election - The Company is an "emerging growth company" and has elected to use the extended transition period for complying with new or revised accounting standards, which may affect comparability with other public companies197 - The Company will cease to be an emerging growth company by December 31, 2026, or earlier if certain revenue or market capitalization thresholds are met198 Recent Accounting Pronouncements - Refer to Note 2 of the unaudited interim condensed financial statements for additional information on recent accounting pronouncements201 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's market risk exposure, primarily interest rate sensitivity, noting that short-term, low-risk financial instruments would not be materially affected by a 10% interest rate change, and inflation or exchange rate fluctuations have not significantly impacted operations - As of June 30, 2025, the Company held $62.1 million in cash, cash equivalents, and short-term investments202 - An immediate 10% change in interest rates would not materially affect the fair value of these financial instruments due to their short-term maturities and low-risk profile202 - The Company does not believe that inflation, interest rate changes, or exchange rate fluctuations have had a significant impact on its results of operations for any periods presented203 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025205 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting207 Part II. Other Information Item 1. Legal Proceedings The Company is not currently involved in any material legal proceedings expected to adversely affect its business, financial position, results of operations, or cash flows - The Company is not currently a party to any material legal proceedings that, if determined adversely, would have a material adverse effect on its business, financial position, results of operations, or cash flows210 Item 1A. Risk Factors This section outlines significant risks and uncertainties that could materially affect the Company's business, financial condition, and results of operations, covering RNS System reliance, market acceptance, supply chain, competition, regulatory compliance, data privacy, intellectual property, financial performance, and stock ownership Summary Risk Factors - The Company relies on its RNS System as its primary revenue source, and failure to market it effectively or expand market share would negatively impact sales and financial results213 - Commercial success depends on significant market acceptance and increasing the number of patients treated, both within Level 4 comprehensive epilepsy centers (CECs) and in the community213 - The Company is vulnerable to supply shortages and price fluctuations due to its dependence on a limited number of single-source suppliers for manufacturing its products213 - Inadequate or unfavorable reimbursement for RNS System procedures and ongoing patient care could diminish sales or affect profitability213 - The planned expiration of the exclusive distribution agreement with DIXI Medical will result in a loss of associated revenue, potentially affecting revenue growth and the ability to achieve cash flow breakeven215 Risks related to operational, commercial and manufacturing matters - The Company's business primarily depends on successfully marketing its RNS System, currently indicated only for adults with drug-resistant focal epilepsy in the U.S., and expanding its adoption in CECs and community settings214216 - Manufacturing operations are subject to FDA's Quality System Regulation (QSR); non-compliance or disruptions (e.g., supply chain issues, equipment malfunction) could harm the business226227 - Reliance on a limited number of single-source suppliers for critical RNS System components makes the Company vulnerable to supply shortages, price fluctuations, and quality issues230231 - Competition from other treatment options (ablative/resective surgery, VNS, DBS) and larger, well-capitalized companies poses a significant risk to sales and market share240241 - Delays or inability to obtain expanded FDA labeling for generalized epilepsy and pediatric focal epilepsy, or delays in FDA reviews due to staffing changes, could harm growth potential263265 Risks related to government regulation and our industry - Failure to comply with U.S. federal and state healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) could lead to substantial criminal, civil, and administrative penalties, exclusion from federal programs, and reputational harm270271274 - Regulatory compliance is expensive, complex, and uncertain; non-compliance with FDA regulations (e.g., QSR, PMA process) could result in enforcement actions, product recalls, and delays in approvals279281287 - Modifications to products may require new FDA clearances or approvals; disagreement with the FDA on such requirements could lead to recalls or cessation of marketing293295 - Healthcare reform initiatives (e.g., OBBBA, Inflation Reduction Act) and other legislative proposals could limit product pricing, coverage, and reimbursement, adversely affecting business and financial condition301302 - Clinical studies for label expansion or new products may be delayed, suspended, or terminated due to various factors, increasing expenses and delaying market access307308 Risks related to privacy, information technology and cybersecurity - The Company's processing of sensitive and personal information subjects it to stringent and evolving data privacy and security laws (e.g., CCPA, EU GDPR), contractual obligations, and industry standards313316317 - Failure to comply with data privacy and security obligations could lead to significant costs, liabilities, investigations, fines, litigation, and reputational harm313323 - Disruptions in IT systems or data (e.g., breaches, ransomware, unauthorized access) could result in unauthorized use/disclosure of sensitive information, fraudulent activity, and adverse consequences including regulatory actions and reputational damage324327330 - The use of AI/ML technologies in product development and future iterations presents privacy and security risks, subject to increasing regulation and scrutiny, potentially leading to biased decisions or competitive disadvantages319343 Risks related to our intellectual property - The Company's success depends on obtaining, maintaining, protecting, enforcing, and defending patent and other intellectual property (IP) protection for its RNS System and other products348 - Changes in patent laws or their interpretation, or failure to successfully prosecute patent applications, could diminish IP protection, allowing competitors to commercialize similar products349352 - Patents could be found invalid or unenforceable if challenged in court or administrative bodies, leading to loss of exclusive rights or inability to commercialize products358359 - Risk of patent or other IP litigation, which can be costly, divert management attention, require payment of damages, or prevent marketing of products360361 - The inability to protect the confidentiality of trade secrets and other proprietary information could harm the business and competitive position395397399 Risks related to financial matters - The Company has a history of net losses and expects to continue incurring losses; inability to achieve or sustain profitability could negatively impact stock value404 - Future capital requirements are significant, and additional funding may be needed but might not be available on acceptable terms, leading to dilution or restrictive debt covenants405416 - The MidCap Term Loan contains restrictive and financial maintenance covenants; non-compliance could lead to an event of default, requiring immediate repayment and harming the business406 - The planned expiration of the DIXI Medical distribution agreement will result in a loss of associated revenue, potentially affecting revenue growth, cash flow breakeven, and long-range revenue growth407 - The Company's ability to use its net operating losses (NOLs) to offset future taxable income may be subject to limitations due to ownership changes or statutory/regulatory changes417 Risks related to ownership of our common stock - Future equity or debt financings could lead to immediate dilution for existing stockholders and a decline in stock price434 - Sales of a substantial number of common stock shares in the public market or the perception of such sales could depress the market price435 - Concentration of ownership among executive officers, directors, and principal stockholders (approximately 57.5%) may prevent new investors from influencing significant corporate decisions438 - The Company's stock price has been volatile and may continue to fluctuate due to various factors, including financial performance, regulatory changes, and general economic conditions439440 - Provisions in corporate charter documents and Delaware law could make an acquisition more difficult and prevent attempts by stockholders to replace or remove current management447449 General risk factors - Unstable market and economic conditions, including global volatility, inflation, interest rate changes, and geopolitical conflicts, may have serious adverse consequences on the Company's business, financial condition, and share price456457 - Business disruptions from natural or man-made disasters, or public health crises, could seriously harm future revenue and financial condition and increase costs, especially given the single manufacturing facility in an earthquake-prone area458 - Litigation and other legal proceedings are inherently unpredictable, costly, and could negatively impact the Company's reputation, financial condition, and divert management attention459460461 - Failure to maintain proper and effective internal control over financial reporting could negatively impact investor confidence and the value of common stock466467 - Partnering with or acquiring other businesses could require significant management attention, disrupt business, dilute stockholder value, and harm results of operations469470 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period, and net proceeds from the April 2021 IPO were used for general corporate purposes as planned - There were no unregistered sales of equity securities during the period471 - The net proceeds of $105.5 million from the April 2021 initial public offering have been used for general corporate purposes, including cash used in operations and capital expenditures, with no material change in planned use472473 Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable475 Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable476 Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or "non-Rule 10b5-1 trading arrangement" during the quarter ended June 30, 2025477 Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, employment agreements, debt agreements, and certifications - The exhibits include corporate governance documents (Amended and Restated Certificate of Incorporation, Bylaws), employment agreements (Separation Agreement, Offer Letter), debt agreements (Credit, Security and Guaranty Agreement), and certifications (Principal Executive Officer, Principal Financial Officer)479 - Schedules and exhibits to the Credit, Security and Guaranty Agreement have been omitted in accordance with Rule 601(a)(5) of Regulation S-K480 Signatures This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its submission by NeuroPace, Inc.'s President and CEO, and CFO - The report was duly signed on August 12, 2025, by Joel Becker, President and Chief Executive Officer, and Patrick Williams, Chief Financial Officer483484
NeuroPace(NPCE) - 2025 Q2 - Quarterly Report