Femasys (FEMY) Risk Analysis

The market price of our common stock has been highly volatile and may fluctuate substantially due to many factors, some of which are beyond our control, including: - announcements of U.S. regulatory approval or disapproval of our FemBloc system or the FDA's decision to grant or decline any future approvals or clearances for enhancements to our products;- announcements of international regulatory approval or disapproval of our FemBloc system or the foreign regulatory body or notified body's decision to grant or decline any future approvals for enhancements to our products;- adverse results from or delays in clinical pivotal trial of our FemBloc system;- unanticipated safety concerns related to the use of our FemBloc system;- unanticipated safety concerns related to the use of our FemaSeed product or other products;- FDA or other U.S. or foreign regulatory or legal actions or changes affecting us or our industry;- our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced medical products on a timely basis;- any voluntary or mandated product recalls;- adverse developments concerning our suppliers or any future strategic partnerships;- the volume and timing of sales of our products;- the introduction of new products or product enhancements by us or others in our industry;- disputes or other developments with respect to our or others' intellectual property rights;- product liability claims or other litigation;- quarterly variations in our results of operations or those of others in our industry;- media exposure of our products or of those of others in our industry;- changes in governmental regulations or in reimbursement;- changes in earnings estimates or recommendations by securities analysts;- changes in financial estimates or guidance, including our ability to meet our future revenue and operating profit or loss estimates or guidance;- the public's reaction to our earnings releases, other public announcements and filings with the SEC;- sales of substantial amounts of our stock by directors, officers or significant stockholders, or the expectation that such sales might occur;- operating and stock performance of other companies that investors deem comparable to us and overall performance of the equity markets;- additions or departures of key personnel;- changes in our capital structure, such as future issuances of securities and the incurrence of debt;- general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; and - other factors described in this "Risk Factors" section. In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management's attention and resources from our business.

We cannot assure you that an active trading market for our common stock will be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling shares of our common stock and enter into strategic partnerships or acquire other complementary products, technologies or businesses by using shares of our common stock as consideration. Furthermore, there can be no guarantee that we will continue to satisfy the continued listing standards of Nasdaq. If we fail to satisfy the continued listing standards, we could be de-listed, which would have a negative effect on the price of our common stock.

Provisions in the amended and restated certificate of incorporation and our amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include: - a prohibition on actions by our stockholders by written consent;- advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings;- a requirement that directors may only be removed "for cause";- a requirement that only the board of directors may change the number of directors and fill vacancies on the board;- division of our board of directors into three classes, serving staggered terms of three years each; and - the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, as amended, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions would apply even if the proposed merger or acquisition could be considered beneficial by some stockholders.

We are an "emerging growth company," as defined in the JOBS Act. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of our most recently completed second fiscal quarter and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include: - being permitted to present only two years of audited financial statements and only two years of related management's discussion and analysis of financial condition and results of operations;- not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;- an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotations;- reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and - exemptions from the requirement to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved. We have elected to take advantage of certain of the reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in the future. As a result, the information that we provide to our investors may be different from the information you might receive from other public reporting companies that are not emerging growth companies in which you hold equity interests. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to take advantage of such extended transition period, which means that we will adopt a new standard when it is issued or revised. We are also a "smaller reporting company," meaning that the market value of our shares held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during the most recently completed fiscal year, or if the market value of our shares held by non-affiliates is less than $250.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if we are a smaller reporting company with less than $100 million in annual revenue, we would not be required to obtain an attestation report.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine , or the Delaware Forum Provision. The Delaware Forum Provision does not apply to any causes of action arising under the Securities Act or the Exchange Act. Our amended and restated bylaws further provides that unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision, as the Company is incorporated in the State of Delaware. In addition, our amended and restated bylaws provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder. We believe the Delaware Forum Provision and the Federal Forum Provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, this provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees and also may impose additional litigation costs on stockholders in pursuing any such claims. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are "facially valid" under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

On May 19, 2025, we received a written notice from Nasdaq that for the preceding 30 consecutive business days, the Market Value of Listed Securities ("MVLS") for our common stock was below the minimum $35.0 million requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2). We also did not meet either of the alternative continued listing standards under Nasdaq Listing Rule 5550(b): (i) stockholders' equity of at least $2.5 million or (ii) net income of $500,000 in the most recently completed fiscal year, or in two of the three most recently completed fiscal years. Following the completion of our August 2025 financing and subsequent warrant exercises, we determined that our stockholders' equity as of October 15, 2025 would have been approximately $5.2 million on a pro forma basis, meeting the minimum $2.5 million stockholders' equity requirement for continued listing under Nasdaq Listing Rule 5550(b)(1). As reported on our Form 8-K filed October 21, 2025, Nasdaq determined that we comply with Nasdaq Listing Rule 5550(b)(1). However, if we fail to evidence continued compliance upon filing of this Annual Report on Form 10-K or any subsequent periodic report, we may again be subject to a deficiency determination and potential delisting proceedings. On July 16, 2025, we received a notice from Nasdaq that our common stock had failed to maintain a minimum closing bid price of $1.00 per share for 30 consecutive business days and that we therefore did not comply with Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until January 12, 2026, to regain compliance. We did not regain compliance during that initial period. On January 12, 2026, we submitted a request to Nasdaq for a 180-day extension, advising Nasdaq that we had demonstrated more than $5 million in stockholders' equity as of December 31, 2025 and providing notice of our intention to cure the deficiency during the extended compliance period by effecting a reverse stock split, if necessary. On January 13, 2026, Nasdaq granted us a second 180-day extension through July 13, 2026 to regain compliance with the Minimum Bid Price Requirement. This is the final compliance period available to us under Nasdaq's rules. If we do not regain compliance by July 13, 2026, our common stock will become subject to delisting. In the event we receive notice that our common stock is being delisted, Nasdaq's rules permit us to appeal that determination to a hearings panel, although no assurance can be given that any such appeal would be successful. We intend to continue actively monitoring the closing bid price of our common stock and will consider all available options to regain compliance, including effecting a reverse stock split. However, there can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement by July 13, 2026, maintain compliance with the stockholders' equity requirement, or remain in compliance with other Nasdaq listing rules. If our common stock is delisted, it could have a material adverse effect on the price and liquidity of our common stock and our ability to raise additional capital.