Item 1A. Risk Factors

The following are significant factors known to us that could materially harm our business, financial condition or operating results or could cause our actual results to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statement made in this Annual Report. The risks described are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also adversely affect our business, financial condition and operating results. If any of these risks actually occur, our business, financial condition, and operating results could suffer significantly.

Risks Related to Our Business

We have only a modest amount of cash, which is not sufficient to support our plan of operations for the long-term.

We have obtained short-term financing as a result of the March 2024 Private Placement; however, such financing provided the Company limited capital and there can be no assurance that additional financing will be available to us, or if available, will be on terms satisfactory to us in the longer-term. If we are unable to obtain funds when we need them or if we cannot obtain funds on terms favorable to us within the longer-term, we may not be able to maintain our operations as a going concern.

We scaled down operations, will not generate significant revenues unless we complete a business combination with an operating company, and need additional capital to fund our activities.

We continue to implement cash management initiatives, included scaled down operations to the core functions of a U.S. Nasdaq listed company with only minimal distribution, marketing, and sales support, allowing the Company to conserve cash and focus on the functions needed to pursue potential strategic alternatives. As we have transitioned our business model, unless we complete a business combination with an operating company, we will not generate significant new revenues in the future and we will continue to incur expenses related to identifying and acquiring an operating company and compliance with our reporting obligations under applicable federal securities laws. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we cannot raise funds on acceptable terms, we may not be able to continue to execute our plan to acquire an operating company and in the extreme case, we may need to liquidate the Company.

We have a history of losses, and we expect to incur losses for the next several years. The report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2023 and 2022 contains explanatory language that substantial doubt exists about our ability to continue as a going concern.

We have incurred substantial losses since our inception, and we expect to continue to incur additional losses for the next several years. For the years ended December 31, 2023 and 2022, we had net losses of $32.7 million and $37.3 million, respectively. For the years ended December 31, 2021 and 2020, we had net losses of $34.8 million and $26.2 million, respectively. From our inception through December 31, 2023, we had an accumulated deficit of $305.5 million. From our inception through December 31, 2021, we had an accumulated deficit of $235.5 million. The reports of our independent registered public accounting firm on our financial statements for the years ended December 31, 2023 and 2022 each contain explanatory language that substantial doubt exists about our ability to continue as a going concern. We completed a number of financings in 2022 and 2023. We completed an at-the-market offering which raised net proceeds of approximately $0.99 million in 2022, a registered direct financing in October 2022, which raised net proceeds of approximately $3.04 million, a registered direct financing in January 2023, which raised net proceeds of approximately $6.9 million, a best-efforts public offering in May 2023, which raised net proceeds of approximately $3.0 million, a preferred stock purchase agreement in October 2023 for up to $1.0 million in proceeds, and a warrant inducement agreement in October 2023, which raised net proceeds of $2.057 million. Additionally, we entered into a securities purchase agreement for the sale of preferred stock in March 2024, which is expected to raise proceeds of approximately $3.0 million. We cannot assure you that we can continue to raise the capital necessary to fund our business. Failure to achieve profitable operations may require us to seek additional financing when none is available or is only available on unfavorable terms.

We have substantial amount of debt which must be liquidated prior to entering an acquisition of an operating company.

We have made significant progress in negotiating our debt with our creditors. As part of the March 2024 Purchase Agreement, the Company entered into settlement agreements (the “Settlement Agreements”) with each of the European Investment Bank (“EIB”) and Curetis GmbH, the Company’s subsidiary (“Curetis”), and Curetis’ trustee in insolvency, pursuant to which the parties agreed to settle outstanding liabilities amongst the parties. Pursuant to the settlement agreements and March 2024 Purchase Agreement, following the final closing of the transactions contemplated by the March 2024 Purchase Agreement, the Company will pay $2.0 million of the proceeds to settle all outstanding debt of the Company to each of EIB and Curetis. The settlement agreement with EIB also terminated that certain Guarantee and Indemnity Agreement, dated as of July 9, 2020, by and between the EIB and the Company, pursuant to which the Company had guaranteed all of Curetis’ debt to EIB. If we are unable to pay and settle such outstanding liabilities in accordance with the terms of the settlement agreements, the Company will continue to have substantial debt to the EIB, and we will not have capital to pay such debt in accordance with its terms, which would have a material adverse effect and, if the EIB exercises its rights and remedies under our guarantee agreement, would likely force us to seek bankruptcy protection.

We may not be able to acquire an operating company and if we complete such an acquisition, we expect that we will need to raise additional capital.

Assuming we transition our business model as expected, our sole business objective, following liquidation of our debts, will be to seek to identify strategic opportunities. As of the date of this report, we have commenced the process of identifying strategic opportunities, but there can be no assurance that we will be able to complete such a transaction.

In the event we complete such a transaction, we expect that we will need to raise substantial additional capital. We intend to rely on external sources of financing to meet any capital requirements and to obtain such funding through the debt and equity markets. We cannot provide any assurances that we will be able to obtain additional funding when it is required or that it will be available to us on commercially acceptable terms, if at all. If we fail to obtain such necessary funding, any such transaction may not be successful.

Our Board of Directors has sole discretion to identify and evaluate transaction candidates and complete transactions without the approval of our stockholders.

We have not developed any specific transaction guidelines and we are not obligated to follow any particular operating, financial, geographic or other criteria in evaluating candidates for potential transactions or business combinations. We will target companies that we believe will provide the best potential long-term financial return for our stockholders and we will determine the purchase price and other terms and conditions of such transactions without review or approval of our stockholders. Accordingly, our stockholders will not have the opportunity to evaluate the relevant economic, financial, and other information that our Board will use and consider in deciding whether or not to enter into a particular transaction.

We will not generate any significant revenue or earnings in the near future unless and until we merge with or acquire an operating business.

Upon settlement of our debts to EIB, if such an event occurs, we will have limited assets and operations. As a result, we do not expect to generate any significant revenue or realize significant revenue unless and until we successfully complete a strategic transaction.

There is competition for those private companies suitable for a merger transaction of the type being contemplated by management.

There is currently a very competitive market for business opportunities, which could reduce the likelihood of consummating a successful business combination. We expect to be an insignificant participant in the business of seeking mergers with, joint ventures with, and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies, venture capital firms, and special purpose acquisition companies, or “SPACs”, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do. As a result, we may be unable to effectively compete with such entities in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of us identifying and consummating a successful business combination.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we collect and store sensitive data, which may include legally protected health information and personally identifiable information about our customers and their patients. We also store sensitive intellectual property and other proprietary business information, including that of our customers. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data center systems. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information and business and financial information. We face four primary risks relative to protecting this critical information: loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of our being unable to identify and audit our controls over the first three risks.

We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store this critical information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, phishing attempts, ransomware attacks or other attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure or modification of confidential information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, phishing attempts, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure or modification of confidential information. The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions.

A security breach or privacy violation that leads to disclosure or modification of or prevents access to consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm, as described above.

Any such breach or interruption could compromise our networks, and the information stored there could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the federal Health Insurance Portability and Accountability Act, or HIPAA, and regulatory penalties. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the federal HIPAA and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to collect, process, and prepare Company financial information as well as manage the administrative aspects of our business, all of which could adversely affect our business. Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In addition, the interpretation and application of consumer, health-related, privacy and data protection laws in the United States and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

We are subject to risks with respect to counterparties, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.

We have entered into various contracts that are material to the operation of our business that subject us to counterparty risks. The ability and willingness of our counterparties to perform their obligations under any contract will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of such counterparty’s industry and the overall financial condition of the counterparty. A prolonged period of difficult industry conditions could lead to changes in a counterparty’s liquidity and increase our exposure to counterparty risk. If our counterparties are unable or unwilling to perform, it could negatively impact our results of operations and cash flows.

Risks Related to Our Securities and Public Company Status

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.

When we are no longer a smaller reporting company, our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented, or reviewed.

When we are no longer a smaller reporting company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline. Internal control deficiencies could also result in a restatement of our financial results in the future.

We cannot assure you that we will be able to continue to comply with the Nasdaq Minimum Bid Price Rule, the Periodic Filing Rule, or other continued listing standards of the Nasdaq Capital Market. If we are unable to maintain compliance with such standards, we could be subject to delisting or other adverse action, which could negatively impact the trading of our common stock.

As previously disclosed, we requested a hearing by the Nasdaq Hearings Panel of The Nasdaq Stock Market LLC to appeal the Nasdaq listing staff’s determination to delist the Company’s securities as a result of the failure of the Company’s common stock to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). In response to the Company’s request, on February 9, 2024, the Company received written notification from Nasdaq notifying the Company that the Panel had granted the Company’s request for an additional period, during which the Company will remain listed on Nasdaq, to regain compliance with the Bid Price Rule. Pursuant to the Notice, the Panel granted the Company an additional period until June 3, 2024 to regain compliance. The extension is subject to certain conditions specified by the Panel in the Notice. Thereafter, Nasdaq notified the Company that it failed to comply with Nasdaq Listing Rule 5250(c)(1) for failing to timely file this Annual Report and the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2024. The Panel again granted the Company’s request for additional time to cure such delinquencies, provided that the Company file this Annual Report by June 3, 2024 and the Quarterly Report on Form 10-Q by July 8, 2024.

While the Company intends to comply with such conditions and rules, there can be no assurance that the Company will be able to regain or remain in compliance with the applicable Nasdaq listing requirements on an ongoing basis or that the Panel will afford the Company additional time to achieve compliance. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

The 2024 Reverse Stock Split may decrease the liquidity of the shares of our common stock.

The liquidity of the shares of our common stock may be affected adversely by the 2024 Reverse Stock Split given the reduced number of shares outstanding after the 2024 Reverse Stock Split, especially if the market price of our common stock does not increase as a result of the 2024 Reverse Stock Split. In addition, the 2024 Reverse Stock Split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

Following the 2024 Reverse Stock Split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.

There can be no assurance that the 2024 Reverse Stock Split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

The market price of our common stock and the trading volume of our common stock has been, and may continue to be, highly volatile, and such volatility could cause the market price of our common stock to decrease.

During 2023, the market price of our common stock fluctuated from a low of $1.70 per share to a high of $34.60 per share, and our stock price continues to fluctuate. The market price and trading volume of our common stock may continue to fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

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our ability to consummate a strategic transaction;

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the trading volume of our common stock;

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variations in our and our competitors’ results of operations;

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changes in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;

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successes or challenges in our collaborative arrangements or alternative funding sources;

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adverse effects on our business condition and results of operations from general economic and market conditions and overall fluctuations in the United States and international markets, including deteriorating market conditions due to investor concerns regarding inflation;

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adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions that could adversely affect our business, financial condition or results of operations;

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future issuances of common stock or other securities;

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the addition or departure of key personnel;

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announcements by us or our competitors of acquisitions, investments or strategic alliances; and

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general market conditions and other factors, including factors unrelated to our operating performance.

Further, the stock market in general, and the market for health care and life sciences companies in particular, has recently experienced extreme price and volume fluctuations. The volatility of our common stock is further exacerbated due to its low trading volume. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock and the loss of some or all of your investment.

Trading of our common stock is limited, and trading restrictions imposed on us by applicable regulations may further reduce trading in our common stock, making it difficult for our stockholders to sell their shares; and future sales of common stock could reduce our stock price.

Trading of our common stock is currently conducted on the NASDAQ Capital Market. The liquidity of our common stock is limited, including in terms of the number of shares that can be bought and sold at a given price and reduction in security analysts’ and the media’s coverage of us, if any. These factors may result in different prices for our common stock than might otherwise be obtained in a more liquid market and could also result in a larger spread between the bid and ask prices for our common stock. In addition, in the absence of a large market capitalization, our common stock is less liquid than the stock of companies with broader public ownership, and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock. We cannot predict the prices at which our common stock will trade in the future, if at all.

The exercise of outstanding common stock purchase warrants and stock options will have a dilutive effect on the percentage ownership of our capital stock by existing stockholders.

As of December 31, 2023, we had outstanding warrants to acquire 1,095,517 shares of our common stock, and stock options to purchase 9,624 shares of our common stock. A significant number of such warrants have exercise prices above our common stock’s recent trading prices, but the holders have the right to effect a cashless exercise of such warrants. If a significant number of such warrants and stock options are exercised by the holders, the percentage of our common stock owned by our existing stockholders will be diluted.

We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future.

We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant. Any interruption in the operation of our ARESdb, due to information technology system failures, part failures or potential disruptions in the event we are required to relocate our instruments within our facility or to another facility, could have an adverse effect on our operations. As a result, capital appreciation, if any, of our common stock will be the sole source of gain, if any, for the foreseeable future.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, instability in inflation in U.S. and foreign markets, increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflicts between Russia and Ukraine and Israel and Hamas, terrorism or other geopolitical events. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the United States and other countries in response to such conflicts may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability. Sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions, including instability in inflation. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and stock price. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.

We may be subject to litigation or government investigations for a variety of claims, which could adversely affect our operating results, harm our reputation, or otherwise negatively impact our business.

We may be subject to litigation or government investigations. These may include claims, lawsuits, and proceedings involving securities laws, fraud and abuse, healthcare compliance, product liability, labor and employment, wage and hour, commercial and other matters. Any such litigation or investigations could result in substantial costs and a diversion of management’s resources and attention. In addition, any adverse determination could expose us to significant liabilities, which could have a material adverse effect on our business, financial condition, and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Risk Management and Strategy

Following the March 2024 Private Placement, our focus has been on the identification of a privately held company to complete a reverse merger or similar strategic transaction. While we continue to maintain minimal distribution, marketing, and sales support, we have scaled down operations to the core functions of a U.S. Nasdaq listed company to conserve cash and focus on the functions needed to pursue potential strategic alternatives. We have implemented risk management processes to manage the risks associated with reliance on vendors, critical service providers, and other third-parties that may lead to a service disruption or an adverse cybersecurity incident. This includes an assessment of vendors during the selection/onboarding process and a review of SOC 1 reports on an annual basis.

In addition, we maintain policies over areas such as information security, access on/offboarding, and access and account management, to help govern the processes put in place by management designed to protect our IT assets, data, and services from threats and vulnerabilities. We partner with industry recognized IT providers leveraging third-party technology and expertise. These third-party service providers are a key part of our current cybersecurity risk management and provide services including, maintenance of an IT assets inventory, periodic vulnerability scanning, identity access management controls including restricted access of privileged accounts, network integrity safeguarded by employing web-based software, including endpoint protection, endpoint detection and response, and remote monitoring management on all devices, industry-standard encryption protocols and critical data backups. Our outsourced information technology consultant conducts proactive patching and monitoring of all of our existing systems and has implemented systems and procedures to mitigate cybersecurity risks that we believe are appropriate for a company of our size, stage of growth and financial condition. In addition, we carry insurance with coverage for cyber events that we believe is suitable for a company of our size, stage of growth and financial condition.

Governance

Management is responsible for the day-to-day management of the risks we face, while our Board of Directors and Audit Committee has responsibility for the oversight of risk management, including risks from cybersecurity threats. In its risk oversight role, our Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are appropriate and functioning as designed. The Board of Directors has delegated to the Audit Committee of the Board of Directors the responsibility for the oversight of information technology, including cybersecurity risks. Member(s) of management assigned with cybersecurity oversight responsibility and/or third-party consultants providing cyber risk services brief the Audit Committee on cyber vulnerabilities identified through the risk management process, emerging threat landscape and new cyber risks, and provide updates on our processes to prevent, detect, and mitigate cybersecurity incidents.

We face risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation. We acknowledge that the risk of cyber incident is prevalent in the current threat landscape and that a future cyber incident may occur in the normal course of its business. We proactively seek to detect and investigate unauthorized attempts and attacks against our IT assets, data, and services, and to prevent their occurrence and recurrence where practicable through changes or updates to internal processes and tools and changes or updates to service delivery; however, potential vulnerabilities to known or unknown threats will remain.

As of the date of this Annual Report, we are not aware of any cybersecurity threats, and have not experienced any cybersecurity incidents, that have materially affected us, including our business strategy, results of operations or financial condition.

For additional information concerning risks related to cybersecurity, see Item 1A. Risk Factors: Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.