femasys(FEMY) - 2023 Q4 - Annual Report

Forward-Looking Statements This section outlines predictions based on current expectations and projections about future events and financial trends, subject to known and unknown risks, uncertainties, and assumptions; actual results could differ materially - This section outlines forward-looking statements, which are predictions based on current expectations and projections about future events and financial trends, subject to known and unknown risks, uncertainties, and assumptions; actual results could differ materially[11][14] - Key areas of forward-looking statements include product development, regulatory approvals (FDA), commercialization, market acceptance, reimbursement, manufacturing, sales and marketing, personnel, clinical trial outcomes, financing, market size estimates, competitive landscape, and regulatory actions[11][12][13][14] Risk Factor Summary This section provides a concise overview of the significant financial, development, operational, and regulatory risks facing the company - The company faces significant risks related to its financial position, including incurred operating losses and the ongoing need for substantial additional capital[17][154] - Key development risks include challenges in clinical trial enrollment and retention, uncertain regulatory approval processes (especially for FemBloc), and the lengthy, expensive nature of clinical development with uncertain outcomes[17][167][171] - Other major risk categories encompass managing growth and employee matters, extensive government regulation, intellectual property protection and potential infringement claims, volatility of common stock, and general economic and operational factors[16][21][23][153] PART I This part details the company's business operations, risk factors, and other foundational information Item 1. Business Femasys Inc. is a biomedical company focused on women's health, offering minimally-invasive, non-surgical therapeutic and diagnostic solutions, emphasizing internally created intellectual property and in-house manufacturing to address multi-billion dollar global markets - Femasys' mission is to provide superior minimally-invasive, non-surgical product technologies for reproductive health, specifically for infertility (FemaSeed, FemVue) and permanent birth control (FemBloc)[24] - The company is woman-founded and led, possesses 180 global patents, and has in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities[24][35][36] - Femasys targets multi-billion dollar global market segments with limited advancements, aiming to help women avoid expensive and potentially harmful pharmaceutical solutions, implants, and surgery[24] Business Overview This section provides a general overview of Femasys' business model, strategic focus, and market position in women's health FemaSeed – Our Artificial Insemination Solution This section describes FemaSeed, the company's artificial insemination solution designed to address infertility FemVue and Other Diagnostic Solutions FemVue, a solution for fallopian tube assessment using ultrasound, is approved for sale in the U.S., Japan, and Canada, offering an alternative to radiologic approaches for infertility diagnosis FemBloc – Our Permanent Birth Control Solution This section details FemBloc, the company's permanent birth control solution Additional Women's Health Solutions This section outlines other women's health solutions offered by the company Our Team This section introduces the leadership and personnel driving the company's operations and strategic initiatives Our Intellectual Property and Production Capabilities This section describes the company's intellectual property portfolio and its in-house production capabilities Our Strategy This section outlines the company's strategic objectives and approaches to market penetration and growth The Current Market Landscape This section analyzes the current market conditions and competitive environment relevant to the company's products The Reproductive Health Opportunity This section discusses the market opportunities within the reproductive health sector that the company aims to address Clinical Development This section provides an overview of the company's clinical development programs for its product candidates Overview of Clinical Programs This section provides a general overview of the company's ongoing clinical development programs Our Permanent Birth Control Solution – FemBloc and Ultrasound Confirmation This section details the clinical development of FemBloc, the permanent birth control solution, including ultrasound confirmation Preclinical Studies This section describes the preclinical studies conducted for the company's product candidates Clinical Trials This section outlines the various clinical trials undertaken for the company's product candidates Our Artificial Insemination Solution This section details the clinical development of the company's artificial insemination solution 510(k) Clearance for Different Intrauterine Directional Delivery Device This section discusses the 510(k) clearance pathway for the company's intrauterine directional delivery device Post-Market Information (FemVue) This section provides post-market information regarding the FemVue diagnostic solution Our Endocervical Tissue Sampler This section describes the company's endocervical tissue sampler product Post-Market Information (FemCerv) This section provides post-market information regarding the FemCerv product Manufacturing This section details the company's manufacturing processes and capabilities for its products Competition This section analyzes the competitive landscape and the company's position within it Sales & Marketing This section outlines the company's strategies and activities for sales and marketing its products FemaSeed – Our Artificial Intratubal Insemination Solution This section details the sales and marketing approach for FemaSeed, the artificial intratubal insemination solution FemBloc – Our Permanent Birth Control Solution This section outlines the sales and marketing strategy for FemBloc, the permanent birth control solution Reimbursement This section discusses the reimbursement landscape and strategies for the company's products Intellectual Property This section describes the company's intellectual property portfolio and its protection strategies Government Regulation This section details the extensive government regulations impacting the company's operations and products United States This section outlines the regulatory framework within the United States relevant to the company's business FDA's Pre-market Review Requirements This section describes the FDA's pre-market review requirements for medical devices 510(k) Clearance Pathway This section explains the 510(k) clearance pathway for medical devices De Novo Classification This section describes the De Novo classification process for novel low-to-moderate risk devices Pre-market Approval Pathway This section details the Pre-market Approval (PMA) pathway for high-risk medical devices Clinical Trials This section outlines the regulatory requirements and conduct of clinical trials Ongoing Regulation by the FDA This section describes the ongoing regulatory oversight by the FDA after market authorization European Union This section outlines the regulatory framework within the European Union relevant to the company's business Other Regions This section briefly discusses regulatory considerations in other international regions Fraud and Abuse and Other Healthcare Regulations This section details various fraud and abuse and other healthcare regulations impacting the company Federal Healthcare Anti-Kickback Statute This section explains the Federal Healthcare Anti-Kickback Statute and its implications Federal Civil False Claims Act This section describes the Federal Civil False Claims Act and its relevance to the company Healthcare Fraud Statute This section outlines the Healthcare Fraud Statute and its potential impact Federal Physician Payments Sunshine Act This section details the Federal Physician Payments Sunshine Act requirements Patient Data Privacy This section discusses regulations related to patient data privacy, such as HIPAA Other State Laws This section addresses other relevant state laws impacting the company's operations Enforcement and Penalties for Noncompliance with Fraud and Abuse Laws and Regulations This section outlines the enforcement mechanisms and penalties for noncompliance with fraud and abuse laws United States Healthcare Reform This section discusses the impact of United States healthcare reform initiatives Employees and Human Capital Resources This section provides information on the company's employees and human capital management Facilities This section describes the company's operational facilities Legal Proceedings This section provides an overview of any current or potential legal proceedings involving the company About Us and Available Information This section provides general information about the company and where to find additional public disclosures Item 1A. Risk Factors This section details the high degree of risk associated with an investment in Femasys common stock, categorizing them into financial, development, operational, and regulatory risks that could significantly impact the company's business and financial condition - The company has incurred significant operating losses since inception ($14.2 million in 2023, $11.4 million in 2022) and expects to continue incurring losses, requiring substantial additional funding[154][156][157] - Clinical development faces risks such as enrollment delays, uncertain regulatory outcomes, and the potential for product candidates (like FemBloc) to fail or suffer delays in obtaining FDA approval[167][171][177] - Operational risks include challenges in expanding sales and marketing, reliance on limited third-party suppliers, potential product liability claims, and compliance with extensive and evolving government regulations (FDA, EU MDR, fraud and abuse laws)[214][224][229][250][258][290] Risks Related to Our Financial Position and Need for Additional Capital This section outlines risks associated with the company's financial health and its ongoing need for external capital Risks Related to Discovery and Development This section details risks inherent in the discovery, preclinical, and clinical development phases of product candidates Risks Related to Managing Growth and Employee Matters This section addresses risks associated with managing organizational growth and human capital resources Risks Related to Government Regulation This section describes risks arising from extensive and evolving government regulations in the healthcare industry Risks Related to Intellectual Property Matters This section covers risks concerning the protection and potential infringement of the company's intellectual property Risks Related to Our Common Stock This section outlines risks specifically related to the company's common stock, including market volatility General Risk Factors This section presents general business and economic risk factors that could affect the company's operations Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - No unresolved staff comments[379] Item 1C. Cybersecurity Femasys employs a cybersecurity program led by the Chief Operating Officer with oversight from the CFO and Audit Committee, encompassing policies, training, and assessments, and has not experienced material incidents - Femasys has a cybersecurity program with policies, procedures, standards, training, and third-party threat intelligence and assessment[380] - The Chief Operating Officer leads the cybersecurity program, reporting to the CFO, who briefs the Board's Audit Committee quarterly on its effectiveness[381] - The company has not experienced any cybersecurity threats or incidents that have had a material impact on its business to date[381] Item 2. Properties Femasys leases a 41,000 square foot facility in Suwanee, Georgia, for R&D, manufacturing, and office space, with the lease expiring in April 2029 and an extension option - Femasys leases a 41,000 sq ft facility in Suwanee, Georgia, for R&D, manufacturing, and office space[149][383] - The current lease expires in April 2029, with an option for a five-year extension[383] Item 3. Legal Proceedings Femasys is not currently involved in any legal proceedings expected to have a material adverse effect on its business, but acknowledges potential future claims related to intellectual property or employment - Femasys is not currently involved in any legal proceedings expected to have a material adverse effect on its business[150][384] - The company may face future claims regarding patent infringement, employment practices, or trademark infringement, which could divert management attention and incur financial costs[150] Item 4. Mine Safety Disclosures This item is not applicable to Femasys Inc - Not applicable[384] PART II This part covers market information for common equity, financial condition, results of operations, and market risk disclosures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Femasys common stock is listed on the NASDAQ Capital Market under FEMY, with 142 holders of record as of March 20, 2024, and the company retains earnings for growth without paying cash dividends - Femasys common stock trades on the NASDAQ Capital Market under the symbol FEMY[385] - As of March 20, 2024, there were 142 holders of record for the common stock[385] - The company has not paid cash dividends and plans to retain future earnings for business development[358][386] Item 6. [Reserved] This item is reserved and not applicable - Not applicable[392] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Femasys' financial condition and results of operations, including business overview, performance factors, comprehensive loss analysis, liquidity, capital resources, and critical accounting estimates Key Financial Performance (Year Ended Dec 31) | Financial Metric | 2023 (USD) | 2022 (USD) | | :--------------- | :--- | :--- | | Net Loss | $(14.25 million) | $(11.39 million) | | Accumulated Deficit | $(108.38 million) | $(94.13 million) | | Sales | $1.07 million | $1.21 million | | R&D Expenses | $7.21 million | $5.81 million | | G&A Expenses | $6.86 million | $5.43 million | - Sales decreased by 11.1% in 2023, primarily due to reduced U.S. and international sales of the FemVue product[415][416] - Research and development expenses increased by 24.0% to $7.2 million in 2023, driven by higher compensation, material, and consultant costs, while general and administrative expenses rose by 26.3% to $6.86 million[415][418][420] Business Overview This section provides a general overview of Femasys' business model and strategic focus FemaSeed – Our Artificial Insemination Solution This section describes FemaSeed, the company's artificial insemination solution FemVue and Other Diagnostic Solutions FemVue, a solution for fallopian tube assessment using ultrasound, is approved for sale in the U.S., Japan, and Canada, offering an alternative to radiologic approaches for infertility diagnosis FemBloc – Our Permanent Birth Control Solution This section details FemBloc, the company's permanent birth control solution Additional Women's Health Solutions This section outlines other women's health solutions offered by the company Factors Affecting Our Business This section discusses key internal and external factors influencing the company's business performance Impact of COVID-19 on Our Business This section analyzes the impact of the COVID-19 pandemic on the company's business operations and financial results Components of Our Comprehensive Loss This section breaks down the various components contributing to the company's comprehensive loss Sales This section analyzes the company's sales performance and revenue generation Cost of sales This section details the costs directly associated with the production and sale of goods Research and development This section discusses expenses related to the company's research and development activities Sales and marketing This section outlines expenses incurred for sales and marketing efforts General and administrative This section details general and administrative expenses, including corporate overhead Depreciation and amortization This section covers depreciation and amortization expenses for assets Other income (expense) This section reports other non-operating income and expenses Income tax expense This section details the company's income tax expenses Results of Operations This section provides a detailed analysis of the company's financial results from operations Comparison of the Years Ended December 31, 2023 and 2022 This section compares the company's financial performance for the years ended December 31, 2023 and 2022 Sales Performance FemVue sales decreased by $134,248 (11.1%) to $1,071,970 in 2023 from $1,206,218 in 2022, driven by reduced U.S. and international sales of $76,434 and $57,814, respectively, with U.S. units down 9.0% and international units down 50.1% Cost of sales This section analyzes the cost of sales in relation to revenue generated Research and development This section details the changes and drivers of research and development expenses Sales and marketing This section analyzes the changes and drivers of sales and marketing expenses General and administrative This section details the changes and drivers of general and administrative expenses Depreciation and amortization This section analyzes the changes in depreciation and amortization expenses Other income (expense) This section details the changes in other non-operating income and expenses Income tax expense This section analyzes the company's income tax expense Liquidity and Capital Resources This section discusses the company's liquidity position and available capital resources Sources of liquidity This section identifies the primary sources of liquidity available to the company Funding requirements This section outlines the company's anticipated funding needs and capital requirements Cash Flows This section provides an overview of the company's cash flow activities Comparison of the Years Ended December 31, 2023 and 2022 (Cash Flows) This section compares the company's cash flow activities for the years ended December 31, 2023 and 2022 Off-Balance Sheet Arrangements This section discloses any off-balance sheet arrangements that could impact the company's financial condition Critical Accounting Estimates This section identifies and discusses the critical accounting estimates and judgments made by management Revenue recognition This section details the company's policies and estimates related to revenue recognition Accrued expenses This section discusses the company's accounting policies and estimates for accrued expenses Recent Accounting Pronouncements This section outlines recent accounting pronouncements and their impact on the company's financial statements Recently Adopted This section details recently adopted accounting pronouncements and their effects Not Yet Adopted This section discusses accounting pronouncements that have been issued but not yet adopted Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate, foreign currency, and credit risks, noting low-risk cash instruments, minimal foreign currency exposure, and no losses from the Silicon Valley Bank closure - The company's cash and cash equivalents, totaling $21.7 million as of December 31, 2023, are primarily in bank deposits and money market funds, carrying a low degree of interest rate risk due to their short-term nature[450][541] - Foreign currency exchange risk is currently minimal as all sales in 2023 and 2022 were in U.S. dollars, but this may increase with international expansion[451] - Femasys successfully transferred its cash and cash equivalents from Silicon Valley Bank to Wells Fargo Bank in March 2023, avoiding losses from the SVB closure, and continues to assess banking relationships to mitigate credit risk[452][517] Interest rate risk This section analyzes the company's exposure to fluctuations in interest rates Foreign currency exchange risk This section discusses the company's exposure to risks arising from foreign currency exchange rate movements Concentration of credit risk This section addresses the company's exposure to credit risk concentrations Emerging Growth Company Status This section explains the company's status as an 'emerging growth company' and related exemptions Item 8. Financial Statements This item presents the audited financial statements of Femasys Inc. for 2023 and 2022, including Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, Cash Flows, and Notes, along with the Independent Registered Public Accounting Firm's Report - The financial statements for 2023 and 2022 were audited by KPMG LLP, who issued an unqualified opinion, stating they present fairly the financial position and results of operations in conformity with U.S. GAAP[458][462] Key Financial Performance (Year Ended Dec 31) | Financial Metric | 2023 (USD) | 2022 (USD) | | :--------------- | :--- | :--- | | Sales | $1.07 million | $1.21 million | | Net Loss | $(14.25 million) | $(11.39 million) | | Cash and Cash Equivalents | $21.72 million | $12.96 million | | Total Assets | $27.76 million | $16.90 million | | Total Liabilities | $9.40 million | $1.65 million | | Total Stockholders' Equity | $18.35 million | $15.24 million | Report of Independent Registered Public Accounting Firm This section contains the audit report from the independent registered public accounting firm Balance Sheets This section presents the company's financial position at specific points in time Statements of Comprehensive Loss This section details the company's comprehensive loss for the reported periods Statements of Stockholders' Equity This section outlines changes in the company's stockholders' equity Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Notes to Financial Statements This section provides detailed explanatory notes to the financial statements (1) Organization, Nature of Business, and Liquidity This note describes the company's organization, business nature, and liquidity position (2) Summary of Significant Accounting Policies This note outlines the significant accounting policies used in preparing the financial statements (3) Fair Value This note provides information on fair value measurements of financial instruments (4) Cash and Cash Equivalents This note details the composition of cash and cash equivalents (5) Commitments and Contingencies This note discloses the company's commitments and contingent liabilities (6) Notes Payable This note provides details on the company's notes payable obligations (7) Convertible Notes with Warrants (November 2023 Financing) This note describes the convertible notes with warrants issued in the November 2023 financing (8) Income Taxes This note provides information on the company's income tax provisions and related balances (9) Stockholders' Equity This note details the components and changes in stockholders' equity (10) Equity Incentive Plans This note describes the company's equity incentive plans and related activity (11) Retirement Plan This note provides information on the company's retirement plan (12) Related‑Party Transactions This note discloses transactions with related parties (13) Net Loss per Share Attributable to Common Stockholders This note details the calculation of net loss per share attributable to common stockholders (14) Subsequent Events This note discloses significant events that occurred after the balance sheet date Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Femasys reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[624] Item 9A. Controls and Procedures Management concluded Femasys' disclosure controls and procedures were effective as of December 31, 2023, and internal control over financial reporting was effective based on the COSO framework, with no auditor attestation required as an emerging growth company - Femasys' disclosure controls and procedures were deemed effective as of December 31, 2023[625] - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[626] - As an 'emerging growth company,' Femasys is not yet required to obtain an auditor attestation report on the effectiveness of its internal control over financial reporting[627] Item 9B. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended December 31, 2023 - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q4 2023[631] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Femasys Inc - Not applicable[632] PART III This part contains information on directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accounting fees Item 10. Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement, and the board has adopted a Code of Ethics - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement[633] - The company has adopted a Code of Ethics applicable to all directors, officers, and employees[634] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement - Executive compensation details are incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement[635] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management, and related stockholder matters, is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement - Security ownership information for beneficial owners and management is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement[636] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement - Details on certain relationships, related transactions, and director independence are incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement[637] Item 14. Principal Accounting Fees and Services Information concerning principal accounting fees and services is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement - Information on principal accounting fees and services is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement[638] PART IV This part lists exhibits and financial statement schedules filed as part of the Form 10-K Item 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the Form 10-K, including organizational documents, warrant forms, equity incentive plans, and various agreements - The report includes a comprehensive list of exhibits, such as the Eleventh Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, various warrant forms (Pre-Funded, Common Stock, Placement Agent, Series A, Series B), and equity incentive plans[640][641] - Key agreements like the Sales Agreement with Piper Sandler & Co. and the Form of Convertible Note are also listed as exhibits[641] Item 16. Form 10-K Summary This item states that no Form 10-K Summary is provided - No Form 10-K Summary is provided[642] Signatures This section lists the individuals who signed the Form 10-K, including executive officers and directors - The Form 10-K is signed by Kathy Lee-Sepsick (President and CEO), Dov Elefant (CFO), Charles Larsen (Chairperson), Alistair Milnes (Director), Joshua Silverman (Director), and Edward Uzialko, Jr. (Director)[647][649]