Minerva Surgical (UTRS) Risk Analysis

This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Quarterly Report. Summary Risk Factors Investing in our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as fully described below. The principal factors and uncertainties that make investing in our common stock speculative or risky include, among others: - Our financial condition raises substantial doubt as to our ability to continue as a going concern. - We may need additional funding and may not be able to raise capital when needed, which could force us to delay or reduce our product development programs and commercialization efforts;- We have a limited history operating as a commercial company. We have a history of net losses, we expect to incur operating losses in the future, and we may not be able to achieve or sustain profitability;- We expect to derive substantially all of our future revenue from sales of our existing products, and these products could fail to generate significant revenue or achieve market adoption;- Our business is dependent upon increasing awareness of treatment options for AUB and the broad adoption of our products by hospitals, physicians, and patients;- If we fail to maintain and grow our direct sales force, differentiate our products from others, or develop broad brand awareness in a cost-effective manner, our growth will be impeded and our business will suffer;- Our ability to increase our customer base and achieve broader market acceptance of our products with OB/GYNs and their patients depends on our ability to expand our marketing efforts;- The market for our products is highly competitive. If our competitors are able to develop or market AUB treatments that are safer or more effective, or gain greater acceptance in the marketplace, than any products we develop, our commercial opportunities will be reduced or eliminated;- Any recurrence of COVID-19 and its variants and resulting efforts to reduce its spread could negatively impact, and may continue to negatively impact, our business, and operations;- We have been a party to intellectual property litigations in the past and may, in the future, be a party to other intellectual property litigation or administrative proceedings that are very costly and time-consuming and could interfere with our ability to sell and market our products;- Our products and operations are subject to extensive government regulation and oversight in the United States, and our failure to comply with applicable requirements could harm our business;- We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices;- If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock;- We are a "controlled company" within the meaning of Nasdaq rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements;- We previously identified and remediated a material weakness in our internal control over financial reporting and may identify material weaknesses in the future or otherwise fail to maintain proper and effective internal controls, which may impair our ability to produce accurate financial statements on a timely basis.

As of the closing of the Share Purchase Agreement, Accelmed held approximately 69.3% of the voting power of our common stock, and New Enterprise Associates held approximately 19.5% of the voting power of our common stock. The beneficial ownership of greater than 50% of our voting stock means Accelmed is able to control matters requiring stockholder approval, including the election of directors, changes to our organizational documents and significant corporate transactions. This concentration of ownership makes it unlikely that any other holder or group of holders of our common stock will be able to affect the way we are managed or the direction of our business. The interests of these parties with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders. Given this concentrated ownership, Accelmed would have to approve any potential acquisition of us. The existence of a significant stockholder may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company. Moreover, the concentration of stock ownership with Accelmed and New Enterprise Associates may adversely affect the trading price of our securities, including our common stock, to the extent investors perceive a disadvantage in owning securities of a company with a significant stockholder. Each of Accelmed, in a Schedule 13D/A filed on July 6, 2023, and New Enterprise Associates, in a Schedule 13D/A filed on July 7, 2023, announced that they were considering effecting a transaction pursuant to which (i) our common stock may be delisted from trading on the Nasdaq Capital Market and (ii) the registration of our common stock under the Securities Exchange Act of 1934 would be terminated (a "Take Private Transaction"). Additionally, in connection with a potential Take Private Transaction, Accelmed is evaluating acquiring shares of our common stock in one or more privately negotiated transactions (Private Purchases) and may discuss the Private Purchases with certain of our existing stockholders. Each of Accelmed and New Enterprise Associates are evaluating the structure to be utilized to effect a Take Private Transaction which may include, among other things, a "short form" merger in accordance with Section 253 of the General Corporation Law of the State of Delaware. There can be no assurance regarding the terms and details of any transaction, that any proposal regarding a Take Private Transaction will be made, or that any Take Private Transaction will ultimately be consummated. If the potential Take Private Transaction does not occur, the market price of our common stock will likely decline as the result of such decision. In addition, our stock price may decline as a result of the fact that we may incur significant expenses related to the potential Take Private Transaction prior to its execution or closing that will not be recovered if the potential Take Private Transaction is not completed. As a consequence of the failure of the potential Take Private Transaction to be completed, as well as of some or all of these potential effects of the termination of the potential Take Private Transaction evaluation, our business could be harmed in that concerns about our viability are likely to increase, making it more difficult to retain employees and existing customers and vendors and to generate new business. Furthermore, pursuant to the terms of the Share Purchase Agreement, Accelmed currently has the right, for so long as Accelmed owns twenty-five percent (25%) or more of the Company's outstanding common stock, to designate for appointment to our Board of Directors as a director the lesser of (i) the number of directors constituting a majority of our Board of Directors, and (ii) if the Company is listed at such time on a national securities exchange, the number of directors of our Board of Directors equivalent to Accelmed's proportional equity ownership of shares of our common stock from time to time. In addition, our amended and restated certificate of incorporation provides (a) that the issuance of any shares of our preferred stock must also be approved by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of our capital stock, (b) any action of stockholders may be taken by partial written consent by the holders of outstanding shares of our capital stock entitled to be voted with respect to the subject matter thereof having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, (c) a special meeting of our stockholders may also be called by written notice to the Company by the holders of a majority of all the votes entitled to be cast on such issue proposed therein, (d) that members of our Board of Directors are elected annually, and (e) any provision of our amended and restated certificate of incorporation may be amended in accordance with Delaware law.

Nasdaq has qualitative and quantitative listing criteria. If we are unable to meet any of the Nasdaq listing requirements in the future, including, for example, if the closing bid price for our common shares continues to trade below $1.00, Nasdaq could determine to delist our common stock. If in the future Nasdaq delists our common shares from trading on its exchange for failure to meet the listing standards, we and our security holders could face significant material adverse consequences including: - a limited availability of market quotations for our securities;- reduced liquidity for our securities;- a deterrent for broker-dealers making a market in or otherwise seeking or generating interest in our securities;- a deterrent for certain institutions and persons from investing in our securities at all;- a determination that our common shares are "penny stock" which will require brokers trading in our common shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;- a limited amount of news and analyst coverage; and - a decreased ability to issue additional securities or obtain additional financing in the future. On October 31, 2022, we received a notification from the Nasdaq Stock Market that for the preceding 30 consecutive trading days, the closing bid price of our common stock was below $1.00 per share. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days from the notice date to regain compliance. To regain compliance, the closing bid price of our common shares must be at least $1.00 per share for a minimum of 10 consecutive trading days. While stockholders approved an amendment to our amended and restated certificate of incorporation to affect a reverse stock split of our common stock at special meeting of our stockholders on February 7, 2023, we requested additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii). On April 26, 2023, we submitted a listing application to accomplish the foregoing, which was approved by the Nasdaq staff on May 2, 2023. Our securities were transferred to the Capital Market at the opening of business on May 4, 2023 and we were thus eligible for an additional 180 calendar day period. On September 29, 2023 we effected a 1-for-20 reverse split of our shares and on October 16, 2023 Nasdaq notified the Company that it is back in compliance with Listing Rule 5550(a)(2). There can be no assurance that the market price per share of our common stock will remain in excess of the $1.00 minimum bid price for a sustained period of time. The continuing effect of our reverse stock split on the market price of our common stock cannot be predicted with any certainty, and the history of similar stock split combinations for companies in like circumstances is varied. It is possible that the per share price of our common stock after the reverse stock split will not rise in proportion to the reduction in the number of shares of common stock outstanding resulting from the reverse stock split, effectively reducing our market capitalization, and there can be no assurance that the market price per post-reverse split share will remain in excess of the $1.00 minimum bid price for a sustained period of time. The market price of our common stock may vary based on other factors that are unrelated to the number of shares outstanding, including our future performance.

Prior to our initial public offering in October 2021, there had been no public market for shares of our common stock. The lack of an active market may impair investors' ability to sell shares at the time the investors wish to sell them or at a price that they consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other products, technologies, or businesses using our shares as consideration.

The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Quarterly Report on Form 10-Q, these factors including: - changes in analysts' estimates, investors' perceptions, recommendations by securities analysts, or our failure to achieve analysts' estimates;- quarterly variations in our or our competitors' results of operations;- periodic fluctuations in our revenue, which could be due in part to the way in which we recognize revenue;- the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;- general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;- changes in reimbursement by current or potential payor;- changes in operating performance and stock market valuations of other technology companies generally, or those in the medical device industry in particular;- actual or anticipated changes in regulatory oversight of our products;- the loss of key personnel, including changes in our board of directors and management;- product recalls or other problems associated with our products;- legislation or regulation of our market;- lawsuits threatened or filed against us, including litigation by current or former employees alleging wrongful termination, sexual harassment, whistleblower, or other claims;- the announcement of new products, product enhancements, or new product trials by us or our competitors;- announced or completed acquisitions of businesses or technologies by us or our competitors;- announcements related to patents issued to us or our competitors and related litigation;- developments in our industry; and - deteriorating market conditions due to investor concerns regarding inflation and war between Russian and Ukraine. In recent years, the stock markets generally, and the market for life sciences technology companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed 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, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business, results of operations, financial condition, and reputation. These factors may materially and adversely affect the market price of our common stock.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market, and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our business, our share price would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

If our existing stockholders sell, or indicate an intention to sell, the trading price of our common stock could decline. Any sales of securities by these stockholders could have a material adverse effect on the market price of our common stock. As of the closing of the Share Purchase Agreement, the holders of an aggregate of 7,331,377 shares of our outstanding common stock, as adjusted post-reverse share split, have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. Registration of these shares under the Securities Act of 1933, as amended (the Securities Act) would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the market price of our common stock.

We currently qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012, as amended (JOBS Act). For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. To the extent that we continue to qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, we will continue to be permitted to make certain reduced disclosures in our periodic reports and other documents that we file with the SEC. We cannot predict if investors will find our common stock less attractive to the extent we rely on available exemptions. If some investors do find our common stock less attractive, there may be a less active trading market for our common stock and our stock price may be more volatile or may decline. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year in which we have more than $1.235 billion or more of total gross revenue in a consecutive 12-month period; (ii) the date we qualify as a "large accelerated filer," with at least $0.7 billion of equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (iv) the last day of the fiscal year ending after the fifth anniversary of our IPO. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock that is held by non-affiliates exceeds $250 million as of the prior June 30th or (2) our annual revenue exceeded $100 million during such completed fiscal year and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30.

Our amended and restated certificate of incorporation and bylaws contain provisions that might enable our management to resist a takeover. These provisions include: - advance notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content of a stockholders' notice;- the right to issue preferred stock with stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer;- a requirement that the authorized number of directors may be changed only by resolution of the board of directors;- allowing all vacancies, including newly created directorships, to be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, except as otherwise required by law;- limiting the forum to Delaware for certain litigation against us; and - limiting the persons that can call special meetings of our stockholders to our board of directors, the chairperson of our board of directors, the chief executive officer, or the president, in the absence of a chief executive officer, or by written notice to the Company by the holders of a majority of all the votes entitled to be cast on such issue proposed at the special meeting of stockholders. These provisions might discourage, delay, or prevent a change in control of our Company or a change in our management. The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. See "Description of capital stock."

Our amended and restated bylaws specify that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, stockholders, officers, or other employees to us or our stockholders, (c) any action or proceeding asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (d) any action or proceeding asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware or, if no state court in Delaware has jurisdiction, the federal District Court for the District of Delaware) and any appellate court therefrom, in all cases subject to the court having jurisdiction over the claims at issue and the indispensable parties; provided that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended (the Exchange Act). Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that the federal District Courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of our securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder's ability to bring a claim in a judicial forum of its choosing, or increase the cost of bringing a claim, which may discourage lawsuits with respect to claims against us and our current and former directors, officers, stockholders, or other employees. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions. Further, in the event a court finds either exclusive forum provision contained in our amended and restated bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations.