10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________

Form 10-K

____________________________________________

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission File Number 001-34899

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Pulse Biosciences, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________

Delaware	46-5696597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3957 Point Eden Way Hayward, CA	94545
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code): (510) 906-4600

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes ☐   No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     Yes ☐   No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ☒   No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐   No ☒

Aggregate market value of registrant’s common stock held by non-affiliates of the registrant on June 29, 2018, based upon the closing price of Common Stock on such date as reported by Nasdaq Capital Market, was approximately $159,262,000. Shares of voting stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares outstanding of the issuer’s common stock as ofFebruary 28, 2019:  20,688,832

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders to be held on May 16, 2019 are incorporated by reference into Part III of this Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	41
Item 2.	Properties	41
Item 3.	Legal Proceedings	41
Item 4.	Mine Safety Disclosures	41
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	42
Item 6.	Selected Financial Data	44
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	79
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	80
Item 11.	Executive Compensation	80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
Item 13.	Certain Relationships and Related Transactions, and Director Independence	80
Item 14.	Principal Accounting Fees and Services	80
PART IV
Item 15.	Exhibits, Financial Statement Schedules	81
Item 16.	Form 10-K Summary	84
Signatures		85

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or Annual Report, contains “forward-looking statements” that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements.

You should read this Annual Report and the documents that we reference elsewhere in this Annual Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. We discuss many of these risks and uncertainties in greater detail in this Annual Report, particularly in Part I. Item 1A. “Risk Factors.” These forward-looking statements represent our estimates and assumptions only as of the date of this Annual Report regardless of the time of delivery of this Annual Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Annual Report.

Part I

Item 1. Business

In this Annual Report on Form 10-K, references to “Pulse,” “Pulse Biosciences,” “we,” “us,” “our” and the “Company” refer to Pulse Biosciences, Inc. and its wholly owned subsidiaries, unless expressly indicated or the context otherwise requires. Pulse Biosciences, Pulse TX, CellFX, Nano-Pulse Stimulation, NPS and the stylized logos are among the trademarks and/or registered trademarks of Pulse Biosciences, Inc. in the United States and other countries.

Overview

Pulse Biosciences, Inc. is a clinical stage medical therapy company pursuing commercial introduction of our proprietary CellFX™ System utilizing our patent-protected Nano-Pulse Stimulation™ (NPS™) platform technology.With our proprietary CellFX System, we can deliver a unique cell-focused effect on dysfunctional cells while preserving surrounding non-cellular tissue, a combination that may potentially lead to both improved efficacy and less collateral tissue damage. It also causes a process of immunogenic cell death that may stimulate an immune response to the dysfunctional cells.

We intend to commercialize novel, proprietary, and differentiated products that have the potential to significantly improve patient outcomes in the markets we serve. To achieve this mission, we intend to:

· Demonstrate the unique benefits of our proprietary CellFX System and its unique mechanism of action across a number of compelling indications. The CellFX System is the only tunable nanosecond pulsed energy system designed for use in human medicine of which we are aware. Our proprietary CellFX System allows for the adjustment of four key pulsing parameters: pulse duration, pulse amplitude, pulse frequency, and the number of pulses, depending on the tissue and desired treatment outcome. We have conducted or are conducting several clinical studies, including studies in Seborrheic Keratosis (SK),the most common benign raised pigmented lesion, Sebaceous Hyperplasia (SH), a common but difficult to treat facial lesion, Basal Cell Carcinoma (BCC), the most common form of skin cancer, cutaneous warts, and acne. We expect to conduct clinical studies on an ongoing basis to continue to demonstrate the value of our CellFX System across a growing list of valuable applications;

· Commercialize our proprietary CellFX System and applications for its use across a broad array of clinical indications. During February 2019 we submitted a Pre-Market Notification 510(k) to the U.S. Food and Drug Administration (FDA) seeking clearance to commercialize our CellFX System. Our FDA filing requests clearance of the CellFX System for commercial use in common dermatologic procedures to remove general benign lesions including SH and SK. Pending regulatory clearance, we plan to launch our CellFX System in the United States.

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Our Proprietary Nano-Pulse Stimulation Technology Platform

Our proprietary CellFX™ System leverages our patented NPS™ technology platform. NPS technology is characterized by ultrafast electrical energy pulses, with pulse durations from billionths up to a millionth of a second. When applied to targeted tissue, our NPS energy pulses enter cells and we believe alter the function of the internal cellular organelles, including the mitochondria and endoplasmic reticulum, without disrupting extracellular tissue, leading to regulated cell death (RCD), a process exhibited by cells in the human body when they undergo stress and are unable to restore cellular homeostasis.

Our proprietary CellFX System’s unique non-toxic and non-thermal mechanism of action is likely a biophysical disruption brought about by the tunable speed and amplitude of our NPS pulses interacting with the physical structure of cells.  While our CellFX System delivers pulses that directly affect the internal organelles of cells, these pulses have no functional effect on non-cellular tissue, such as collagen, a protein that forms the structural foundation of the skin. In short, with our proprietary CellFX System, we can deliver a more selective, cell-focused effect that we believe leads to RCD while preserving surrounding non-cellular tissue, a combination that may potentially lead to highly differentiated treatment applications.  Additionally, in the case of cancer this regulated cell death process may result in immunogenic cell death that stimulates the immune system to mount a systemic immune response against antigens, or markers, in those cancer cells.

Aesthetic Dermatology Procedure Market

We believe our CellFX System has high potential to offer improved clinical outcomes for a broad range of dermatology conditions and aesthetic skin applications for which targeted clearance of cellular lesions or structures is medically or cosmetically desirable. Current dermatology procedures to remove lesions or undesired skin tissue typically involve either excision (e.g. surgery)  or the use of heat (e.g. lasers or radiofrequency energy) orcold (e.g. cryoablation). These thermal methods of tissue destruction affect both cellular and non-cellular tissue components indiscriminately, which can lead to collateral damage of the dermal foundation in the skin.

Based on our clinical data demonstrating the unique, non-thermal, cell targeting NPS mechanism, we believe there is a significant opportunity for our CellFX System in aesthetic and medical dermatology in the United States. According to the 2017 Consumer Survey by the American Society for Dermatologic Surgery (ASDS) the number of consumers considering a cash-pay cosmetic procedure has more than doubled, from 30% in 2013 to 70% in 2017. The survey also highlighted that consumers ranked their dermatologist as the #1 influencer of skin procedure decisions. We have worked closely with top key opinion leaders (KOLs) in the aesthetic and medical dermatology field to identify those procedures and skin conditions in which our CellFX System and its unique NPS mechanism of action would offer a high value proposition.

Initial Aesthetic Dermatology Applications

Sebaceous Hyperplasia

Sebaceous Hyperplasia (SH) is a common, benign condition of sebaceous glands in adults of middle age or older. SH occurs when the sebaceous glands become enlarged, creating small, shiny, yellowish lesions or bumps, usually 2-4 millimeters in diameter and typically on the face. Results from our research have demonstrated that NPS has a unique ability to target cellular structures located within the dermis of the skin, such as the sebaceous gland, without damaging the dermis, making it a potentially unique and highly effective treatment modality for SH lesions and similar targets residing deeper within the dermis of the skin. 

During 2018 we conducted a multi-center clinical study evaluating the safety and efficacy of our NPS platform for the treatment of SH. Results from our clinical study, including 73 patients and 222 treated SH lesions, indicate that NPS technology is effective for eliminating SH. Over 99% of treated SH lesions (221 of 222) were rated clear or mostly clear by investigators at the 60-day post treatment follow-up evaluation. Approximately 92% (n=203) of treated lesions were assessed as clear or mostly clear after a single treatment. Patients in the study rated 77% of lesion outcomes as satisfied or mostly satisfied.

We believe that the successful elimination of SH lesions reflects a valuable commercial opportunity for our CellFX System in an area of unmet need and substantiates the unique ability of NPS pulses to penetrate the dermis and target deeper cellular structures without damaging the surrounding dermis.

Seborrheic Keratosis

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Seborrheic Keratosis (SK) is one of the most common non-cancerous skin growths in older adults. SK usually appear as a brown, black or light tan growth on the face, chest, shoulders or back and has a waxy, scaly, slightly elevated appearance. SK are normally painless, and patients often seek to have them removed if they become irritated by clothing or for cosmetic reasons.

During 2017 and 2018 we conducted a multi-center clinical study evaluating the safety and efficacy of NPS technology for the treatment of SK. Results from our clinical study, including 58 patients and 174 treated SK lesions, indicate that a single NPS treatment is effective for eliminating SK. 82% of treated SK lesions (143 of 174) were rated clear or mostly clear by investigators at the 106-day post treatment follow-up evaluation. Patients in the study rated 78% of treatment outcomes as satisfied or mostly satisfied.

We believe that the results of this clinical study provide support to pursue commercial opportunities for the CellFX System in the treatment of SK.

Future Dermatology Application Feasibility Studies

We expect to conduct clinical studies on an ongoing basis to continue to evaluate clinical opportunities for and demonstrate the value of our CellFX System across a growing list of valuable indications: 

Cutaneous Warts

During 2018 we initiated a 20 patient multi-center clinical feasibility study evaluating the safety and effectiveness of our CellFX System for the treatment of non-genital cutaneous warts. Non-genital cutaneous warts are benign grainy skin growths that are typically caused by the human papillomavirus (HPV). Results from this study will inform decisions regarding opportunities for future clinical studies for the treatment of warts.

Acne

During early 2019 we initiated a multi-center clinical feasibility study evaluating the safety and effectiveness of our CellFX System for the treatment of acne on the back. Back acne is characterized by eruptions of pimples, pustules, blackheads and/or cysts, often on the upper back, and is generally caused by the same factors that trigger facial acne, namely overactive sebaceous glands that lead to the proliferation of acne related bacteria. Our unique ability to target the sebaceous gland, as evidenced by the impressive results from our sebaceous hyperplasia study, led our dermatology advisory board to encourage us to pursue a feasibility study in acne, based on the role of the sebaceous glands in chronic acne eruptions. 

Nano-Pulse Stimulation Initiated Immunogenic Cell Death

In previously published preclinical models of cancerous lesions, NPS treatment has been shown to induce immunogenic cell death (ICD), a process that leads to the exposure of the unique cancer cell antigens to the immune system, resulting in the generation of cytotoxic T-cells and the mounting of an adaptive immune response targeted against those cells, without any observed toxic side effects. Based on this foundation of preclinical evidence, we believe NPS technology has the potential to play a role in immuno-oncology. Applications in immuno-oncology are a longer-term potential opportunity and may require the use of adjuvants or other agents in combination with NPS. We continue to evaluate NPS technology and our CellFX System in clinical and preclinical studies.

During 2018 we commenced a clinical biomarker study to evaluate the CellFX System and NPS technology in Basal Cell Carcinoma (BCC), the most prevalent form of skin cancer. We believe BCC represents a bridge between our developments in dermatology and those in oncology. This is our first human study in cancer and it will allow us to look at both the ability of CellFX System and NPS pulses to treat BCC lesion cells and the immune response changes as a result of treatment. This is not a therapeutic endpoint study, but it is an important first step that enables us to move quickly to demonstrate safety and NPS technology effect in treating skin cancer while providing necessary information to inform decisions relative to next steps towards a follow-on study aimed at a therapeutic endpoint.

Our CellFX System

We have developed and plan to commercialize our proprietary CellFX System into the large and growing aesthetic procedure market as our first commercial market. The CellFX System is a platform, designed to support a wide array of

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applications in aesthetic dermatology and potentially in other medical disciplines. We believe our CellFX System is the only tunable nanosecond pulsed energy delivery system designed and used in human medicine. Our CellFX System allows for the adjustment of four key treatment parameters: pulse duration, pulse amplitude, pulse frequency, and the number of pulses, depending on the target tissue, application and desired treatment outcome.

The CellFX System currently includes a multi-use handpiece and an initial family of five (5) single-patient use dermatology treatment tips. The system is designed to operate in a variety of medical environments, including a physician’s office or clinic, as well as outpatient surgery centers or hospitals. The system is a mobile cart-based system that can easily be transported from room to room and plugs into a standard wall outlet adaptable to either U.S. or international power sources.

The treatment tips enable treatment of a variety of lesion sizes, from 1.5mm to 10mm square, and wirelessly connect to our CellFX System when they are plugged into the handpiece. This enables the use of automated treatment settings based on the treatment tip being utilized.

The CellFX System and its component parts are engineered for volume manufacturing and the use of outsourced contract manufacturing partners to ensure our ability to meet anticipated demand while effectively managing underlying system costs that support a profitable sale of the CellFX System at competitive price points.

Safety Profile of Our NPS Technology Platform

During the course of conducting human clinical studies in dermatology with the NPS platform to support an FDA filing at leading dermatology research centers across the United States, no serious adverse events have been reported and patient tolerance to the procedure has been very high. A histological study of treated human tissue examined by experts in dermatopathology revealed a unique and consistent cell-specific mechanism of action and a predictable healing response that spared non-cellular dermal tissue across a wide range of skin types and patient demographics.

Commercialization Strategy

During February 2019 we submitted a Pre-Market Notification 510(k) to the FDA seeking clearance to commercialize our CellFX System. Pending regulatory clearance, we plan to launch our CellFX System in the United States during 2019.  The commercialization strategy for our CellFX System is comprised of three primary elements:

· We are in the process of building a sales and marketing team comprised of professionals with experience in delivering products and applications into the aesthetic dermatology market and have long-standing relationships with the key opinion leaders, clinics and customers. We plan to scale our sales and marketing infrastructure along with the growth of the business;

· We intend to leverage and expand our existing relationships with our KOL advisors. These opinion leaders have significant influence on their peers and on the adoption of new technologies and treatment modalities through podium presentations at major meetings and media exposure in major markets; and

· We will continue to conduct clinical studies and work with our KOLs to pursue additional applications for which our cell specific mechanism of action is enabling. We have already started our evaluation for the treatment of warts, acne and basal cell carcinoma. Our application development pipeline continues to reveal additional targets that have potential to add to the utilization potential of our future growing installed base.

We believe knowledgeable salespersons who can convey and assist the clinician in delivering the value of our CellFX System to patients, success of early adopter KOLs, and the increasing utility of our CellFX System with meaningful clinical data greatly enhances our ability to attract customers and promote ongoing utilization of installed systems.

Intellectual Property

We maintain a portfolio of intellectual property surrounding our CellFX System and our NPS technology platform. As a medical technology company our current patents and ongoing intellectual property development are, and will continue to be, a priority for our business. We believe our intellectual property is an important competitive advantage for us. We also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to further develop, maintain and strengthen our competitive position. We actively protect our intellectual property through a combination of patent registrations, trademarks, and copyright protections; confidentiality agreements with our employees, consultants and other parties; and access control to sensitive information.

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We own or have a license to 89 issued patents worldwide and have 79 patent applications pending worldwide, with the earliest expiration of a United States issued patent, in this case a licensed patent, in 2020 and the latest in 2035. As we have over the last several years, we are filing and plan to continue to file new patent applications to protect our systems, algorithms, applicators, methods, and designs of our technologies and products as they evolve. Medical technologies such as ours may be utilized in many different applications and incorporate several patentable features, and our strategy will be to always strive to protect our products and technologies with multiple patents directed to the variety of features and applications, in order to establish a strong defense against competitors and such that an expiration of a single patent does not lessen our overall comprehensive coverage. We believe our NPS platform and current CellFX System are protected by several issued patents covered in multiple pending applications we are pursuing.

Research and Development

Since inception, the majority of our business has focused on the development of our CellFX System and earlier clinical versions of the system, conducting clinical studies, including dermatology studies in SK, SH, warts, acne and BCC, and preclinical and basic research into the unique mechanism of action of our Nano-Pulse Stimulation technology platform. We continue to conduct research and development activities in pursuit of commercial applications for our CellFX System, but have not yet commercialized or recognized revenue from our technology.

The development of our proprietary CellFX System has involved a multi-disciplinary effort including; electrical, mechanical, biomedical, and software engineers to design and integrate the various elements of our CellFX System and its predecessors; clinical research specialists to plan and conduct clinical studies; and research scientists to assess and interpret the focal and systemic biological effects of our technology. We believe we can expand the potential of our CellFX System through ongoing innovation and additional clinical studies demonstrating safety and efficacy in additional dermatologic conditions and additional therapeutic areas.

Competition

The applications we intend to target are subject to intense competition from rapidly evolving companies and new scientific discoveries. We compete against well-established incumbent technologies offering products in oncology, dermatology and aesthetics, minimally invasive treatments, and veterinary applications. Given the broad scope of our technology, we face competition ranging from large manufacturers with multiple business lines to small companies with focused products, as well as providers of other medical therapies and therapeutics for conditions that we intend to treat. Some of these companies currently have greater financial, technical, research and/or other resources than we do and have larger and more established manufacturing capabilities and marketing, sales and support functions. Our future success will depend on our ability to establish and maintain a competitive position in current and future technologies. Our technology is unique and differentiated in that NPS technology stimulates primarily intracellular cell death which we believe would be less traumatic to treated tissue and would result in less scarring or collateral damage to surrounding tissues.

Government Regulation

The CellFX System is a medical device subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDC&A, and its implementing regulations, as well as other federal and state regulatory bodies in the United States. The laws and regulations govern, among other things, product design and development, pre-clinical and clinical testing, manufacturing, packaging, labeling, storage, recordkeeping and reporting, clearance or approval, marketing, distribution, promotion, import and export, and post-marketing surveillance.

The FDA regulates the medical device market to ensure the safety and efficacy of these products. The FDA allows for two primary pathways for a medical device to be commercialized: a successful pre-market approval application, or PMA, or Premarket Notification, or 510(k) clearance. The FDA has established three different classes of medical devices, based on the level of risk associated with using a device and consequent degree of regulatory controls needed to govern its safety and efficacy.

Class I and Class II devices are considered lower risk devices. Most Class I devices are exempt from the 510(k) process. Most Class II devices, including the CellFX System requires 510(k) clearance from the FDA in order to be marketed in the United States. A 510(k) Premarket Notification is a premarket submission made to the FDA to demonstrate that the device to be marketed is substantially equivalent (SE) to a legally marketed device that is not subject to premarket approval, or a predicate. Companies making a 510(k) submission must compare their 510(k) device to a predicate device. A device recently cleared under 510(k) is usually used as a predicate device. However, any legally U.S. marketed device that has the same intended use and same technological characteristics may be used as a predicate device. The FDA has a 90-calendar day

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review goal from the date of receipt of the 510(k) to either authorize or decline commercial distribution of the device, but clearance generally takes longer than 90 days. If the FDA decides that the product is not substantially equivalent to a predicate device, a clearance will not be granted and the device cannot be commercialized.

Medical devices regarded as the highest risk by the FDA are designated Class III and generally require thesubmission of a PMA application for approval. Class III devices generally include life-sustaining, life-supporting, or implantable devices or devices without a known predicate technology already approved by the FDA.

A PMA application must be accompanied by substantial data that supports the reasonable safety and efficacy of the device, which includes the provision of preclinical, clinical, technical, manufacturing and labeling information. After the FDA determines the application is sufficient complete to commence a substantive review, it has 180 days to review the submission, but it can typically take longer (up to several years) as this regulatory body can request additional data, including clinical data or clarifications. The FDA may also impose additional regulatory scrutiny for a PMA, including the institution of an outside advisory committee (panel review) to assess the application or provide recommendations as to whether to approve the device. Although the FDA is not required to follow the recommendation of an advisory panel, it generally does. As part of the review, the FDA will also inspect the manufacturing operations of the company requesting approval to verify compliance with Quality System regulations.

After a device receives 510(k) clearance or PMA approval, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or PMA Supplemental approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with the determination not to seek a new 510(k) clearance or PMA Supplement, the FDA may retroactively require a new 510(k) clearance or PMA Supplements to be submitted. The FDA could also require a manufacturer to cease marketing and distribution and/or recall the modified device until clearance or approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, and possible warning letters.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply. These include:

· The FDA’s Quality System Regulation (QSR) which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

· labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses;

· medical device reporting (MDR), regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; and

· post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

The FDA has broad post-market and regulatory enforcement powers. We may be subject to unannounced inspections by the FDA and the Food and Drug Branch of the California Department of Public Health to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers.

Failure to comply with applicable regulatory requirements can result in enforcement action by FDA, which may include any of the following sanctions:

· warning letters, fines, injunctions, consent decrees and civil penalties;

· repair, replacement, refunds, recall or seizure of our products;

· operating restrictions, partial suspension or total shutdown of production;

· refusing our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products;

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· withdrawing 510(k) clearance or premarket approval that has already been granted; and

· criminal prosecution.

Regulatory System for Medical Devices in Europe

The European Union (EU) consists of 28-member states and has a coordinated system for the authorization of medical devices. Marketing medical devices in the EU is subject to compliance with the Medical Devices Directive 93/92/EEC (MDD). A medical device may be placed on the market within the EU only if it conforms to certain “essential requirements” and bears the CE Mark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, the device must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in a suitable manner.

Manufacturers must demonstrate that their devices conform to the relevant essential requirements through a conformity assessment procedure. The nature of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length of time the device is in contact with the body, the degree of invasiveness and the extent to which the device affects the anatomy. Conformity assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are often private entities and are authorized or licensed to perform such assessments by government authorities. Manufacturers usually have some flexibility to select a notified body for the conformity assessment procedures for a particular class of device and to reflect their circumstances, e.g., the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed. Notified bodies also may review the manufacturer’s quality systems. If satisfied that the product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity and application of the CE Mark. Application of the CE Mark allows the general commercializing of a product in the EU. The product can also be subjected to local registration requirements depending on the country.

In May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which will repeal and replace the MDD with effect from May 26, 2020. The MDR clearly envisages, among other things, stricter controls of medical devices, including strengthening of the conformity assessment procedures, increased expectations with respect to clinical data for devices and pre-market regulatory review of high-risk devices. The MDR also envisages greater control over notified bodies and their standards, increased transparency, more robust device vigilance requirements and clarification of the rules for clinical investigations. Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May 26, 2020 may continue to be placed on the market for the remaining validity of the certificate, until May 27, 2024 at the latest. After the expiry of any applicable transitional period, only devices that have been CE marked under the MDR may be placed on the market in the EU.

Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, impacts the transmission, maintenance, use and disclosure of certain individually identifiable health information (referred to as protected health information, or PHI). Since HIPAA was enacted in 1996, numerous implementing regulations have been issued, including, but not limited to: (1) standards for the privacy of individually identifiable health information (the Privacy Rule), (2) standards to protect the confidentiality, integrity and security of electronic protected health information (the Security Rule), (3) standards for electronic transactions, (4) a standard unique national provider identifier for providers and health plans, and (5) the HHS Breach Notification Rule. We refer to these rules, as well as similar state laws applicable to our operations, as the HIPAA Rules. HHS has also issued regulations governing the enforcement of the HIPAA Rules, the violation of which potentially includes significant criminal and civil penalties. Furthermore, many states have similar laws and regulations applicable to our operations, including but not limited to state data security breach requirements.

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The HIPAA Rules apply to “covered entities,” which includes healthcare providers who conduct certain transactions electronically, including but not limited to the electronic submission of health care claims to an insurance carrier. We also provide services to customers that are directly regulated entities under HIPAA and the HIPAA Rules, and we are required to provide satisfactory written assurances to these customers through our written agreements that we will provide our services in accordance with HIPAA and the HIPAA Rules. As such, HIPAA and the HIPAA Rules apply to various aspects of our business and we are required to be in compliance with HIPAA and the HIPAA Rules.

On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act, or HITECH, provisions of the American Recovery and Reinvestment Act of 2009.  This law includes strengthened federal privacy and security provisions to protect personally-identifiable health information, such as the notification requirements set forth in the Breach Notification Rule. On January 25, 2013, the Office for Civil Rights (OCR) of the Department of Health and Human Services published its final rule to modify the HIPAA Privacy, Security, Breach and Enforcement Rules, including most revisions/additions made by the HITECH Act. The rule became effective on March 23, 2013, and entities and business associates covered by the rule were required to comply with most of the applicable requirements by September 23, 2013.

We are currently subject to the HIPAA regulations. We are subject to audit under the U.S. Department of Health and Human Services, or HHS, HITECH-mandated audit program. We may also be audited in connection with a privacy complaint. We are subject to prosecution and/or administrative enforcement and increased civil and criminal penalties for non-compliance, including a new, four-tiered system of monetary penalties adopted under HITECH. We are also subject to enforcement by state attorneys general who were given authority to enforce HIPAA under HITECH. To avoid penalties under the HITECH breach notification provisions, we must ensure that breaches of protected health information are promptly detected and reported within the company, so that we can make all required notifications on a timely basis. However, even if we make required reports on a timely basis, we may still be subject to penalties for the underlying breach.

In addition to the federal privacy regulations, there are a number of state laws regarding the privacy and security of health information and personal data that are applicable to clinical laboratories. The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely and new privacy and security laws in this area are evolving. Requirements of these laws and penalties for violations vary widely. We believe that we have taken the steps required of us to comply with health information privacy and security statutes and regulations in all jurisdictions, both state and federal. However, we may not be able to maintain compliance in all jurisdictions where we do business. Failure to maintain compliance, or changes in state or federal laws regarding privacy or security, could result in civil and/or criminal penalties and could have a material adverse effect on our business.

If we or our operations are found to be in violation of HIPAA, HITECH or their implementing regulations, we may be subject to penalties, including civil and criminal penalties, fines, and exclusion from participation in U.S. federal or state health care programs, and the curtailment or restructuring of our operations. HITECH increased the civil and criminal penalties that may be imposed against Covered Entities, their Business Associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

New laws governing privacy may be adopted in the future as well. We have taken steps to comply with health information privacy requirements that are applicable to us.

Federal, State and Foreign Fraud and Abuse Laws

Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs. Our business is subject to compliance with these laws. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act, which we refer to collectively as the Affordable Care Act, was enacted in the United States. The provisions of the Affordable Care Act are effective on various dates. The Affordable Care Act expands the government’s investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments to both the Anti-Kickback Statute and the False Claims Act, to make it easier to bring suit under these statutes. The Affordable Care Act also allocates additional resources and tools for the government to police healthcare fraud, with expanded subpoena power for HHS, additional funding to investigate fraud and abuse across the healthcare system and expanded use of recovery audit contractors for enforcement.

Anti-Kickback Statutes.  The federal healthcare programs’ Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce

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either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid.

The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payment of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered businesses, the statute has been violated. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. In addition, some kickback allegations have been claimed to violate the Federal False Claims Act, discussed in more detail below.

The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are otherwise lawful in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, Congress authorized the Office of Inspector General, or OIG, of HHS to issue a series of regulations known as “safe harbors.” These safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy an applicable safe harbor may result in increased scrutiny by government enforcement authorities such as OIG.

Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of recipients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

Government officials have focused their enforcement efforts on the marketing of healthcare services and products, among other activities, and recently have brought cases against companies, and certain individual sales, marketing and executive personnel, for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

Federal False Claims Act.  Another development affecting the healthcare industry is the increased use of the federal False Claims Act, and in particular, action brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has violated the False Claims Act and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically. In addition, various states have enacted false claims laws analogous to the False Claims Act, and many of these state laws apply where a claim is submitted to any third-party payor and not just a federal healthcare program.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $11,181 and $22,363 for each separate instance of false claim. As part of any settlement, the government may ask the entity to enter into a corporate integrity agreement, which imposes certain compliance, certification and reporting obligations. There are many potential bases for liability under the False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The federal government has used the False Claims Act to assert liability on the basis of inadequate care, kickbacks and other improper referrals, and improper use of Medicare numbers when detailing the provider of services, in addition to the more predictable allegations as to misrepresentations with respect to the services rendered. In addition, the federal government has prosecuted companies under the False Claims Act in connection with off-label promotion of products. Our future activities relating to the reporting of wholesale or estimated retail prices of our products, the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products and the sale and marketing of our products may be subject to scrutiny under these laws.

While we are unaware of any current matters, we are unable to predict whether we will be subject to actions under the False Claims Act or a similar state law, or the impact of such actions. However, the costs of defending such claims, as well as any sanctions imposed, could significantly affect our financial performance.

The Sunshine Act.  The Physician Payment Sunshine Act, or the Sunshine Act, which was enacted as part of the Affordable Care Act, requires manufacturers of prescription drugs, devices, biologics or other medical supplies available for coverage by Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the Secretary of HHS: (i) payments or other transfers of value made by that entity, or by a third-party as directed by that entity, to physicians and

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teaching hospitals or to third parties on behalf of physicians or teaching hospitals; and (ii) physician ownership (including immediate family ownership) and investment interests in the entity. The statute requires the federal government to make reported information available to the public starting September 2014, which it has. Failure to comply with the reporting requirements can result in significant civil monetary penalties ranging from $1,000 to $10,000 for each payment or other transfer of value that is not reported (up to a maximum per annual report of $150,000) and from $10,000 to $100,000 for each knowing failure to report (up to a maximum per annual report of $1.0 million). Additionally, there are criminal penalties if an entity intentionally makes false statements in such reports. We are subject to the Sunshine Act and the information we disclose may lead to greater scrutiny, which may result in modifications to established practices and additional costs. Additionally, similar reporting requirements have also been enacted on the state level domestically, and an increasing number ofcountries worldwide either have adopted or are considering similar laws requiring transparency of interactions with healthcare professionals.

Foreign Corrupt Practices Act.  The Foreign Corrupt Practices Act, or FCPA, prohibits any United States individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system of internal accounting controls for international operations.

International Laws.  In Europe, various countries have adopted anti-bribery laws providing for severe consequences, in the form of criminal penalties and/or significant fines, for individuals and/or companies committing a bribery offense. Violations of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation. For instance, in the United Kingdom, under the Bribery Act 2010, which went into effect in July 2011, a bribery occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also falls within the scope of the Bribery Act 2010. Under the new regime, an individual found in violation of the Bribery Act of 2010, faces imprisonment of up to 10 years. In addition, the individual can be subject to an unlimited fine, as can commercial organizations for failure to prevent bribery.

There are also international privacy laws that impose restrictions on the access, use, and disclosure of health information. All of these laws may impact our business. Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain required patient information could significantly impact our business and our future business plans.

U.S. Healthcare Reform

Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt commercialization of our current and future solutions. Changes in healthcare policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our current and future solutions. The Affordable Care Act substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts our industry. The Act contains a number of provisions that impact our business and operations, some of which in ways we cannot currently predict, including those governing enrollments in federal healthcare programs and reimbursement changes.

There will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payors to reduce costs while expanding individual healthcare benefits. Certain of these changes could impose additional limitations on the prices we will be able to charge for our current and future solutions or the amounts of reimbursement available for our current and future solutions from governmental agencies or third-party payors. While in general it is too early to predict specifically what effect the Affordable Care Act and its implementation or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition.

Environmental

We are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain hazardous and potentially hazardous substances used in connection with our operations. Although we believe that we have complied with these laws and regulations in all material respects and, to date, have not been required to take any action to correct any noncompliance, there can be no assurance that we will not be required to incur significant costs to comply with environmental regulations in the future.

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Insurance

We maintain product and clinical trial liability insurance coverage which includes a maximum of per claim and an annual aggregate policy limits, subject to self-insured retentions. The policy covers, subject to policy conditions and exclusions, claims of bodily injury and property damage from any product manufactured by us or from trial-related adverse events.

There is no assurance that our level of coverage is adequate. We may not be able to sustain or maintain our current level of coverage and cannot assure you that adequate insurance coverage will continue to be available on commercially reasonable terms, or at all. A successful product liability claim may exceed our existing coverages and may make future coverages significantly more expensive, if available at all.

Employees

As of December 31, 2018, we had 54 full-time employees. Of these employees, 41 were in research and development and 13 were in general and administration. Substantially all of our employees are located at our headquarters in Hayward, California. None of our employees are represented by labor unions or are covered by a collective bargaining agreement with respect to their employment. We have not experienced any work stoppages, and we consider our relationship with our employees to be good.

Available Information

Effective June 18, 2018, Pulse Biosciences reincorporated as a Delaware Corporation. We were originally incorporated in Nevada on May 19, 2014 under the name Electroblate, Inc. and changed our name to Pulse Biosciences, Inc. effective December 8, 2015.  Our corporate offices are located at 3957 Point Eden Way, Hayward, California. Our telephone number is (510) 906-4600. 

Our website is located at www.pulsebiosciences.com. The information that can be accessed through our website is not incorporated into this Annual Report on Form 10-K, and the inclusion of our website address is an inactive textual reference only. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through the “Investor Relations” section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

Additionally, we use our website as a channel for distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding us, as well as corporate governance information, is routinely posted and accessible on the “Investor Relations” section of the website, which is accessible by clicking “Investors” on the menu tab labeled “About Us” on our website home page.

Item 1A.Risk Factors

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other informationin this Annual Report, including our financial statements and related notes,which could have a material adverse effect on our business, financial condition, results of operations and prospects. The risks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition, results of operations and prospects.

Risks Relating to Our Business, Industry and Financial Condition

Since we have a limited operating history and have not commenced any revenue producing operations, it is difficult to evaluate the future of our business.  

We are a clinical-stage medical technology company and have not yet commenced revenue-producing operations. To date, our operations on a consolidated basis have consisted of the continued development of our technologies and implementation of the early parts of our business plan. We have incurred significant operating losses in each year since our inception and we expect to continue to incur additional losses for the next several years. In addition, a high percentage of our

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expenses will continue to be fixed; accordingly, our losses may be greater than expected and our operating results may suffer. We have limited historical financial data upon which we may base our projected revenue and base our planned operating expenses. Our limited operating history makes it difficult to evaluate our technology or prospective operations and business prospects. 

We currently have no commercial products or product revenue and may never become profitable.

To date, we have not generated revenue and have relied on financing from the sale of equity securities to fund our operations. We expect that our future financial results will depend primarily on our success in obtaining approval for, launching, selling and supporting our therapies and treatments utilizing our CellFX System or other products based on NPS technology; however, our technology is still in development and has not been approved to treat any disease or condition. We expect to expend significant resources on hiring of personnel, continued scientific and product research and development, potential product testing and preclinical and clinical investigation, intellectual property development and prosecution, marketing and promotion, capital expenditures, working capital, general and administrative expenses, and fees and expenses associated with our capital raising efforts. We expect to incur costs and expenses related to consulting costs, laboratory development costs, hiring of scientists, engineers, and other operational personnel, and the continued development of relationships with potential partners. We are incurring significant operating losses, we expect to continue to incur additional losses for at least the next several years, and we cannot assure you that we will generate revenue or be profitable in the future. Our future products may never be approved or become commercially viable or accepted for use. Even if we find commercially viable applications for our technology, which may include licensing, we may never recover our research and development expenses.

Investment in medical technology is highly speculative, because it entails substantial upfront capital expenditures and significant risk that any potential product will fail to demonstrate adequate efficacy or clinical utility. Investors should evaluate an investment in us in light of the uncertainties encountered by developing medical technology companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to achieve profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could adversely affect the market price of our common stock and could significantly impair our ability to raise capital, expand our business or continue to implement our business plan.

If we are unable to obtain sufficient funding, we may be unable to execute our business plan and fund operations. We may not be able to obtain additional financing on commercially reasonable terms, or at all.

We have experienced operating losses, and we expect to continue to incur operating losses for the next several years as we implement our business plan. Currently, we have no revenue and do not have arrangements in place for all the anticipated financing that would be required to fully implement our business plan. Our prior losses combined with expected future losses, have had and will continue to have, for the foreseeable future, an adverse effect on our stockholders’ equity and working capital. While we believe we have the resources necessary to fund operations for the next twelve months from the date of issuance of this Annual Report, our inability to raise capital in the future could have a material adverse effect on our business, financial condition and results of operations. We plan to raise additional funds in the near future and intend to finance our operations through equity financings.

We cannot give any assurance that we will be able to obtain all the necessary funding that we may need. In addition, we believe that we will require additional capital in the future to fully develop our technologies and planned products to the stage of a commercial launch. We have pursued and may pursue additional funding through various financing sources, including the private sale of our equity and debt securities, licensing fees for our technology, joint ventures with capital partners and project type financing. If we raise funds by issuing equity or equity-linked securities, dilution to our stockholders will result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities issued or borrowings could impose significant restrictions on our operations. We also may seek government based financing, such as development and research grants. There can be no assurance that funds will be available on commercially reasonable terms, if at all.

The incurrence of indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms. These agreements may require that we relinquish, or license to a third party on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves, or reserve certain opportunities for future

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potential arrangements when we might otherwise be able to achieve more favorable terms. In addition, we may be forced to work with a partner on one or more of our products or market development programs, which could lower the economic value of those programs to us.

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, we may terminate or delay the development of one or more of our products, delay clinical trials necessary to market our products, or delay establishment of sales and marketing capabilities or other activities necessary to commercialize our products. If this were to occur, our ability to grow and support our business and to respond to market challenges could be significantly limited or we may be unable to continue operations, in which case you could lose your entire investment.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control and may be difficult to predict, including:

· the timing and cost of, and level of investment in, research, development and commercialization activities relating to our product candidates, which may change from time to time;

· the timing of receipt of approvals or clearances for our product candidates from regulatory authorities in the United States;

· the timing and status of enrollment for our clinical trials;

· coverage and reimbursement policies with respect to our product candidates, if approved or cleared, and potential future drugs or devices that compete with our product candidates;

· the cost of manufacturing our product candidates, as well as building out our supply chain, which may vary depending on the quantity of production and the terms of our agreements with manufacturers;

· expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies;

· the level of demand for our products, if approved or cleared, which may vary significantly over time;

· litigation, including patent, employment, securities class action, stockholder derivative, general commercial and other lawsuits;

· future accounting pronouncements or changes in our accounting policies; and

· the timing and success or failure of nonclinical studies and clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.

The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.

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If we lose key management personnel, our ability to identify, develop and commercialize new or next generation product candidates will be impaired, could result in loss of markets or market share and could make us less competitive.

We are highly dependent upon the principal members of our management team, including our Chief Executive Officer, Darrin Uecker, and the members of our sales, marketing, scientific and engineering teams. These persons have significant experience and knowledge with sub-microsecond pulsed electric fields and more broadly in aesthetics, dermatology, life sciences and medical technologies. The loss of any team member could impair our ability to design, identify, and develop new intellectual property and new scientific or product ideas. The loss of a key employee, the failure of a key employee to perform in his or her current position or our inability to attract and retain skilled employees could result in our inability to continue to grow our business or to implement our business strategy. We compete for qualified management and scientific personnel with other life science companies, academic institutions and research institutions. Our employees could leave our company with little or no prior notice and may be free to work for a competitor. If one or more of our senior executives or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and other senior management may be required to divert attention from other aspects of the business. In addition, we do not have “key person” life insurance policies covering any member of our management team or other key personnel. The loss of any of these individuals or any inability to attract or retain qualified personnel, including scientists, engineers and others, could prevent us from pursuing collaborations and materially and adversely affect our product development and introductions, business growth prospects, results of operations and financial condition. 

There is a limited talent pool of experienced professionals in our industry. If we are not able to retain and recruit personnel with the requisite technical skills, we may be unable to successfully execute our business strategy.

The specialized nature of our industry results in an inherent scarcity of experienced personnel in the field. Our future success depends upon our ability to attract and retain highly skilled personnel, including scientific, technical, commercial, business, regulatory and administrative personnel, necessary to support our anticipated growth, develop our business and perform certain contractual obligations. Given the scarcity of professionals with the scientific knowledge that we require and the competition for qualified personnel among life science businesses, we may not succeed in attracting or retaining the personnel we require to continue and grow our operations.

Rapidly changing technology in life sciences could make the products we are developing obsolete.

The life sciences industries are characterized by rapid and significant technological changes, frequent new product introductions and enhancements and evolving industry standards. Our future success will depend on our ability to continually develop and then improve the products that we design and to develop and introduce new products that address the evolving needs of our customers on a timely and cost-effective basis. We also will need to pursuenew market opportunities that develop as a result of technological and scientific advances. These new market opportunities may be outside the scope of our proven expertise or in areas which have unproven market demand. Any new products developed by us may not be accepted in the intended markets. Our inability to gain market acceptance of new products could harm our future operating results.

We expect to operate in a highly competitive market, we may face competition from large, well-established medical technology, device and product manufacturers with significant resources, and we may not be able to compete effectively.

The medical technology, medical device, biotechnology and pharmaceutical industries are characterized by intense and dynamic competition to develop new technologies and proprietary therapies. We face competition from a number of sources, such as pharmaceutical companies, medical device companies, generic drug companies, biotechnology companies and academic and research institutions.  We may find ourselves in competition with companies that have competitive advantages over us, such as:

· significantly greater name recognition;

· established relations with healthcare professionals, customers and third-party payers;

· greater efficacy or better safety profiles;

· established distribution networks;

· additional lines of products, and the ability to offer rebates, higher discounts or incentives to gain a competitive advantage;

· greater experience in obtaining patents and regulatory approvals for product candidates and other resources;

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· greater experience in conducting research and development, manufacturing, clinical trials, obtaining regulatory approval for products, and marketing approved products; and

· greater financial and human resources for product development, sales and marketing, and patent litigation.

We may also face increased competition in the future as new companies enter our markets and as scientific developments surrounding electro-signaling therapeutics continue to accelerate. While we will seek to expand our technological capabilities to remain competitive, research and development by others may render our technology or product candidates obsolete or noncompetitive or result in treatments or cures superior to any therapy developed by us. In addition, certain of our product candidates, if approved, may compete with other dermatological products, including over-the-counter, or OTC, treatments, for a share of some patients’ discretionary budgets and for physicians’ attention within their clinical practices. Even if a generic product or an OTC product is less effective than our product candidates, a less effective generic or OTC product may be more quickly adopted by physicians and patients than our competing product candidates based upon cost or convenience. As a result, we may not be able to compete effectively against current and potential future competitors or their devices and products. 

We may rely on third parties for our sales, marketing, manufacturing and/or distribution, and these third parties may not perform satisfactorily.

We do not currently conduct any aspects of sales, marketing, large-scale manufacturing or distribution. To be able to commercialize our planned products, we may elect to internally develop all of the foregoing or utilize third parties with respect to one or more of these items. Our reliance on these third parties may reduce our control over these activities; however, reliance on third parties does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards. Any failure of these third parties to perform satisfactorily and in compliance with relevant laws and regulations could lead to delays in the development of our planned products, including delays in our clinical trials, or failure to obtain regulatory approval for our planned products, or failure to successfully commercialize our planned products or other future products. Some of these events could be the basis for FDA or other regulatory action, including injunction, recall, seizure or total or partial suspension of production.

We do not have any corporate experience in establishing these capabilities, and therefore, we may be unsuccessful in achieving commercialization and earning revenues. We believe that setting up the commercialization aspects of a company will take a substantial amount of capital and commitment of time and effort. We may seek development and marketing partners and license our technology to others in order to avoid our having to provide the marketing, manufacturing and distribution capabilities within our organization. There can be no assurance that we will find any development and marketing partners or companies that are interested in licensing our technology. If we are unable to establish and maintain adequate sales, marketing, manufacturing and distribution capabilities, independently or with others, we will not be able to generate product revenue, and may not become profitable.

If we are unable to manage the anticipated growth of our business, our future revenue and operating results may be harmed.

We have experienced and continue to experience rapid growth in our business. Recent and future growth imposes significant added responsibilities on management, including the need to identify, recruit, train and integrate additional employees. Rapid expansion in personnel could mean that less experienced people carry out our research and development activities, manufacture, market and sell CellFXSystem and NPS therapies and treatments, which could result in inefficiencies and unanticipated costs, reduced quality and disruptions to our operations. In addition, rapid and significant growth may strain our administrative and operational infrastructure, and the failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed.

Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.

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Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. Furthermore, the market for aesthetic medical procedures may be particularly vulnerable to unfavorable economic conditions. In particular, insurance coverage and reimbursement for aesthetic dermatology procedures using CellFXSystem may not be available, and, as a result, demand for this product will be tied to discretionary spending levels of our targeted patient population. A global financial crisis or a global or regional political disruption could cause extreme volatility in the capital and credit markets. A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including weakened demand for our lead product candidates or any future product candidates, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could adversely impact our business.

Security breaches, loss of data and other disruptions to us or our third-party service providers 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, and our third-party service providers may collect and store sensitive data, including legally protected health information, personally identifiable information about our patients, information related to our trials, intellectual property, and our proprietary business and financial information. We manage and maintain our applications and data utilizing a combination of on-site and vendor-owned systems. We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorized access, as well as risks associated with our ability to identify and audit such events.

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 otherwise breached due to employee error, malfeasance or other activities. While we have not experienced any such attack or breach, if such an event were to occur, our networks would be compromised and the information we store on those networks could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such 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 of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, provide services, conduct research and development activities, collect, process and prepare company financial information, provide information about our product candidates and manage the administrative aspects of our business and could damage our reputation, any of which could adversely affect our business.

In addition, the interpretation and application of federal and state consumer, health-related and data protection laws in the United States 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, systems and compliance procedures in a manner adverse to our business.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the future sale of planned products and the use of planned products in human clinical studies. For example, we may be sued if any of our product candidates, including any that are developed in combination therapies, allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. We may also be subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannot successfully defend ourselves against claims that our planned products caused injuries, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

· decreased demand for any planned products that we may develop;

· injury to our reputation and significant negative media attention;

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· withdrawal of patients from clinical studies or cancellation of studies;

· significant costs to defend the related litigation and distraction to our management team;

· substantial monetary awards to patients;

· loss of revenue; and

· the inability to commercialize any products that we may develop.

For example, for our clinical trials in the field of oncology, patients with the types and stages of cancer targeted by our NPS technology may already be in severe and advanced stages of disease, may have worsened conditions despite traditional therapies, may not be surgical candidates, and/or may have both known and unknown significant pre-existing and potentially life-threatening conditions. During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our CellFX System or our NPS technology. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market those products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our product, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval processes, or impact and limit the type of regulatory approvals our products could receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could harm our business.

We currently maintain product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

We may become involved in litigation that may materially adversely affect us.

From time to time, we may be involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normal course of our business in addition to governmental and other regulatory investigations and proceedings. In addition, third parties may, from time to time, assert claims against us in the form of letters and other communications. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations and prospects.  See the section entitled “Legal Proceedings” for more detail on our current legal proceedings.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. If not utilized, the federal and state NOL carryforwards will begin to expire in various years beginning after 2034. Under the Internal Revenue Code of 1986, as amended, or the Code, and certain similar state tax provisions, a corporation is generally allowed a deduction for net operating losses, or NOLs, carried over from a prior taxable year. Under those provisions, we can carry forward our NOLs to offset our future taxable income, if any, until such NOLs are used or expire. The same is true of other unused tax attributes, such as tax credits.

In addition, under Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset future taxable income. We believe that we have had one or more ownership changes, and, as a result, a portion of our existing NOLs may be subject to limitation. Future changes in our stock ownership could result in additional limitations. We may not be able to utilize a material portion of our NOLs even if we attain profitability.

Further,in December 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted into law. The change in the tax law was partially effective in 2017 and fully effective in 2018. The primary impacts to us include a decrease of the corporate income tax rate structure and NOL limitations. These changes may have a material impact to the value of deferred tax assets and liabilities and our future taxable income and effective tax rate. We are assessing the TCJA with professional advisers, and believe that the impact of the TCJA on our business may not be fully known for some time, and until such analysis is

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complete, the full impact of the new tax law on us in future periods is uncertain, and no assurances can be made by us on any potential impacts.

We have a substantial amount of goodwill and intangible assets which over time may have to be written down as we make the required periodic assessments as to their value as reflected on our financial statements.

A significant portion of our total assets are comprised of goodwill and intangibles that arose from our 2014 business acquisitions. We review goodwill for impairment at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. We also review our intangible assets for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. If we take an impairment charge for either goodwill or intangible assets, the overall assets will be reduced. Such an impairment charge may result in a change in the perceived value of the company and ultimately may be reflected as a reduction in the market price of our securities. Additionally, an impairment charge may also adversely influence our ability to raise capital in the future.

If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act 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. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.

In connection with the audit of our financial statements as of and for the year ended December 31, 2016, we identified a material weakness in our internal control over financial reporting. The material weakness related to a lack of effective controls to adequately restrict access and segregate duties. We implemented measures and remediated the material weakness in 2017; however, we cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to avoid potential future material weaknesses. The existence of one or more material weaknesses could preclude a conclusion that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

We are required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act if we continue to take advantage of the exemptions contained in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. 

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Our facilities in California are located near known earthquake faults, and the occurrence of an earthquake or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.

Our facilities in the San Francisco Bay Area are located near known earthquake fault zones and are vulnerable to damage from earthquakes. We are also vulnerable to damage from other types of disasters, including fire, floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our business at our facilities would be seriously, or potentially completely, impaired. In addition, the nature of our activities could cause significant delays in our research programs and commercial activities and make it difficult for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. Accordingly, an earthquake or other disaster could materially and adversely harm our ability to conduct business.

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Risks Related to Product Development

We currently do not have any products approved or cleared by the FDA or other similar foreign regulatory authorities for commercial sale or any commercialized products.

To date, we have invested a substantial amount of time and capital to research and develop the foundations of our technology and potential applications. For us to develop any products that might ultimately be commercialized, we will have to invest further time and capital in research and product development, obtaining regulatory approval or clearance, implementing regulatory compliance standards, and market development. Therefore, we may never develop any products that can be commercialized. All of our development efforts will require substantial additional investment, which may never result in any revenue. Our efforts may not lead to approved or commercially successful products for a number of reasons, including:

· we  may not be able to complete the development of any planned products;

· we may not be able to obtain regulatory approvals or clearancesfor our planned products, or the approved or cleared indications may be narrower than we seek;

· we  may experience delays in our development program, clinical trials and the regulatory approval or clearance process;

· our NPS technology may not prove to be safe or effective in clinical trials;

· physicians may not receive any reimbursement from third-party payers, or the level of reimbursement may be insufficient to support widespread adoption of any of our products;

· any products that are approved or cleared by regulatory authorities may not be accepted in the marketplace by physicians or patients;

· we  may not be able to manufacture our products in commercial quantities or at an acceptable cost; and

· rapid technological change or the appearance of a new competitive technology may make our technology and products obsolete.

Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure or delay can occur at any time during the clinical trial process. Success in nonclinical studies and early feasibility clinical studies does not ensure that expanded clinical trials that will be used to support regulatory submissions will be successful. These setbacks have been caused by, among other things, nonclinical findings made while clinical trials were underway, and safety or efficacy observations made in clinical trials, including previously unreported adverse events. Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval or clearance for our product candidates. 

Interim “top-line” and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim top-line or preliminary results from our clinical trials. Interim results from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Differences between preliminary or interim data and final data could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.

If we fail to obtain and maintain necessary regulatory clearances or approvals for our devices, or if clearances or approvals for future devices and indications are delayed or not issued, our commercial operations would be harmed. Additionally, changes in methods of product candidate manufacturing may result in additional costs or delay.

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Our product candidates under development are medical devices that are subject to extensive regulation by FDA in the United States and by regulatory agencies in other countries where we plan to do business. Government regulations specific to medical devices are wide-ranging and govern, among other things:

· device design, development and manufacture;

· laboratory, preclinical and clinical testing, labeling, packaging, storage and distribution;

· premarketing clearance and approval;

· record keeping;

· device marketing, promotion and advertising, sales and distribution; and

· post-marketing surveillance, including reporting of deaths and serious injuries and recalls and correction and removals.

Before a new medical device or a new intended use for, an existing device can be marketed in the United States, a company must first submit and receive either 510(k) clearance or premarketing approval, or PMA from the FDA, unless an exemption applies. In the 510(k) clearance process, the FDA will determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate with reasonable scientific data the safety and effectiveness of the device based on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). Either process can be expensive, lengthy and unpredictable. We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business.

The FDA and the Federal Trade Commission, or FTC, also regulate the advertising and promotion of our devices to ensure that the claims we make are consistent with our regulatory clearances, that there are adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including FDA warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions:

· adverse publicity, warning letters, fines, injunctions, consent decrees and civil penalties;

· repair, replacement, refunds, recall or seizure of our devices;

· operating restrictions, partial suspension or total shutdown of production;

· refusing our requests for 510(k) clearance or premarket approval of new devices, new intended uses or modifications to existing devices;

· withdrawing 510(k) clearance or premarket approvals that have already been granted; and

· criminal prosecution.

If any of these events were to occur, our business and financial condition would be harmed.

Our efforts may never demonstrate the feasibility of our technology.

Our research and development efforts remain subject to all of the risks associated with the development of new technology. CellFX System and NPS applications are not yet fully developed. Development of the underlying technology, including the development of our CellFX System, may be affected by unanticipated technical or other problems, among other

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development and research issues, and the possible insufficiency of funds needed in order to complete development of these products or devices. Regulatory and clinical hurdles or challenges also may result in delays and cause us to incur additional expenses that may increase our need for capital and result in additional losses. In addition, the potential indications for our NPS technology are numerous, and we may fail to pursue the most optimal indications. If we cannot complete, or if we experience significant delays in developing our technology, applications or products for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail and investors may lose the entirety of their investment.

The mechanism of action of NPS platform has not been fully determined or validated.

The exact mechanism(s) of action(s) of NPS technology platform is not fully understood, and data is still being gathered regarding its use. Furthermore, there are only a relatively small number of scientists and researchers who can be considered experts in the use of this emerging technology. A full understanding of a future product’s mechanism of action and a large scale of scientific experts are typically believed to make product development less risky. The FDA or similar foreign regulatory authorities may view this as increasing the potential risks, and diminishing the potential benefits, of products based on NPS technology. In addition, potential partners may view this as a limitation of the program, and it may be more challenging for us to obtain a partnership on favorable terms as a result.

Our planned products may cause serious adverse side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial desirability of an approved label or result in significant negative consequences following any marketing approval.

The risk of failure of clinical development is high. For example, the vast majority of our in vivo data has been a result of animal testing, and we have only completed a limited number of feasibility studies in humans. It is difficult to predict when or if this or any planned products will prove safe enough to receive regulatory approval or clearance. Undesirable side effects caused by NPS pulses or any of our planned products could cause us or regulatory authorities to interrupt, delay or halt clinical trials. They could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authority. 

Additionally, if any of our planned products receive marketing approval or clearance but, we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including:

· we may be forced to recall such product and suspend the marketing of such product;

· regulatory authorities may withdraw their approvals of such product;

· regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success of such products;

· the FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings about such product;

· the FDA may restrict distribution of our products and impose burdensome implementation requirements on us;

· we  may be required to change the way the product is administered or conduct additional clinical trials;

· we  could be sued and held liable for harm caused to subjects or patients;

· we may be subject to litigation or product liability claims; and

· our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular planned product, if approved.

Our business is dependent upon physicians adopting our CellFX System and NPS technology, and if we fail to obtain broad adoption, our business would be adversely affected.

If we obtain regulatory approval or clearancefor our CellFX System, our success will depend on our ability to educate physicians regarding the benefits of CellFX treatments over existing treatment modalities and to persuade them to prescribe

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CellFX treatments for their patients. We do not know if the CellFX System or NPStechnology will be successful over the long term, and market acceptance may be hindered if physicians are not presented with compelling data demonstrating the efficacy and safety of our products compared to alternative treatments. Any studies we, or third parties, may conduct comparing our CellFX System or NPS technology with alternative treatments may be expensive, time consuming or may not yield positive results. Additionally, adoption will be directly influenced by a number of financial factors, including the ability of providers to attract cash payments from patients or to obtain sufficient reimbursement from third party commercial payors, and the Centers for Medicare & Medicaid Services, or CMS, for the professional services they provide in administering CellFX treatments. The efficacy, safety, performance and cost-effectiveness of our CellFXSystem, NPS technology, or other potential products based on NPS technology, on a stand-alone basis and relative to competing services, will determine the availability and level of reimbursement received by us and providers. If physicians do not adopt and prescribe our future products, we may never become profitable.

We may find it difficult to enroll patients in our clinical trials. If we cannot enroll a sufficient number of eligible patients to participate in the clinical trials, we may not be able to initiate or continue clinical trials, which could delay or prevent development of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates as well as completion of required follow-up periods. In general, if patients are unwilling to participate in our trials because of negative publicity from adverse events in the life sciences industry or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting trials and obtaining regulatory approval or clearance of planned products may be delayed. If there are delays in accumulating the required patients and patient data, there may be delays in completing the trial.Further, if any of our clinical trial sites fail to comply with required good clinical practices, or GCPs, we may be unable to use the data gathered at those sites. If our clinical investigators fail to carry out their contractual duties or regulatory obligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons, our clinical trials may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.

Laboratory conditions differ from commercial conditions and field conditions, and the safety and effectiveness of our planned products may depend on the technique of the user.

Observations and developments that may be achievable under laboratory circumstances may not be able to be replicated in broader research and development phases, in commercial settings, or in the use of any of the planned products in the field. Furthermore, if commercialized, CellFX treatments will be administered by healthcare professionals and will require a degree of training and practice to administer correctly. Treatment results achieved during the laboratory or in clinical trials conducted by us or other investigators may not be representative of the results actually encountered during commercial use of our products due to variability in administration technique. The training and skills of investigators in our clinical trials may not be representative of the training and skills of future product users, which could negatively affect treatment results. In addition, there may be a selection bias in the patients and/or sites of administration chosen for any clinical trials that would positively affect treatment results.

Issues with our firmware and software may negatively affect the function of our devices.

The safety and effectiveness of CellFX-based treatments and therapies may depend, in part, on the function of firmware run by the microprocessors embedded in the device and associated software. This firmware and software is proprietary to us. While we have made efforts to test the firmware and software extensively, it is potentially subject to malfunction which in turn may harm a patient. Further, it may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, or similar problems. Any of these might result in harm to a patient or the unauthorized release of confidential medical, business or other information of other persons or of ours.  

We may encounter manufacturing problems or delays that could result in lost revenue. Additionally, we currently rely on third-party suppliers for critical materials needed to manufacture our CellFX System and related applicators. Any problems experienced by these suppliers could result in a delay or interruption of their supply to us, and as a result, we may face delays in the development and commercialization of planned products.

We perform final assembly of our devices to support our current research and development activities at our facility in California. We believe we have adequate manufacturing capacity for these purposes. However, if demand for our planned products increases significantly, we will need to either expand our manufacturing capabilities or outsource to other manufacturers. We have no corporate experience in commercial-scale manufacturing of our planned products, and we

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currently rely upon third-party suppliers to manufacture and supply components for our CellFX System. The manufacture of these products in compliance with the FDA’s regulations requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of medical device products often encounter difficulties in production, including difficulties with production costs and yields, quality control, quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced FDA requirements, other federal and state regulatory requirements, and foreign regulations.

We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, and if our contract manufacturers cannot successfully manufacture our product candidates that conform to our specifications and the strict regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able to rely on their manufacturing facilities for the manufacture of our product candidates. In addition, we have limited control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds these facilities inadequate for the manufacture of our product candidates or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates.

We currently purchase components for our CellFX System under purchase orders and do not have long-term contracts with most of the suppliers of these materials. If suppliers were to delay or stop producing our components, or if the prices they charge us were to increase significantly, or if they elected not to sell to us, we would need to identify other suppliers. We could experience delays in manufacturing the devices while finding another acceptable supplier, which could impact our results of operations. 

We may not become commercially viable if our ultimate commercialized products or related treatments fail to obtain an adequate level of reimbursement by Medicare and other third-party payers.

We believe that the commercial viability of our potential devices and products and related treatments, and therefore our commercial success as a company, may be affected by the availability of government reimbursement and medical insurance coverage and reimbursement for newly approved medical therapies, technologies and devices. Insurance coverage and reimbursement is not assured. It typically takes a period of use in the market place before coverage and reimbursement is granted, if it is granted at all. In the United States and other jurisdictions in Europe and other regions, physicians and other healthcare providers generally rely on insurance coverage and reimbursement for their revenues, therefore this is an important factor in the overall commercialization plans of a proposed product and whether it will be accepted for use in the marketplace. Without insurance coverage and reimbursement for our planned products, we would expect to earn only diminished revenues, if any revenues are earned.

Medicare, Medicaid, health maintenance organizations and other third-party payers are increasingly attempting to contain healthcare costs by limiting both the scope of coverage and the level of reimbursement of new medical technologies and products, and as a result, they may not cover or provide adequate payment for the use of our planned products. In order to obtain satisfactory reimbursement arrangements, we may have to agree to a fee or sales price lower than the fee or sales price we might otherwise charge. Each plan may separately require us to provide scientific and clinical support for the use of our products and, as a result, the coverage determination process is often a time-consuming and costly process with no assurance that coverage and adequate reimbursement will be applied consistently or obtained at all.  Even if Medicare and other third-party payers decide to cover procedures involving our proposed devices and products, we cannot be certain that the reimbursement levels will be adequate. Accordingly, even if our planned products are approved for commercial sale, unless government and other third-party payers provide adequate coverage and reimbursement for our devices and products, some physicians may be discouraged from using them, and our sales would suffer.

Medicare reimburses for medical technologies and products in a variety of ways, depending on where and how the item is used. However, Medicare only provides reimbursement if CMS determines that the item should be covered and that the use of the device or product is consistent with the coverage criteria. A coverage determination can be made at the local level by the Medicare administrative contractor, a private contractor that processes and pays claims on behalf of CMS for the geographic area where the services were rendered, or at the national level by CMS through a national coverage determination. There are statutory provisions intended to facilitate coverage determinations for new technologies, but it is unclear how these new provisions will be implemented and it is not possible to indicate how they might apply to any of our proposed devices and products, as they are still in the development stages. Coverage presupposes that the technology, device, or product has been cleared or approved by the FDA and further, that the coverage will be no broader than the approved intended uses of the device or product as approved or cleared by the FDA, but coverage can be narrower. A coverage determination may be so limited that relatively few patients will qualify for a covered use of a device or product.

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Obtaining a coverage determination, whether local or national, is a time-consuming, expensive and highly uncertain proposition, especially for a new technology, and inconsistent local determinations are possible. On average, Medicare coverage determinations for medical devices and products lag behind FDA approval or clearance. The Medicare statutory framework is also subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare. Medicaid coverage determinations and reimbursement levels are determined on a state by state basis, because Medicaid, unlike Medicare, is administered by the states under a state plan filed with the Secretary of the United States Department of Health and Human Services (HHS). Medicaid generally reimburses at lower levels than Medicare. Moreover, Medicaid programs and private insurers are frequently influenced by Medicare coverage determinations.

We work with outside scientists and their institutions in developing product candidates. These scientists may have other commitments or conflicts of interest, which could limit our access to their expertise, harm our ability to leverage our discovery platforms, or negatively impact our clinical trials.

We work with scientific advisors and collaborators at academic research institutions in connection with our product development. These scientists and collaborators are not our employees, but they serve as either independent contractors or researchers under research agreements that we have with their sponsoring clinic, academic institution or research institution. Such scientists and collaborators may have other commitments that would limit their availability to us. Although our scientific advisors generally agree not to do competing work, if an actual or potential conflict of interest between their work for us and their work for another entity arises, we may lose their services. It is also possible that some of our valuable proprietary knowledge may become publicly known through these scientific advisors if they breach their confidentiality agreements with us, which would cause competitive harm to our business. To the extent these scientists and collaborators may receive cash or equity compensation in connection with such services from time to time, these relationships and any related compensation may result in perceived or actual conflicts of interest, or a regulatory authority to conclude that the financial relationship may have affected the interpretation of the trial, such that the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of the marketing application we submit.

Risks Related to Intellectual Property

If we or our licensors are unable to protect our/their intellectual property, then our financial condition, results of operations and the value of our technology and products could be adversely affected.

Patents and other proprietary rights are essential to our business, and our ability to compete effectively with other companies is dependent upon the proprietary nature of our technologies. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain and strengthen our competitive position. We seek to protect these, in part, through confidentiality agreements with certain employees, consultants and other parties. Our success will depend in part on the ability of our licensors and us to obtain, to maintain (including making periodic filings and payments) and to enforce patent protection for the licensed intellectual property, in particular, those patents to which we have secured rights. We, and our licensors, may not successfully prosecute or continue to prosecute the patent applications which we have licensed. Even if patents are issued in respect of these patent applications, we or our licensors may fail to maintain these patents, may determine not to pursue litigation against entities that are infringing upon these patents, or may pursue such enforcement less aggressively than we ordinarily would for our own patents. Without adequate protection for the intellectual property that we own or license, other companies might be able to offer substantially identical products for sale, which could unfavorably affect our competitive business position and harm our business prospects. Even if issued, patents may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection that we may have for our products.

Litigation or third-party claims of intellectual property infringement or challenges to the validity of our patents would require us to use resources to protect our technology and may prevent or delay our development, regulatory approval or commercialization of our product candidates.

If we are the target of claims by third parties asserting that our products or intellectual property infringe upon the rights of others we may be forced to incur substantial expenses or divert substantial employee resources from our business. If successful, those claims could result in our having to pay substantial damages or could prevent us from developing one or more product candidates. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

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If we or our collaborators experience patent infringement claims, or if we elect to avoid potential claims others may be able to assert, we or our collaborators may choose to seek, or be required to seek, a license from the third-party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly. The cost to us of any litigation or other proceeding, regardless of its merit, even if resolved in our favor, could be substantial. Some of our competitors may be able to bear the costs of such litigation or proceedings more effectively than we can because of their having greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Intellectual property litigation and other proceedings may, regardless of their merit, also absorb significant management time and employee resources.

If we fail to comply with our obligations in the agreements under which we license development or commercialization rights to products or technology from third-parties, we could lose license rights that are important to our business.

We hold licenses from Old Dominion University Research Foundation (“ODURF”) and Eastern Virginia Medical School (“EVMS”) and from Alfred E. Mann Institute for Biomedical Engineering at the University of Southern California (“AMI-USC”) to intellectual property relating to the sub-microsecond electric field technology, as well as applicator design and configuration, and pulse generators in addition to the intellectual property that we own for these things. For the continuance of the license with ODURF and EVMS, we must continue to comply with the various obligations set forth in the license. If we fail to meet these obligations, the licensor will have the right to terminate the applicable license or modify certain terms of the license agreement. Generally, the loss of any one of our current licenses, or any other license we may acquire in the future, could harm our business, prospects, financial condition and results of operation. In addition, some of our licenses from third parties limit the field in which we can use the licensed technology. Therefore, in order for us to use such licensed technology in potential future applications that are outside the licensed field of use, we may be required to negotiate new licenses with our licensors or expand our rights under our existing licenses. We cannot assure you that we will be able to obtain such licenses or expanded rights on reasonable terms or at all. In the event a dispute with our licensors were to occur, our licensors may seek to renegotiate the terms of our licenses, increase the royalty rates that we pay to obtain and maintain those licenses, limit the field or scope of the licenses, or terminate the license agreements. In addition, we have limited rights to participate in the prosecution and enforcement of the patents and patent applications that we have licensed. As a result, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. Further, because of the rapid pace of technological change in our industry, we may need to rely on key technologies developed or licensed by third parties, and we may not be able to obtain licenses and technologies from these third parties at all or on reasonable terms. The occurrence of these events may have a material adverse effect on our business, financial condition or results of operations.

Our intellectual property rights will not necessarily provide us with competitive advantages.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

· others may be able to make products that are similar to our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;

· others may independently develop similar or alternative technologies without infringing on our intellectual property rights;

· issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

· we may obtain patents for certain products many years before we obtain marketing approval for products utilizing such patents, and because patents have a limited life, which may begin to run prior to the commercial sale of the related product, the commercial value of our patents may be limited;

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· our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

· we may fail to develop additional proprietary technologies that are patentable;

· the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States, or we may fail to apply for or obtain adequate intellectual property protection in all the jurisdictions in which we operate; and

· the patents of others may have an adverse effect on our business, for example by preventing us from marketing one or more of our product candidates for one or more indications.

Any of the aforementioned threats to our competitive advantage could harm our business.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely upon, among other things, unpatented proprietary technology, processes, trade secrets and know-how. Any involuntary disclosure to or misappropriation by third-parties of our confidential or proprietary information could enable competitors to duplicate or surpass our technological achievements, potentially eroding our competitive position in our market. We seek to protect confidential or proprietary information in part by confidentiality agreements with our employees, consultants and third-parties. While we require all of our employees, consultants, advisors and any third-parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. These agreements may be terminated or breached, and we may not have adequate remedies for any such termination or breach. Furthermore, these agreements may not provide meaningful protection for our trade secrets and know-how in the event of unauthorized use or disclosure. To the extent that any of our staff were previously employed by other pharmaceutical, medical technology or biotechnology companies, those employers may allege violations of trade secrets and other similar claims in relation to their medical device development activities for us.

If we are unable to protect the intellectual property used in our products, others may be able to copy our innovations which may impair our ability to compete effectively in our markets.

The strength of our patents involves complex legal and scientific questions and can be uncertain. Our patents or patent applications may be challenged or our patent applications may fail to result in issued patents and our existing or future patents may be too narrow to prevent third-parties from developing or designing around our intellectual property and in that event we may lose competitive advantage and our business may suffer. Further, the patent applications that we license or have filed may fail to result in issued patents. The claims may need to be amended. Even after amendment, a patent may not issue and in that event we may not obtain the use of the intellectual property that we seek and may lose competitive advantage which could result in harm to our business.

We may become involved in future lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we or our licensors may file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or of our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. If we or any current licensors or future licensees or licensors with rights to prosecute, assert or defend patents related to our product candidates fail to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, or if patents covering any of our product candidates are asserted against infringers or defended against claims of invalidity or unenforceability in a manner which adversely affects such coverage, our ability to develop and commercialize any such product candidate may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

The United States Patent and Trademark Office may initiate interference proceedings to determine the priority of inventions described in or otherwise affecting our patents and patent applications or those of our collaborators or licensors.

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An unfavorable outcome could require us to cease using the technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if a prevailing party does not offer us a license on terms that are acceptable to us. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction of our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information, which would harm our competitive position.

In addition to patents, we rely on trade secrets, technical know-how and proprietary information concerning our business strategy and product candidates in order to protect our competitive position, which are difficult to protect. As we collaborate with various third parties on the research and development of our planned products, we must, at times, share trade secrets with them. In the course of our research and development activities and our business activities, we rely on confidentiality agreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors or potential strategic collaborators. In addition, each of our employees and consultants is required to sign a confidentiality agreement and invention assignment agreement upon joining our company. Our employees, consultants, contractors, business partners or outside scientific collaborators might intentionally or inadvertently disclose our trade secret information in breach of these confidentiality agreements or our trade secrets may otherwise be misappropriated. Our collaborators might also have rights to publish data, and we might fail to apply for patent protection prior to such publication. It is possible that a competitor will make use of such information, and that our competitive position will be compromised. In addition, to the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how, and our trade secrets cannot be enforced against such independently developed knowledge. If we cannot maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information would be jeopardized, which would adversely affect our competitive position.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our independent contractors, collaborators and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us, we may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could harm our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our current or future product candidates, if any, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology

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products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. We believe this is caused by both the technical nature of the subject matter and a general enthusiasm for generic competition in developing countries, and is not a concern that is specific to any particular foreign jurisdiction. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We have not yet registered some of our trademarks in all of our potential markets, and failure to secure those registrations could adversely affect our business.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or conflict with third-party rights. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. Additionally, if we apply to register our trademarks in all of our potential markets, our applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. In such cases, over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then our marketing abilities may be impacted.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our existing and future products.

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. In 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also may affect patent litigation. These also include provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allow third party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. 

In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our patents and applications. Furthermore, the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.

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Risks Related to Government Regulation

We may never receive regulatory approval or clearance, including that from the FDA, for any of our planned products.

We may never receive regulatory approval or clearance, including from the FDA, for any potential devices or products in the United States or in any foreign market. For example, during September 2017, we withdrew our application seeking clearance of our system for soft tissue ablation. As such, it is highly speculative as to any timing for our planned products to be approved or cleared or commercialized. Investors need to take a long-term approach to an investment in our securities, as the commercial realization of our technology is speculative and well into the future.

We will be subject to stringent domestic and foreign regulation in respect of any potential devices and products. Any unfavorable regulatory action may materially and adversely affect our future financial condition and business operations and prospects.

Our potential devices and products, further development activities and manufacturing and distribution, once developed and determined, will be subject to extensive, rigorous and ongoing regulation by numerous government agencies, including the FDA and similar foreign regulatory authorities. To varying degrees, each of these agencies monitors and enforces our compliance with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution, and the safety and effectiveness of our medical technology. The process of obtaining and maintaining marketing approval or clearance from the FDA and similar foreign regulatory authorities for new devices and products, or for enhancements, expansion of the indications or modifications to existing products, could:

· take a significant, indeterminate amount of time;

· require the expenditure of substantial resources;

· involve rigorous preclinical and clinical testing, and possibly post-market surveillance;

· involve modifications, repairs or replacements of our products;

· require design changes of our products;

· result in limitations on the indicated uses of our products; and

· result in our never being granted the regulatory approval or clearance we seek.

If we experience any of these occurrences, our operations may suffer, we might experience harm to our competitive standing and result in further losses that adversely affect our financial condition. We will have ongoing responsibilities under FDA and international regulations, both before and after a product is approved or cleared and commercially released. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections. If an inspection were to conclude that we are not in compliance with applicable laws or regulations, or that any of our devices are ineffective or pose an unreasonable health risk, the FDA or similar foreign regulatory authorities could ban such devices or products, detain or seize such devices or products, order a recall, repair, replacement, or refund of such devices or products, or require us to notify health professionals and others that the therapies, devices or products present unreasonable risks of substantial harm to the public health. Additionally, the FDA or similar foreign regulatory authorities may impose other operating restrictions, enjoin and restrain certain violations of applicable law pertaining to our devices and products and assess civil or criminal penalties against our officers, employees, or us. The FDA and similar foreign regulatory authorities have been increasing its scrutiny of the industry and the government is expected to continue to scrutinize the industry closely with inspections and possibly enforcement actions. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our devices and products. In addition, negative publicity and product liability claims resulting from any adverse regulatory action could have a material adverse effect on our financial condition and results of operations.

The continuing development of our CellFX™ System and other products depends upon maintaining strong working relationships with physicians.

The development, marketing, and sale of our products in development, including the CellFX System, depends upon our ability to maintain strong working relationships with physicians. We rely on these professionals to provide us with considerable knowledge and experience regarding the development, marketing and sale of our products. Physicians assist us

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in clinical trials and as researchers, marketing and product consultants and public speakers. If we cannot maintain our strong working relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could harm our business, financial condition and results of operations. The medical device industry’s relationship with physicians is under increasing scrutiny by the Office of Inspector General, or OIG, the Department of Justice, or DOJ, state attorneys general, and other foreign and domestic government agencies. Our failure to comply with laws, rules and regulations governing our relationships with physicians, or an investigation into our compliance by the OIG, DOJ, state attorneys general and other government agencies, could significantly harm our business.

We may be subject to healthcare laws and regulations relating to our business and could face substantial penalties if we are determined not to have fully complied with such laws, which would have an adverse impact on our business.

We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, There are many federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result in significant criminal and civil penalties. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our products for which we obtain marketing approval or clearance. Such laws include:

· the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a U.S. healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the U.S. federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

· U.S. federal civil and criminal false claims laws and civil monetary penalties laws, including the civil False Claims Act, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. government;

· the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

· HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

· the U.S. Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members;

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· federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and

· analogous state and non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and state and non-U.S. laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

We have implemented a comprehensive compliance program to identify and deter healthcare violations by employees and other third-parties that perform services for us.  Notwithstanding our compliance program, it is possible that governmental authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. healthcare programs, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the above occur, it could have a material adverse effect on our liquidity and financial condition.

To obtain the necessary device approvals or clearances from regulatory authorities for our product candidates, we will have to conduct various preclinical and clinical tests, which may be costly and time consuming, and maynot provide results that will allow us to seek regulatory approval or clearance.

The number of preclinical and clinical tests that will be required for regulatory clearance or approval varies depending on the disease or condition to be treated, the method of treatment, the nature of the device, the jurisdiction in which we are seeking approval or clearance and the applicable regulations. Regulatory agencies, including those in the United States, Canada, Europe and other countries where medical devices and products are regulated, can delay, limit or deny approval of a product for many reasons. For example, regulatory agencies:

· may not deem a technology or device to be reasonably safe or effective for any intended use or indication;

· may interpret data from preclinical and clinical testing differently than we do;

· may determine our manufacturing facility or processes do not comply with Quality System regulations;

· may conclude that our device does not meet quality standards for durability, long-term reliability, biocompatibility, electromagnetic compatibility, or electrical safety; and

· may change their approval or clearance policies or adopt new regulations.

The FDA may make requests or suggestions regarding conduct of our clinical trials, resulting in an increased risk of difficulties or delays in obtaining regulatory approval or clearance in the US. As part of the process for regulatory approval or clearance, we may, from time to time, elect to withdraw an application. For example, during September 2017, the FDA requested that we submit additional data in connection with our application seeking clearance of our system for soft tissue ablation. Subsequent to this FDA request, we chose to withdraw our application.

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Even if a potential device or product ultimately is cleared or approved by the different regulatory authorities, it may be cleared or approved only for narrow indications which may render it commercially less viable.

Even if we complete clinical testing and a potential device or product of ours is cleared or approved, it may not be cleared or approved for the indications that are necessary or desirable for a successful commercialization. The FDA may grant marketing authorization contingent on the performance of costly additional clinical trials which may be required after approval or clearance. The FDA also may approve or clear our lead product candidates for a more limited indication or a narrower patient population than we originally requested. Our preference will be to obtain as broad an indication as possible for use in connection with the particular disease or treatment for which it is designed. However, the final classification may be more limited than we originally seek. The limitation on use may make the device or product commercially less viable and more difficult, if not impractical, to market. Therefore, we may not obtain the revenues that we seek in respect of the proposed product, and we will not be able to become profitable and provide an investment return to our investors. 

Even if we obtain clearance or approval to sell a potential product, we will be subject to ongoing requirements and inspections that could lead to the restriction, suspension or revocation of our clearance.

We, as well as any potential third-party manufacturer, will be required to adhere to FDA Quality System, which include testing, control, and documentation requirements. We will be subject to similar regulations in foreign countries. Even if regulatory approval or clearance of a product is granted, the approval or clearance may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval or clearance, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Ongoing compliance with Quality System regulations and other applicable regulatory requirements is strictly enforced in the United States through periodic inspections by state and federal agencies, including the FDA, and in international jurisdictions by comparable agencies. Failure to comply with regulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure to obtain premarket clearance or premarket approval for devices, withdrawal of approvals previously obtained, and criminal prosecution. The restriction, suspension or revocation of regulatory approvals or any other failure to comply with regulatory requirements will limit our ability to operate and could increase our costs.

Any failure or delay in completing clinical trials or studies for our devices and products and the expense of those trials may adversely affect our business.

Preclinical studies, clinical trials and post-clinical monitoring and trials required to demonstrate the reasonable safety and efficacy of our potential devices and products are and will be timeconsuming and expensive. If we must conduct additional clinical trials or other studies with respect to any of ourproposed product candidates to those that are initially contemplated, if we are unable to successfully complete any clinical trials or other studies, or if the results of these trials or studies are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for the planned products, we may not be able to obtain marketing approval, or we may obtain approval for indications that are not as broad as we seek. Our research and product development costs also will increase if we experience delays in testing or approvals. The completion of clinical trials for our proposed therapies, devices and products could be delayed because of our inability to manufacture or obtain from third-parties materials sufficient for use in preclinical studies and clinical trials; delays in patient enrollment and variability in the number and types of patients available for clinical trials; difficulty in maintaining contact with patients after treatment, resulting in incomplete data; poor effectiveness of proposed devices and products during clinical trials; unforeseen safety issues or side effects; and governmental or regulatory delays and changes in regulatory requirements and guidelines. If we incur significant delays in our clinical trials, our competitors may be able to bring their products to market before we do, which could result in harming our ability to commercialize our planned products. If we experience any of these occurrences our business will be materially harmed.

Because we and one of our licensors have used federal funding in the development of certain aspects of our technology, the federal government retains ‘march-in’ rights in connection with results derived from these grants.

March-in rights give the federal government the right to grant to other entities, which may include competitors, licenses or to take a license for itself if the government funded the development of a patent. The march-in right applies to patents that have been issued. The march-in right is intended to be used only if there is a threat to public health and safety that the owner of the patent is not equipped to handle. The march-in right may also be used to remove the exclusive rights belonging to a patent holder if the patent for which the government provided funding is not suitable for public use. If march-in rights are used by the government, the entities using the patent are required to pay royalties to the patent holder, which amount would be subject to negotiation. Because federal funding was used for some aspects of the company’s technology that will be the subject of some of our patents, the company could be subject to the march-in right and lose its exclusivity of those patents, and may suffer direct competition if any license is granted by the government under the march-in right to a competitor.

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Our employees, collaborators and other personnel may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, collaborators, vendors, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and similar foreign regulatory authorities report financial information or data accurately or disclose unauthorized activities to us. See also “–We may be subject to healthcare laws and regulations relating to our business and could face substantial penalties if we are determined not to have fully complied with such laws, which would have an adverse impact on our business.” We adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Healthcare policy changes, including recent federal legislation to reform the U.S. healthcare system, may have a material adverse effect on us. 

Our operations may be impacted by the Patient Protection and Affordable Care Act (PPACA). For example, the PPACA imposed, among other things, a 2.3% federal excise tax, with limited exceptions, on any entity that manufactures or imports Class I, II and III medical devices offered for sale in the United States that began on January 1, 2013. The excise tax was suspended for a two year period beginning January 1, 2016 and was further suspended through December 31, 2019, and will be reinstated on medical device sales starting January 1, 2020. The current administration has expressed an intention to repeal the PPACA and replace it with alternative reforms. The details and timing of any further such actions are unknown at this time, and it is possible that these changes could adversely affect our business.

On January 2, 2013, the American Taxpayer Relief Act of 2012, or the ATRA, came into effect, which, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare devices and services, which could result in reduced demand for our devices or additional pricing pressures.

We face uncertainties that might result from modification or repeal of any of the provisions of the PPACA, including as a result of current and future executive orders and legislative actions. The impact of those changes on us and potential effect on the medical device industry as a whole is currently unknown. Any changes to the PPACA are likely to have an impact on our results of operations, and may have a material adverse effect on our results of operations. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

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Risks Related to Owning Our Common Stock

The price of our common stock has been, and we expect it to continue to be, highly volatile, and you may be unable to sell your shares at or above the price you paid to acquire them.

The market price of our common stock has been highly volatile, and we expect it to continue to be highly volatile for the foreseeable future in response to many risk factors listed in this section, and others beyond our control, including:

· results of clinical trials of our planned products or those of our competitors;

· actions by regulatory bodies, such as the FDA, that effect our business or have the effect of delaying or rejecting approval or clearance of our planned products;

· actual or anticipated fluctuations in our financial condition and operating results;

· announcements by our customers, partners or suppliers relating directly or indirectly to our products, services or technologies;

· announcements of technological innovations by us or our competitors;

· changes in laws or regulations applicable to our planned products;

· announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or achievement of significant milestones;

· additions or departures of key personnel;

· competition from existing products or new products that may emerge;

· fluctuations in the valuation of companies perceived by investors to be comparable to us;

· disputes or other developments related to proprietary rights, including patents, litigation matters or our ability to obtain intellectual property protection for our technologies;

· announcements or expectations of additional financing efforts;

· sales of our common stock by us or our stockholders;

· stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

· reports, guidance and ratings issued by securities or industry analysts;

· overall conditions in our industry and market; and

· general economic and market conditions.

If any of the foregoing occurs, it may cause our stock price or trading volume to decline. Stock markets in general, and the market for companies in our industry in particular, have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our common stock. Investors may not realize any return on their investment in us and may lose some or all of their investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns and adversely impact our ability to raise capital to fund our operations, which could seriously harm our business.

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Sales or purchases of shares of our common stock may adversely affect the market for our common stock.

If we or our stockholders, particularly our directors, executive officers and significant stockholders, sell or purchase, register for sale, or indicate an intent to sell or purchase, shares of our common stock in the public market, it may have a material adverse effect on the market price of our common stock. In particular, Robert W. Duggan is not subject to any contractual restrictions with us on his ability to sell or transfer our common stock, and these sales or transfers could create substantial declines in the price of our securities or, if these sales or transfers were made to a single buyer or group of buyers, could contribute to a transfer of control of our company to a third party. Sales by Robert W. Duggan of a substantial number of shares, or the expectation of such sales, could cause a significant reduction in the market price of our common stock.

We maintain a shelf registration statement on Form S-3 pursuant to which we may, from time to time, sell up to an aggregate of $150.0 million of our common stock, preferred stock, depositary shares, warrants, debt securities or units. We may also issue shares of common stock or securities convertible into, exchangeable or exercisable for our common stock from time to time in connection with financings, acquisitions, investments or otherwise. Any such issuances would result in dilution to our existing stockholders and could cause our stock price to fall. We may also sell shares or other securities at a price per share that is less than the price per share paid by existing investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

We do not know whether an active, liquid and orderly trading market will be maintained for our common stock and as a result it may be difficult for you to sell your common stock.

Prior to our initial public offering in May 2016, there was no public market for our common stock. Although our common stock is listed on The Nasdaq Capital Market, the market for our shares has demonstrated varying levels of trading activity. As a result of these and other factors, you may not be able to sell your common stock quickly or at or above the price paid to acquire the stock or at all. Further, an inactive market may also harm our ability to raise capital by selling additional common stock and may harm our ability to enter into strategic collaborations or acquire companies or products by using our common stock as consideration.

Our common stock could be delisted from the Nasdaq Capital Market if we fail to regain compliance with Nasdaq listing rules.

On July 30, 2018, we received a notice from Nasdaq indicating that we were not in compliance with the audit committee requirements as set forth in Listing Rule 5605, which requires us to have at least three members of our audit committee. Nasdaq has provided us with a cure period until the earlier of the next annual meeting of stockholders or July 27, 2019 to regain compliance.

If our common stock is delisted from the Nasdaq Capital Market and we are unable to obtain listing on another national securities exchange, our common stock may trade only on the over-the-counter market (the “OTC”). If our common stock were to trade on the OTC, the market price and liquidity of our common stock may decline because smaller quantities of shares would likely be bought and sold, and transactions could be delayed. In addition, in the event our common stock is delisted, broker-dealers transacting in our common stock could be subject to certain additional regulatory burdens, which may discourage them from effecting transactions in our common stock, thus further limiting the liquidity of our common stock and potentially resulting in lower prices and larger spreads in the bid and ask prices for our common stock. A delisting from the Nasdaq Capital Market could also negatively impact our ability to raise capital in the future.

Concentration of ownership by our principal stockholders may limit your ability to influence the outcome of director elections and other transactions requiring stockholder approval.  

A significant percentage of our outstanding stock is held by a limited number of investors, including Robert W. Duggan. Mr. Duggan, Chairman of our Board, beneficially owns approximately 44% of our common stock outstanding as of the date of this Annual Report. As a result, such persons will have significant influence over corporate actions requiring stockholder approval, including the following actions:

· to elect or defeat the election of our directors;

· to amend or prevent amendment of our certificate of incorporation or bylaws;

· to effect or prevent a merger, sale of assets or other corporate transaction; and

· to control the outcome of any other matter submitted to our stockholders for vote.

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Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

Management currently beneficially holds a small percentage of our common stock. Other than their positions as directors or officers, and the restriction on the stockholders being able to call a special meeting limited to holders of 15% or more of the outstanding shares of common stock, our management will not be able to greatly influence corporate actions requiring stockholder approval.

Robert W. Duggan’s significant ownership position may deter or prevent efforts by other companies to acquire us, which could prevent our stockholders from realizing a control premium.

Robert W. Duggan, is the Chairman of our Board, beneficially owns approximately 44% of our common stock outstanding as of the date of this Annual Report. As a result of Robert W. Duggan’s significant ownership and position as Chairman of the Board, other companies may be less inclined to pursue an acquisition of us and therefore we may not have the opportunity to be acquired in a transaction that stockholders might otherwise deem favorable, including transactions in which our stockholders might realize a substantial premium for their shares. 

We have incurred and will continue to incur costs as a result of operating as a public company and our management has been and will be required to devote substantial time to public company compliance initiatives.

As a public company, listed in the United States, we have incurred and will continue to incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the Nasdaq. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance.

Stockholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and other personnel have and will continue to devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation related rules, regulations, and guidelines prompted by the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, and rules adopted by the SEC and Nasdaq, will likely result in increased costs to us as we respond to their requirements. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Furthermore, these and future rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. 

We are an “emerging growth company” under the JOBS Act as well as a “smaller reporting company”; as a result, we cannot be certain if the applicable reduced disclosure requirements will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, 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. We also qualify as a “smaller reporting company,” as defined in the Exchange Act, and so long as we remain a smaller reporting company, we benefit from and may take advantage of scaled disclosure requirements. 

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We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our reporting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.  We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our market price and trading volume could decline.

The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We currently have no analysts covering us and there can be no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our market 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.

We have not paid dividends in the past and have no plans to pay dividends.

We plan to reinvest all of our earnings, to the extent we have earnings, into our product research and development. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our outstanding common stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Certain anti-takeover provisions of Delaware law and provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. Our certificate of incorporation and bylaws include provisions that:

· authorize our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of preferred stock and up to approximately 500,000,000 shares of authorized but unissued shares of common stock;

· require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

· specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors, any of our officers, or any stockholder holding at least fifteen percent (15%) of the voting power of the capital stock issued and outstanding and entitled to vote;

· establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

· the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all the then outstanding shares of our voting stock, voting together as a single class, to amend provisions of our certificate of incorporation or our bylaws;

· the ability of our board of directors by majority vote, to amend the bylaws; and

· provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.

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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, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to engage in certain types of transactions with us.

Item 1B. Unresolved Staff Comments 

None.

Item 2. Properties

We lease approximately 15,700 square feet of premises located in Hayward, California, which is used for our corporate headquarters and principal operating facility. The term of this lease is sixty-two (62) months and commenced on July 1, 2017. We have the right to extend this lease for five years upon written notice not more than twelve months nor less than nine months prior to the expiration of the original lease term.

We believe that our existing facilities will be sufficient to meet our needs for the foreseeable future.

Item 3.Legal Proceedings.

From time to time, we may be involved in a variety of legal proceedings and claims relating to securities laws, product liability, patent infringement, contract disputes, employment matters and other matters relating to the normal course of our business in addition to governmental and other regulatory investigations and proceedings. In addition, third parties may, from time to time, assert claims against us in the form of letters and other communications.

We and certain of our directors have received subpoenas from the Securities and Exchange Commission (“SEC”) requesting documents and other information in connection with an investigation into trading in our stock in advance of our September 2017 financing announcement. According to documents received from the SEC, “This investigation is a non-public, fact-finding inquiry. We are [the SEC is] trying to determine whether there have been any violations of the federal securities laws. The investigation and the subpoena do not mean that we have [the SEC has] concluded that you or anyone else has violated the law. Also, the investigation does not mean that we have a negative opinion of any person, entity or security.” We and our directors have fully cooperated with the investigation.

The results of legal proceedings and claims are inherently unpredictable. We do not believe any currently pending matters will have a material adverse effect on our business based on our current understanding of such matters.

Item 4.Mine Safety Disclosures

Not applicable.

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed on The Nasdaq Capital Market and has been traded under the symbol “PLSE” since May 18, 2016.

Holders of Record

As of February 28, 2019, there were approximately 11 stockholders of record of our common stock. We believe the actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in “street” name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.  

Dividend Policy

We have never declared or paid any cash dividend on our common stock and have no present plans to do so. We intend to retain earnings for use in the operation and expansion of our business.  

Sales of Unregistered Securities

None.

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Performance Graph

The performance graph included in this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of Pulse Biosciences, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

The following graph shows a comparison from May 18, 2016 (the date our common stock commenced trading on the Nasdaq Capital Market through December 31, 2018 of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance. Data for The Nasdaq Composite Index and the Nasdaq Biotechnology Index assume reinvestment of dividends.

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Item 6. Selected Financial Data  

The following selected consolidated statements of operations data for the years ended December 31, 2018, 2017, and 2016, and the consolidated balance sheet data as of December 31, 2018 and 2017, are derived from, and qualified by reference to, our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for the period from May 19, 2014 (inception) through December 31, 2014 and selected consolidated balance sheet data as of December 31, 2016, 2015 and 2014 are derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected for any future period. The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

During the years ended December 31, 2016 and 2015, patent legal costs of $0.5 million and $0.4 million, respectively, were reclassified from research and development costs to general and administrative costs. These changes did not impact loss from operations or net loss. These reclassifications are reflected in the table below.

									May 19, 2014
									(inception)
									through
	Year Ended December 31,								December 31,
(in thousands, except per share amounts)	2018		2017		2016		2015		2014
Revenue	$	—	$	—	$	—	$	—	$	—
Operating expenses:
General and administrative		20,045		15,503		3,415		1,621		43
Research and development		17,253		9,646		5,506		2,181		26
Amortization of intangible assets		665		665		665		666		111
Costs of business acquisitions		—		—		—		—		120
Total operating expenses		37,963		25,814		9,586		4,468		300
Other income (expense):
Interest income		446		247		68		—		—
Other expense		(28)		—		—		—		—
Total other income (expense)		418		247		68		—		—
Loss from operations, before income taxes		(37,545)		(25,567)		(9,518)		(4,468)		(300)
Income tax benefit		—		—		—		(1,657)		(23)
Net loss	$	(37,545)	$	(25,567)	$	(9,518)	$	(2,811)	$	(277)
Net loss per share:
Basic and diluted net loss per share	$	(2.20)	$	(1.73)	$	(0.86)	$	(0.37)	$	(0.11)
Weighted average shares used to compute net loss per common share — basic and diluted		17,078		14,754		11,009		7,565		2,511
	As of December 31,
	2018		2017		2016		2015		2014
Cash, cash equivalents and investments	$	59,583	$	38,069	$	16,395	$	3,606	$	7,009
Working capital		57,254		36,268		15,647		3,337		6,866
Total assets		70,640		49,821		26,314		14,325		17,896
Total liabilities		4,306		3,826		1,016		660		1,821
Total stockholders' equity		66,334		45,995		25,298		13,665		16,074

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes thereto included in Item 8 under the heading “Financial Statements and Supplementary Data”. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K contains forward-looking statements that involve risks and uncertainties, including statements regarding our expected financial results in future periods. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. You should read the “Risk Factors” section of thisForm 10-Kfor a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. We do not assume any obligation to update any forward-looking statements.

Overview

We are a clinical stage medical therapy company pursuing commercial introduction of our proprietary CellFX™ System utilizing our patent-protected Nano-Pulse Stimulation™ (NPS™) platform technology. With our proprietary CellFX System, we can deliver a unique cell-focused effect on dysfunctional cells while preserving surrounding non-cellular tissue, a combination that may potentially lead to both improved efficacy and less collateral tissue damage. It also causes a process of immunogenic cell death that may stimulate an immune response to the dysfunctional cells.We are currently conducting research and development activities in pursuit of commercial applications for our NPS technology, but we have not yet commercialized or recognized revenue from our technology.

Plan of Operation

We plan to establish ourselves as a medical therapy company with a local, non-thermal, and drug-free treatment platform that initiates cell death in targeted tissue by a process of cell signaling and also induces a systemic adaptive immune response to the targeted tissue. In order to accomplish this, we plan to:

· Improve our technology by continuing our research and product development efforts. We expect to develop interchangeable tissue applicators to target different tissue types that will leverage the novel characteristics of our technology platform.

· Further explore and understand the benefits of NPS technology platform with the objectives of broadening the currently planned cosmetic and therapeutic applications and identifying new applications. We anticipate that results of our clinical studies will enable us to recognize certain unmet medical needs that may be addressed by our technology.

· Continue to protect and expand our intellectual property portfolio with respect to NPS technology, which we expect will increase our ability to deter competitors and position our company for favorable licensing and partnering opportunities.

· Partner with medical or biomedical device companies for certain applications which we anticipate may accelerate product development and acceptance into target market areas and allow us to gain the sales and marketing advantages of the distribution infrastructure.

Critical Accounting Policies and Use of Estimates

The following discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in economic factors or conditions that are outside of the company’s control. As a result, these issues are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, future business plans and the projected financial results, the terms of existing contracts, trends in the industry and information available from other outside sources.

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Long-Lived Assets

We review long-lived assets, consisting of property and equipment and intangible assets, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the consolidated balance sheet, reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

Goodwill

We record goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. We review goodwill for impairment at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable based on the fair value of the reporting units. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, goodwill is not considered impaired and no further testing is required. If further testing is required, we perform a two step-process. The first step involves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the test is performed by comparing the carrying value of the goodwill in the reporting until to its implied fair value. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value. For the purpose of impairment testing, we have determined that it has one reporting until. To date, there has been no impairment of goodwill. 

Stock-Based Compensation

We periodically issue stock options to officers, directors, employees and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their fair values. Stock option grants, which are generally time vested, are measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. We estimate the grant date fair value of stock options, using the Black-Scholes option-pricing model on a straight-line basis over the requisite service period of the award.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so that they are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows:

Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes valuation model on the implied yield based on the U.S. Treasury yield curve in effect at the time of grant.

Expected Term. The expected term represents the period that our stock-based awards are expected to be outstanding. Because of the limitations on the sale or transfer of our common stock as a privately held company before our initial public offering, we did not believe our historical exercise pattern was indicative of the pattern we would experience as a publicly-traded company. We have consequently used the simplified method to calculate expected term, which is the average of the contractual term and vesting period. We plan to continue using the simplified method until we have sufficient trading history as a publicly traded company.

Volatility. We determine the price volatility factor based on the historical volatilities of comparable public companies in a similar industry. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

Dividend Yield. The expected dividend assumption is based on our current expectations about our anticipated dividend policy. We currently do not expect to issue any dividends.

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Income Taxes

We account for income taxes using the asset and liability method, whereby deferred tax assets and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted rates and laws that will be in effect when the differences are expected to reverse.

We provide a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. If we determine that we would be able to realize deferred tax assets in the future in excess of the recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, “Accounting for Uncertainty in Income Taxes.” The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized.

We are subject to U.S. federal income taxes and income taxes in California. As our net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which we currently operate or have operated in the past. We are not currently under examination by any tax authority.

Segment and Geographical Information

We operate and manage our business as one reportable and operating segment. Our Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. Primarily all of our long-lived assets are based in the United States.

Components of Results of Operations

Operating Expenses

We generally recognize operating expenses as they are incurred in two general categories, general and administrative costs and research and development costs, as well as non-cash amortization of intangible assets. Our operating expenses also include non-cash components related to depreciation and amortization of property and equipment and stock-based compensation costs, which are allocated, as appropriate, to general and administrative costs and research and development costs.

· General and administrative expenses consist of salaries and related expenses for executive, finance, legal, human resources, information technology and administrative personnel, professional fees, patent filing fees and costs, insurance costs and other general corporate expenses. We expect general and administrative expenses to increase in the future as we hire personnel and incur additional costs to support the expansion of our research and development activities and our operation as a public company, including higher legal, accounting, insurance, compliance, compensation and other costs.

· Research and development expenses consist of salaries and related expenses and consulting costs related to the design, development and enhancement of our potential future products, prototypes material and devices, including rent. We expect research and development costs to increase in the future as we initiate additional clinical trials, continue development and enhancement of our CellFX System and pursue commercial applications of our NPS technology.

Reclassification

Certain items in prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position.

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Results of Operations

Comparison of theYearsendedDecember 31, 2018and2017

Our consolidated statements of operations as discussed herein are presented below:

	Year Ended
	December 31,
(in thousands)	2018		2017		$ Change
Revenue	$	—	$	—	$	—
Operating expenses:
General and administrative		20,045		15,503		4,542
Research and development		17,253		9,646		7,607
Amortization of intangible assets		665		665		—
Total operating expenses		37,963		25,814		12,149
Other income (expense):
Interest income		446		247		199
Other expense		(28)		—		(28)
Total other income (expense)		418		247		171
Loss from operations, before income taxes		(37,545)		(25,567)		11,978
Income tax benefit		—		—		—
Net loss	$	(37,545)	$	(25,567)	$	11,978

General and Administrative

General and administrative expenses consist of salaries and related expenses for executives, finance, legal, human resources, information technology and administrative personnel. General and administrative expenses increased by $4.5 million to $20.0 million in 2018 from $15.5 million in 2017 due primarily to $2.7 million of increased professional services and consulting costs, $1.1 million of increased compensation costs, $0.4 million of increased insurance costs, and $0.2 million of increased travel and expenses and office supplies costs. Professional, consulting and insurance costs increased primarily as a result of increased costs incurred due to operations and reporting obligations as a public company, and increased legal costs related to our intellectual property and reincorporation from the State of Nevada to the State of Delaware.Compensation, travel and expenses, and office supplies costs increased as a result of increased headcount in 2018. General and administrative expenses are expected to increase substantially during 2019 in connection with the buildout of additional operational infrastructure to support the anticipated commercialization of our CellFX System in the aesthetic dermatology market. 

Research and Development

Research and development expenses consist of salaries and related expenses for research and development personnel, clinical trials and consulting costs related to the design, development and enhancement of our potential future products, prototypes material and devices. Research and development expenses increased by $7.6 million to $17.3 million in 2018 from $9.6 million in 2017 due primarily to $3.0 million of increased compensation costs, $1.5 million of increased stock-based compensation expense, $1.2 million of increased prototype expenses, $0.6 million of increased lab and office supplies, $0.4 million of increased clinical trial expense, $0.4 million of increased consulting and outside services costs, $0.2 million of increased in travel expenses, and $0.2 million of increased depreciation expense. Stock-based compensation and compensation related costs increased a result of headcount increases. Prototype expenses increased as a result of the design and testing of the CellFX System which was introduced in the beginning of the fourth quarter of 2018. Lab, office supplies, and travel expenses increased as a result of increased headcount. Clinical trial costs increased due to the Company’s clinical study of NPS technology for the treatment of sebaceous hyperplasia, basal cell carcinoma, warts, and other general benign lesions studies. Consulting and outside services and lab supplies increased due to increased product development activities. Depreciation and amortization expense increased due to increased leasehold improvements purchased and installed in our Hayward facility around mid-2017. Research and development expenses are expected to continue to increase substantially during 2019 as we expand our clinical study activities by initiating additional studies, continue development and enhancement of our CellFX System in preparation for additional clinical trials.

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Other Income (Expense)

Other income (expense) increased by $0.2 million to $0.4 million in 2018 from $0.2 million due primarily to the increased interest income earned from higher interest rates earned on cash equivalent and investment balances.

Comparison of theYearsendedDecember 31, 2017and2016

Our consolidated statements of operations as discussed herein are presented below:

	Year Ended
	December 31,
(in thousands)	2017		2016		$ Change
Revenue	$	—	$	—	$	—
Operating expenses:
General and administrative		15,503		3,415		12,088
Research and development		9,646		5,506		4,140
Amortization of intangible assets		665		665		—
Total operating expenses		25,814		9,586		16,228
Other income:
Interest income		247		68		179
Total other income		247		68		179
Loss from operations, before income taxes		(25,567)		(9,518)		16,049
Income tax benefit		—		—		—
Net loss	$	(25,567)	$	(9,518)	$	16,049

General and Administrative

General and administrative expenses increased by $12.1 million to $15.5 million in 2017, from $3.4 million in 2016 due primarily to $8.5 million of increased stock-based compensation expense, $1.9 million of increased professional and consulting costs, $0.9 million of increased compensation costs, $0.2 million of increased insurance costs, $0.2 million of increased office supplies costs, $0.1 million of increased travel expenses and $0.1 million of increased depreciation and amortization expense. Stock-based compensation increased principally due to the higher Black-Scholes values and grant date intrinsic value ascribed to options and restricted stock units, respectively, granted during 2017 and due to the acceleration of former board of director stock options. Headcount increases during 2017 also contributed to increased stock-based compensation as well as compensation costs more broadly. Professional, consulting and insurance costs increased primarily as a result of increased costs incurred due to operations and reporting obligations as a public company, and increased legal costs related to our intellectual property. The increase in office supplies costs was due to the Company’s move to new office space in the third quarter of 2017. Travel expenses increased as a result in the increase in clinical trials being conducted in 2017. Depreciation and amortization expense increased due to increased leasehold improvements purchased and installed in our Hayward facility around mid-2017.

Research and Development

Research and development expenses increased by $4.1 million to $9.6 million in 2017, from $5.5 million in 2016. The increase was due primarily to $1.6 million of increased stock-based compensation expense, $1.2 million of increased compensation costs, $0.9 million of increased clinical trial expense, $0.3 million of increased consulting and outside services costs, $0.2 million of increased depreciation and amortization expense and $0.1 million of increased lab supplies, partially offset by $0.1 million of decreased sponsored research expenses. Stock-based compensation increased principally due to the higher Black-Scholes values and grant date intrinsic value ascribed to options and restricted stock units, respectively, granted during 2017. Compensation costs increased as a result of headcount increases. Clinical trial costs increased due to the Company’s clinical study of NPS platform for the treatment of seborrheic keratosis that was initiated and conducted during 2017. Consulting and outside services and lab supplies increased due to increased product development activities, including those around the 510(k) submission to the FDA. Depreciation and amortization expense increased due to increased leasehold improvements purchased and installed in our Hayward facility around mid-2017. Sponsored research expenses decreased mainly due to the timing of sponsored research activities conducted by Old Dominion University Research Foundation (“ODURF”) during 2017 compared to 2016.

49

Interest Income

Interest income increased by $0.2 million from $0.1 million in 2017 due primarily to the increased interest income earned on higher cash equivalent and investment balances as a result of the proceeds received from the issuance of equity securities.

Liquidity and Capital Resources

To date, we have not generated any revenues from product sales. Since inception, we have funded our business plan through the issuance of equity securities and grants from governmental agencies. Over the next few years, we intend to invest in research and development to develop commercially viable products and to assess the feasibility of potential future products. Additionally, we expect that our general and administrative expenses will increase as we continue to incur substantial incremental costs associated with being a public company.

In December 2018, we completed a rights offering pursuant to which we sold an aggregate of 3,581,148 shares of our common stock, par value $0.001 per share, at a price per share of $12.57 per share, for net proceeds of approximately $44.8 million.

Our consolidated statements of cash flows as discussed herein are presented below:

	Year Ended December 31,
(in thousands)	2018		2017		2016
Net cash used in operating activities	$	(23,896)	$	(11,087)	$	(8,051)
Net cash provided by (used in) investing activities	$	26,117	$	(22,998)	$	(14,381)
Net cash provided by financing activities	$	45,496	$	35,382	$	20,915
Net increase (decrease) in cash	$	47,717	$	1,297	$	(1,517)

At December 31, 2018, we had cash, cash equivalents and investments of $59.6 million. We believe that our existing cash, cash equivalents and investments will be sufficient to fund our projected operating requirements for at least the next 12 months from the filing date of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018; however, we plan to raise additional capital in the future. These expectations are based on our current operating and financing plans which are subject to change. Until we are able to generate sustainable product revenues at profitable levels, we expect to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such additional funds may not be available on terms acceptable to us or at all, particularly in light of recent market conditions. If we raise funds by issuing equity or equity-linked securities, the ownership of our stockholders will be diluted and the holders of new equity securities may have priority rights over our existing stockholders. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds by entering into agreements on unattractive terms. Our inability to raise capital could have a material adverse effect on our business, financial condition and results of operations.

Operating Activities

During 2018, we used cash of $23.9 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, depreciation and amortization, increased accounts payable and accrued expenses, partially offset by increased prepaid expenses and decreased deferred rent.

During 2017, we used cash of $11.1 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation, landlord incentives received for leasehold improvements, depreciation and amortization, increased accounts payable and accrued expenses, partially offset by increased prepaid expenses and other current and non-current assets and decreased deferred rent.

During 2016, we used cash of $8.1 million in operating activities. The difference between cash used in operating activities and net loss consisted primarily of stock-based compensation and depreciation and amortization, increased accrued expenses, partially offset by increased prepaid expenses and other current assets and deferred offering costs.

Investing Activities

During 2018, cash provided from investing activities of $26.1 million from the sale of investments of $24.9 million and $41.8 million of cash proceeds from the maturities of investments, partially offset by $40.3 million cash used for the purchase of investments and $0.3 million cash used in purchase of property and equipment.

50

During 2017, we used cash of $23.0 million for investing activities for the purchase of investments, leasehold improvements and equipment.

During 2016, we used cash of $14.4 million for investing activities for the purchase of investments and office and laboratory equipment.

Financing Activities

During 2018, cash provided from financing activities was $45.5 million due to net proceeds from our rights offering and the issuance of common stock in connection with the exercise of stock options and warrants and our employee stock purchase plan.

During 2017, cash provided from financing activities was $35.4 million due to the net proceeds received from our private placements and the issuance of common stock in connection with the exercise of stock options and warrants.

During 2016, cash provided from financing activities was $20.9 million due to the net proceeds received from our initial public offering, after deducting underwriting discounts and commissions and other offering costs. 

Contractual Obligations

Frank Reidy Research Center Agreement

As provided for in the license agreement with Old Dominion University Research Foundation (“ODURF”) and Eastern Virginia Medical School, effective on November 6, 2014, we sponsored certain approved research activities at ODURF’s Frank Reidy Research Center under a sponsored research agreement. In June 2017, we agreed to sponsor $0.7 million in research from July 1, 2017 to June 30, 2018. In August 2018, we agreed to sponsor $0.8 million in research from September 1, 2018 to August 1, 2019. These sponsored researches were funded through monthly payments made upon ODURF certifying, to our reasonable satisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principal investigator may transfer funds with the budget as needed with our approval so long as the obligations of ODURF under the task order and statement of work remain unchanged and unimpaired. During the years ended December 31, 2018, 2017, and 2016, we incurred costs relating to the sponsored research agreement equal to $0.7 million, $0.8 million and $0.9 million, respectively. As of December 31, 2018, $0.6 million remained payable under this agreement.

In addition, during 2017, we agreed to provide $0.3 million in research funding to researchers affiliated with ODURF and Eastern Virginia Medical School matching funds made available to those researchers by the Virginia Biosciences Health Research Corporation. Our sponsorship affords access to certain intellectual property, if any, developed during the project. As of December 31, 2018, there was approximately $0.1 million remained payable under this agreement. 

Operating Lease

We leased approximately 4,300 square feet of corporate offices and research facilities in Burlingame, California, at a monthly cost of approximately $21,000. This lease expired on June 30, 2017.

In January 2017, we entered into a new lease agreement for premises consisting of approximately 15,700 rentable square feet located in Hayward, California.  

51

The lease commenced on July 1, 2017 and expires in August 2022, with an option to extend the lease term for an additional five years. Under the terms of the lease agreement, the landlord provided an allowance for tenant improvements in the amount of $2.1 million, which was recorded as deferred rent at the inception of the lease term. Rent expense associated with the future minimum lease payment is reduced by amortization of tenant improvement allowance over the life of the lease. An offsetting amount was recorded as leasehold improvement at the inception of the lease term. Leasehold improvements are depreciated over the lease term. The following table summarizes our contractual obligations as of December 31, 2018 (in thousands):

	Payments Due by Period
(in thousands)	Total		Less Than 1 Year		1 to 3 Years		3 to 5 Years		More Than 5 Years
Rent Obligation	$	2,056	$	536	$	1,128	$	392	$	—

Off-Balance Sheet Arrangements

At December 31, 2018, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

In the ordinary course of business, we enter into standard indemnification arrangements. Pursuant to these arrangements, we indemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology, or from claims relating to our performance or non-performance under a contract. The maximum potential amount of future payments we could be required to make under these agreements is not determinable because it involves claims that may be made against us in future periods, but have not yet been made. To date, we have not incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

We also enter and have entered into indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law. In addition, we may have obligations to hold harmless and indemnify third parties involved with our fundraising efforts and their respective affiliates, directors, officers, employees, agents or other representatives against any and all losses, claims, damages and liabilities related to claims arising against such parties pursuant to the terms of agreements entered into between us and such third parties in connection with such fundraising efforts. No liability associated with such indemnification agreements has been recorded as of December 31, 2018.

JOBS Act Accounting Election

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Trends, Events and Uncertainties

Research and development of new technologies are, by their nature, unpredictable. Although we undertake development efforts with commercially reasonable diligence, there can be no assurance that the net proceeds from our financings will be sufficient to enable us to develop our technology to the extent needed to generate future sales to sustain our operations. If we do not continue to have enough funds to sustain our operations, we will consider other options to continue our path to commercialization of NPS technology platform, including, but not limited to, additional financing through follow-on stock offerings, debt financings, or co-development agreements and /or other alternatives.

We cannot assure investors that our technology will be adopted or that we will ever achieve sustainable revenues sufficient to support our operations. Even if we are able to generate revenues, there can be no assurances that we will be able to achieve profitability or positive operating cash flows. There can be no assurances that we will be able to secure additional financing in the future on acceptable terms or at all. If cash resources are insufficient to satisfy our ongoing cash needs, we would be required to scale back or discontinue our technology and product development programs, or obtain funds, if available, although there can be no assurances, through the sale, licensing or strategic alliances that could require us to relinquish rights to our technology and intellectual property, or to curtail, suspend or discontinue our operations entirely.

52

Other than as discussed above and elsewhere in this Annual Report on Form 10-K, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition. 

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Interest Rate and Market Risk

Our exposure to interest rate and market risk is confined to our cash, cash equivalents and investments, all of which have maturities of less than two years. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of our cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we maintain a portfolio of cash equivalents and investments in a variety ofsecurities ofhigh credit quality. The securities in our investment portfolio are not leveraged, are classified as available-for-sale, and are, due to their relatively short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe thata hypothetical 10% changein market interestrates would have a material negative impact on the value of our investment portfolio.

Foreign Exchange Risk

The majority of our expense and capital purchasing activities are transacted in U.S. dollars. We do not have any international operations. We may incur foreign exchange gains or losses in the future.

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Item 8. Financial Statements and Supplementary Data

PULSE BIOSCIENCES, INC.

Index to Consolidated Financial Statements

	Page
	Number
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firms	56
Consolidated Balance Sheets	58
Consolidated Statements of Operations and Comprehensive Loss	59
Consolidated Statements of Stockholders’ Equity	60
Consolidated Statements of Cash Flows	61
Notes to Consolidated Financial Statements	62

55

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Pulse Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Pulse Biosciences, Inc. (as defined in Note 2 to the consolidated financial statements) (the “Company”) as of December 31, 2017, the related consolidated statements of operations and comprehensive loss, and cash flows, for each of the two years in the period ended December 31, 2017, and stockholders’ equity for the year ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Gumbiner Savett Inc.

We had served as the Company's auditor since 2015.

Santa Monica, California

March 16, 2018

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Pulse Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Pulse Biosciences, Inc. and subsidiaries (the “Company”) as of December 31, 2018, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows, for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

San Jose, California  

March 14, 2019

We have served as the Company's auditor since 2018.

57

PULSE BIOSCIENCES, INC.

Consolidated Balance Sheets

(in thousands, except par value)

	December 31,
	2018		2017
ASSETS
Current assets:
Cash and cash equivalents	$	51,103	$	3,386
Investments		8,480		34,683
Prepaid expenses and other current assets		779		412
Total current assets		60,362		38,481
Property and equipment, net		2,173		2,570
Intangible assets, net		5,213		5,878
Goodwill		2,791		2,791
Other asset		101		101
Total assets	$	70,640	$	49,821
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,272	$	782
Accrued expenses		1,421		1,034
Deferred rent, current		415		397
Total current liabilities		3,108		2,213
Deferred rent, less current		1,198		1,613
Total liabilities		4,306		3,826
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized – 50,000 shares; no shares issued and outstanding		—		—
Common stock, $0.001 par value; authorized – 500,000 shares; issued and outstanding  –20,593shares and 16,819shares at December 31, 2018 and 2017, respectively		21		17
Additional paid-in capital		142,032		84,202
Accumulated other comprehensive loss		(1)		(51)
Accumulated deficit		(75,718)		(38,173)
Total stockholders’ equity		66,334		45,995
Total liabilities and stockholders’ equity	$	70,640	$	49,821

See accompanying notes to the consolidated financial statements.

58

PULSE BIOSCIENCES, INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

	Year Ended December 31,
	2018		2017		2016
Revenue	$	—	$	—	$	—
Operating expenses:
General and administrative		20,045		15,503		3,415
Research and development		17,253		9,646		5,506
Amortization of intangible assets		665		665		665
Total operating expenses		37,963		25,814		9,586
Other income (expense):
Interest income		446		247		68
Other expense		(28)		—		—
Total other income (expense)		418		247		68
Loss from operations, before income taxes		(37,545)		(25,567)		(9,518)
Income tax benefit		—		—		—
Net loss		(37,545)		(25,567)		(9,518)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities, net of tax		50		(44)		(7)
Comprehensive loss	$	(37,495)	$	(25,611)	$	(9,525)
Net loss per share
Basic and diluted net loss per share	$	(2.20)	$	(1.73)	$	(0.86)
Weighted average shares used to compute net loss per common share — basic and diluted		17,078		14,754		11,009

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amount)

				Additional		Accumulated Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance, December 31, 2016	13,315	$	13	$	37,898	$	(7)	$	(12,606)	$	25,298
Shares issued upon closing of private placements, net of issuance costs of $199	2,820		3		34,840		—		—		34,843
Issuance of shares upon exercise of warrants	522		—		50		—		—		50
Issuance of shares upon exercise of stock options	162		1		488		—		—		489
Stock-based compensation expense	—		—		10,926		—		—		10,926
Unrealized loss on available-for-sale securities	—		—		—		(44)		—		(44)
Net loss	—		—		—		—		(25,567)		(25,567)
Balance, December 31, 2017	16,819		17		84,202		(51)		(38,173)		45,995
Issuance of common stock in a rights offering at $12.57 per share for cash, net of issuance cost of $213	3,581		4		44,782		—		—		44,786
Issuance of shares upon exercise of warrants	24		—		—		—		—		—
Issuance of shares upon exercise of stock options	145		—		498		—		—		498
Issuance of shares under employee stock purchase plan	24		—		327		—		—		327
Stock-based compensation expense	—		—		12,338		—		—		12,338
Tax payments related to shares withheld for vested restricted stock units	—		—		(115)		—		—		(115)
Unrealized gain on available-for-sale securities	—		—		—		50		—		50
Net loss	—		—		—		—		(37,545)		(37,545)
Balance, December 31, 2018	20,593	$	21	$	142,032	$	(1)	$	(75,718)	$	66,334

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2018		2017		2016
Cash flows from operating activities:
Net loss	$	(37,545)	$	(25,567)	$	(9,518)
Adjustments to reconcile net loss to net cash used in   operating activities:
Depreciation		645		336		94
Loss on disposal of fixed assets		28		—		—
Amortization of intangible assets		665		665		665
Stock-based compensation		12,338		10,926		870
Net premium amortization and discount on available-for-sale securities		(140)		26		4
Landlord incentive for tenant improvements		—		2,119		—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(367)		(144)		(415)
Accounts payable		490		517		3
Accrued expenses		387		245		246
Other asset		—		(101)		—
Deferred rent		(397)		(109)		—
Net cash used in operating activities		(23,896)		(11,087)		(8,051)
Cash flows from investing activities:
Purchases of property and equipment		(276)		(2,551)		(64)
Purchase of investments		(40,297)		(43,595)		(19,067)
Maturities of investments		41,815		23,148		4,750
Sales of investments		24,875		—		—
Net cash provided by (used in) investing activities		26,117		(22,998)		(14,381)
Cash flows from financing activities:
Proceeds from exercises of stock options and warrants		498		539		—
Proceeds from issuance of common stock from private placements, net of issuance costs of $199		—		34,843		—
Proceeds from issuance of common stock from initial public offering, net of issuance costs of $2,711		—		—		20,915
Proceeds from issuance of common stock under employee stock purchase plan		327		—		—
Proceeds from issuance of common stock from rights offering, net of issuance costs of $213		44,786		—		—
Tax payments related to shares withheld for vested restricted stock units		(115)		—		—
Net cash provided by financing activities		45,496		35,382		20,915
Net increase (decrease) in cash		47,717		1,297		(1,517)
Cash and cash equivalents at beginning of period		3,386		2,089		3,606
Cash and cash equivalents at end of period	$	51,103	$	3,386	$	2,089
Supplemental disclosure of noncash investing   and financing activities:
Reclassification of deferred offering costs to additional paid-in capital upon initial public offering	$	—	$	—	$	627
Equipment purchased in accrued expenses		33		38		18

See accompanying notes to the consolidated financial statements.

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PULSE BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

1.  Description of the Business

Pulse Biosciences, Inc.,is a clinical stage medical therapy company pursuing commercial introduction of its proprietary CellFX™ System utilizing the Company’s proprietary Nano-Pulse Stimulation™ (NPS™) platform technology. The Company’s CellFX System provides a novel, precise, non-thermal cellular treatment technology delivering nanosecond duration energy pulses that impact cells in treated tissue while sparing surrounding non-cellular tissue. The novel characteristics of the Company’s CellFX System mechanism of action has the potential to significantly benefit patients across multiple medical applications, including dermatology, the Company’s first planned commercial application.

The Company was incorporated in Nevada on May 19, 2014. On June 18, 2018, the Company reincorporated from the State of Nevada to the State of Delaware. The Company’s headquarters and research facility are located in Hayward, California.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will need to raise additional capital to finance its operations. However, there can be no assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements.

2.  Summary of Significant Accounting Policies 

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities Exchange Commission (the “SEC”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affect the amounts reported in the financial statements and accompanying notes to the financial statements.  Estimates include, but are not limited to, the valuation of investments, clinical trial accruals, the valuation and recognition of stock-based compensation and useful lives assigned to long-lived assets. Actual amounts could differ from these estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and investments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses since inception.

Fair Value of Financial Instruments

TheCompany believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of such instruments.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company has designated all investments as available-for-sale and therefore, such investments are reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income (loss) (“OCI”) in stockholders’ equity. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is included in other income, net. Realized gains and losses, as well

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as interest income, on available-for-sale securities are also included in other income, net. The Company includes all of its available-for-sale securities in current assets.

All of the Company’s investments are subject to a periodic impairment review. The Company recognizes an impairment loss when a decline in the fair value of its marketable investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the marketable investments fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security and whether or not the Company will be required to sell the security before the recovery of its amortized cost. No impairment losses were incurred during the periods presented.

Property and Equipment

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from three to five years.

Intangible Assets

The Company’s intangible assets consist of acquired patents and licenses, which are being amortized over their estimated useful lives of twelve years.

Long-Lived Assets

The Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment during each fiscal year or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during the periods presented.

Goodwill

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting until level at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. To date, there has been no impairment of goodwill.

Stock-Based Compensation

The Company recognizes the cost of stock-based compensation in the financial statements based upon fair value. The fair value of stock options is determined as of the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock unit (RSU) awards is determined based on the number of units granted and the closing price of the Company’s common stock on the grant date. The fair value of each purchase under the employee stock purchase plan (ESPP) is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company’s determination of the fair value of equity-settled awards is impacted by the price of the Company's common stock as well as changes in assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected term that awards will remain outstanding, expected common stock price volatility over the term of the awards, risk-free interest rates and expected dividends. The fair value of an award is recognized over the period during which service is required to be performed in exchange for the award, the requisite service period (usually the vesting period) on a straight-line basis.

Equity instruments issued to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as the underlying equity instruments vest. The fair value of these equity instruments are expensed over the service period.

Estimates of the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, are affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affect the fair value of the award and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. The Company determines the volatility factor based on the historical volatilities of comparable public companies in similar industries. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected

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term of the equity-settled award. For all stock options granted to date, the Company used the simplified method to calculate the expected term, which is the average of the contractual term and vesting period. Prior to the Company’s initial public offering, the fair value of common stock was determined by reference to either recent or anticipated cash transactions involving the sale of the Company’s common stock.

The Company recognizes the fair value of stock-based compensation costs in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations.

Research and Development Costs

Research and development costs consist primarily of compensation costs, fees paid to consultants and outside service providers and organizations (including university research institutes), costs associated with clinical trials, development prototypes and other expenses relating to the acquisition, design, development and testing of the Company’s product candidates. Research and development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate.

Patent Costs

The Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs not related to acquired patents, including patent-related legal fees, filing fees and other costs, including internally generated costs, are expensed as incurred. During the years ended December 31, 2018, 2017 and 2016, patent costs totaled $0.6 million, $0.8 million and $0.5 million, respectively. Patent costs are included in general and administrative costs in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company is subject to U.S. federal income taxes and income taxes in California. As the Company’s net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company is not currently under examination by any tax authority.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. At December 31, 2018 and 2017, the Company had not recorded any liability for uncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of income tax expense.

Comprehensive Loss

Comprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Company displays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.

Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive

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common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

Basic and diluted net loss per common share is the same for all periods presented because all warrants, stock options and restricted stock units outstanding are anti-dilutive.

The following outstanding stock options, warrants and restricted stock units to purchase common stock were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

	Year Ended December 31,
	2018		2017		2016
Common stock warrants		213,485		249,709		874,610
Common stock options		2,956,687		2,598,659		1,229,355
Restricted stock units		222,606		229,774		—
Total		3,392,778		3,078,142		2,103,965

Segment and Geographical Information

The Company operates and manages its business as one reportable and operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s assets are based in the United States.

Reclassification

Certain items in prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position.

Recent Accounting Pronouncements

During May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update to periods beginning after December 15, 2017. This updated standard became effective for the Company in the first quarter of fiscal year 2018. Since the Company has not recognized or generated revenue to date, the adoption of this pronouncement did not have any impact to its financial statements.

During February 2016, the FASB issued ASU No. 2016-02, Leases, which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019. The Company generally does not finance purchases of equipment or other capital, but does lease its facilities. The adoption of the new standard will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (See Note 12 – Commitments and Contingencies). The Company adopted the new standard effective January 1, 2019 and will not restate comparative periods. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance.  The Company will elect the package of practical expedients permitted under the transition guidance and as such, the adoption of this ASU will not change the classification of any of the Company’s leases.  The Company estimates that approximately $1.7 million will be recognized as total lease liabilities and approximately $0.1 million will be recognized as total rights-of-use assets on the Company’s consolidated balance sheet as of January 1, 2019.

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3. Investments and Fair Value of Financial Instruments

Investments

The Company’s investments have been classified and accounted for as available-for-sale. The Company’s investments consisted of the following (in thousands):

		December 31, 2018
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	8,481		—		(1)	$	8,480
Total assets measured at fair value	$	8,481	$	—	$	(1)	$	8,480

		December 31, 2017
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial paper	$	7,216	$	—	$	(6)	$	7,210
Corporate bonds		19,524		—		(33)		19,491
Asset-backed securities		7,994		—		(12)		7,982
Total assets measured at fair value	$	34,734	$	—	$	(51)	$	34,683

The contractual maturities of the Company’s investments were as follows (in thousands):

	December 31,
Investments	2018		2017
Due in one year	$	8,480	$	30,096
Due in one to two years		—		4,587
Total	$	8,480	$	34,683

Fair Value of Financial Instruments

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 -  Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include money market funds.

Level 2 - Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include commercial paper, corporate bonds and asset-backed securities.

Level 3 - Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. The Company did not classify any of its investments within Level 3 of the fair value hierarchy.

The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

			December 31, 2018
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	50,703		—		—	$	50,703
U.S. Treasury Securities	Investments		—		8,480		—		8,480
Total assets measured at fair value		$	50,703	$	8,480	$	—	$	59,183

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			December 31, 2017
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	2,758	$	—	$	—	$	2,758
Commercial paper	Investments		—		7,210		—		7,210
Corporate bonds	Investments		—		19,491		—		19,491
Asset-backed securities	Investments		—		7,982		—		7,982
Total assets measured at fair value		$	2,758	$	34,683	$	—	$	37,441

During year ended December 31, 2018 and 2017, the Company did not record impairment charges related to its marketable investments. During the year ended December 31, 2018 and 2017, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2018 or December 31, 2017.

4.  Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	December 31,
	2018		2017
Leasehold improvements	$	2,248	$	2,257
Laboratory equipment		518		484
Furniture, fixtures and equipment		248		231
Software		118		79
Construction in progress		33		—
		3,165		3,051
Less: Accumulated depreciation and amortization		(992)		(481)
	$	2,173	$	2,570

During June 2017, the Company prepared to move into new office space in Hayward, California, and its landlord provided $2.1 million for leasehold improvements pursuant to the tenant allowance clause in the lease agreement between the Company and its landlord which has been capitalized and amortized over the shorter of the lease term or estimated useful life.

Depreciation expense for the years ended December 31, 2018, 2017, and 2016 was $0.6 million,  $0.3 million, and $0.1 million, respectively.

5.  Intangible Assets, Net

Intangible assets primarily consist of a license to utilize certain patents, know-how and technology relating to the Company’s NPS for biomedical applications acquired from Old Dominion University Research Foundation (“ODURF”), Eastern Virginia Medical School, and the University of Southern California. In addition, the Company entered into a Sponsored Research Agreement with Old Dominion University’s Frank Reidy Research Center for Bioelectrics, a leading research organization in the field, which includes certain intellectual property rights arising from the research.

Intangible assets, net consisted of the following (in thousands):

	December 31,
	2018		2017
Acquired patents and licenses	$	7,985	$	7,985
Less: Accumulated amortization		(2,772)		(2,107)
	$	5,213	$	5,878

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A  schedule of the amortization of intangible assets for the five years ending December 31, 2019 through 2023 and thereafter is as follows (in thousands):

Year Ending December 31:
2019	$	665
2020		665
2021		665
2022		665
2023		665
Thereafter		1,888
	$	5,213

6.  Goodwill

In 2014, the Company acquired three companies (the “acquisitions”) for aggregate consideration of $5.5 million. In accordance with ASC Topic 805, Business Combinations, the Company recorded goodwill of $2.8 million in connection with the acquisitions as the consideration paid exceeded the fair value of the net tangible assets and the intangible assets acquired.

The Company reviews goodwill for impairment at least annually or whenever changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Based on the Company’s annual impairment test as of December 31, 2018, 2017 and 2016, the Company determined that no impairment of goodwill existed, and was not aware of any indicators of impairment at such date.

7.  Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	December 31,
	2018		2017
Compensation expense	$	938	$	685
Accrued clinical		156		21
Professional fees		274		211
Supplies		53		65
Other		—		52
	$	1,421	$	1,034

8.  Stockholders’ Equity and Stock-Based Compensation

Preferred Stock

The Company has authorized a total of 50,000,000 shares of preferred stock, par value $0.001 per share, none of which were outstanding at December 31, 2018 and 2017. The Company’s Board of Directors has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights, without any further vote or action by the Company’s stockholders.

Common Stock

The Company has authorized a total of 500,000,000 shares of common stock, par value $0.001 per share.

Initial Public Offering

During May 2016 through June 2016, the Company closed its initial public offering (“IPO”), whereby the Company sold 5,749,846 shares of common stock at $4.00 per share. The Company received net proceeds of approximately $20.3 million from the IPO, including proceeds from the exercise of the overallotment option granted to the underwriters, net of underwriting discounts and commissions and other offering costs.

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Private Placements

During February 2017, the Company entered into a securities purchase agreement, pursuant to which the Company, in a private placement, issued and sold an aggregate of 819,673 shares of the Company’s common stock, par value $0.001 per share, at a price per share of $6.10, for net proceeds of approximately $5.0 million.

During September 2017, the Company entered into a securities purchase agreement with an existing investor, pursuant to which the Company, in a private placement, issued and sold an aggregate of 2,000,000 shares of the Company’s common stock, par value $0.001 per share, at a price per share of $15.02, for net proceeds of approximately $29.9 million.

Rights Offering

On October 25, 2018, the Company commenced a rights offering pursuant to which stockholders of record as of November 19, 2018, were issued, at no charge, one subscription right for each share of common stock then outstanding. Each right entitled the holder to purchase 0.19860755 share of the Company’s common stock for $12.57 per share (the “Rights Offering”).  

Stockholders who exercised their rights in full were also permitted an over-subscription right to purchase additional shares of common stock that remained unsubscribed at the expiration of the Rights Offering, subject to the availability of shares and a pro rata allocation of shares among persons exercising the oversubscription right.

Upon the closing of the Rights Offering on December 6, 2018, the Rights Offering was oversubscribed. A total of 3,581,148 shares of the Company’s common stock were issued and sold in the Rights Offering for net proceeds of approximately $44.8 million. Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 35% of the Company’s outstanding common stock prior to the Rights Offering, participated in the Rights Offering and purchased an aggregate of 3,146,226 shares for an additional investment of approximately $39.5 million.

Common Stock Warrants

In connection with a private placement offering of the Company’s shares of common stock, par value $0.001 per share in 2014, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its common stock at a price of $2.67 per share (the “Private Placement Warrants”). The Private Placement Warrants are exercisable for a  period of seven years. As of December 31, 2018, there were a total of 91,876 of Private Placement Warrants outstanding.

In connection with the closing of the Company’s initial public offering in 2016, the Company issued warrants as compensation to its underwriters, as representatives of the underwriters of its initial public offering to purchase a total of 574,985 shares of its common stock at a price of $5.00 per share (“the IPO Warrants”). The IPO Warrants are exercisable for a period of five years. As of December 31, 2018, there were a total of 121,609 of the IPO Warrants outstanding. 

A summary of warrant activity for the year ended December 31, 2018 is presented below:

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Shares	Exercise Price		Life (in Years)
Warrants outstanding at December 31, 2017	249,709	$	4.14	3.56
Issued	—
Exercised	(36,224)		5.00
Expired/terminated	—
Warrants outstanding and exercisable at December 31, 2018	213,485	$	4.00	2.37

During the year ended December 31, 2018, warrants to purchase 36,224 shares of common stock were net exercised, resulting in the issuance of approximately 23,957 shares of common stock.

The intrinsic value of exercisable in-the-money stock warrants was approximately $1.6 million as of December 31, 2018.

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Equity Plans

2017 Equity Incentive Plan and 2017 Inducement Equity Incentive Plan

The Board of Directors (the “Board”) of the Company previously adopted, and the Company’s stockholders approved, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”).

The 2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board may determine. Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under the Company’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), and shares reserved but not issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the 2017 Plan. The 2017 Plan is administered by the Board’s Compensation Committee. Effective January 1, 2019, the number of shares of common stock available under the 2017 Plan increased by 823,716 shares pursuant to the evergreen provision of the 2017 Plan. Pursuant to the 2017 Plan, the 2019 share increase is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. As of December 31, 2018, 539,436 shares of common stock remained available for issuance under the 2017 Plan.

During November 2017, the Board of the Company adopted the 2017 Inducement Equity Incentive Plan (the “Inducement Plan”) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval.

The Inducement Plan has a 10-year term, and provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan may have a term up to ten years and have variable vesting provisions. New hire grants generally vest 25% upon the first anniversary of the grant and 1/48th monthly thereafter, over the subsequent 36 months. Equity-based awards issued under the Inducement Plan are only issuable to individuals not previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’s adoption date. As of December 31, 2018,  541,625 shares of common stock were available for issuance under the Inducement Plan.

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”).

The 2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the 2017 ESPP. In January 2019,  the Board determined not to increase the number of shares of common stock available under the 2017 ESPP pursuant to the evergreen provision of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. During the year ended December 31, 2018, the Company issued 23,869 shares of common stock under the 2017 ESPP. As of December 31, 2018, 478,474 shares of common stock remained available for issuance under the 2017 ESPP.

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A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the year ended

December 31, 2018 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares	Price		Life (in Years)
Balances - December 31, 2017	2,598,659	$	16.88	8.2
Options granted	657,375		15.18
Options exercised	(144,508)		3.44
Options canceled	(147,839)		19.04
Options expired	(7,000)		19.99
Balances - December 31, 2018	2,956,687	$	17.04	7.6
Stock options exercisable at December 31, 2018	1,513,617	$	15.70	6.6

The exercise prices of stock options outstanding and exercisable are as follows at December 31, 2018:  

Options Outstanding				Options Exercisable
		Weighted average
	Number	remaining contractual	Weighted average	Number	Weighted average
Exercise Price	outstanding	life (in years)	exercise price	vested	exercise price
$2.67 - $4.28	732,842	6.0	$                   3.84	579,735	$                   3.79
$4.67 - $7.55	218,359	7.7	5.27	105,633	5.42
$11.00 - $16.52	471,375	9.6	13.49	53,634	14.71
$19.35 - $30.99	1,534,111	7.7	26.12	774,615	26.08
	2,956,687	7.6	$                 17.04	1,513,617	$                 15.70

The tables above exclude 42,500 performance stock options granted during the year ended December 31, 2018 for which the performance criteria had not been established as of December 31, 2018.

The intrinsic value of stock options exercised during the year ended December 31, 2018, 2017 and 2016 was$1.8 million,$3.8 million, and $0, respectively.

The fair value of employee stock options was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

	Year Ended December 31,
	2018		2017		2016
Expected term in years		5.3 - 6.1		0.4 - 6.1		6.1
Expected volatility		70%		70% - 90%		80%
Risk-free interest rate		2.6 - 3.0%		1.0% - 2.2%		1.2% - 1.5%
Dividend yield		—		—		—

The fair value of the stock options granted to employees and directors during the years ended December 31, 2018, 2017 and 2016, calculated pursuant to the Black-Scholes option-pricing model, was$6.4 million,$26.8 million,  and $1.2 million, respectively.

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The fair value of ESPP was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

	Year Ended December 31,
	2018		2017		2016
Expected term in years		0.5 - 1.0		0.5 - 1.3		—
Expected volatility		70%		95%		—
Risk-free interest rate		1.9% - 2.5%		1.1% - 1.2%		—
Dividend yield		—		—		—

Total stock-based compensation expense consisted of the following (in thousands):

	Year Ended December 31,
	2018		2017		2016
General and administrative	$	9,004	$	9,136	$	674
Research and development		3,334		1,790		196
Total stock-based compensation expense	$	12,338	$	10,926	$	870

The fair value of restricted stock unit (“RSUs”) awards is determined based on the number of units granted and the closing price of the Company’s common stock as of the grant date.  The estimated fair value of RSUs is recognized on a straight-line basis over the requisite service period. During 2017, the Company granted 160,974 RSUs all of which vested pursuant to which no shares were issued, duringJune 2018.  Additional paid in capital was reduced by$0.1 million for tax payments related to shares withheld in connection with the vesting of the RSUs. The stock-based compensation expense related to these RSUs was approximately $2.1 million and $2.9 million during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was no unrecognized compensation expense related to these RSUs.

During the year ended December 31, 2017, the Company granted 68,800 RSUs to certain employees which vest 50% on June 1, 2019 with the remaining 50% vesting on June 1, 2021. In the event of a change in control, these RSUs vest 100%. The stock-based compensation expense recorded in 2018 and 2017 related to these RSUs was approximately$0.4 million and$0.1 million, respectively. As of December 31, 2018, there was $0.9 million of unrecognized compensation expense related to these RSUs.

During November 2017, the Board of Directors of the Company accepted resignations of certain members of its board of directors resulting in the full vesting of their outstanding equity awards. This resulted in the Company recording an additional $1.2 million of stock-based compensation expense for the year ended December 31, 2017.

At December 31, 2018, there was $17.1 million of unrecognized compensation cost related to unvested stock-based compensation arrangements, which is expected to be recognized over a weighted average period of 2.3 years.

9.  Research Grants and Agreements

Sponsored Research Agreement

The Company entered into a Sponsored Research Agreement (“SRA”) with Old Dominion University Research Foundation (“ODURF”) during 2014 pursuant to which the Company sponsors research activities performed by ODURF’s Frank Reidy Center. ODURF is compensated by the Company for its conduct of each study in accordance with the budget and payment terms set forth in the applicable task order. During the years ended December 31, 2018, 2017 and 2016, the Company agreed to sponsor $0.8 million,$0.7 million and $1.0 million, respectively, in research during the subsequent 12-month period to be funded through monthly payments made upon ODURF certifying, to the Company’s reasonable satisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principal investigator may transfer funds with the budget as needed without the Company’s approval so long as the obligations of ODURF under the task order and statement of work remain unchanged and unimpaired. As of December 31, 2018,  $0.6 millionremained payable under this research agreement.

In addition, during the year ended December 31, 2017, the Company agreed to provide $0.3 million in research funding to researchers affiliated with ODURF and Eastern Virginia Medical School matching funds made available to those

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researchers by the Virginia Biosciences Health Research Corporation. The Company’s sponsorship affords access to certain intellectual property, if any, developed during the project. As of December 31, 2018, there was approximately $0.1 millionremained payable under this agreement.  

During the years ended December 31, 2018, 2017 and 2016, the Company incurred costs relating to the SRA equal to $0.7 million, $0.8 million and $0.9 million, respectively.

10. Income Taxes

The income tax provision for the years ended December 31, 2018 and 2017 was $0 and $0, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at December 31, 2018 and 2017 are summarized below (in thousands):

	December 31,
	2018		2017
Temporary differences	$	111	$	36
Credits		5,330		1,536
Stock compensation		2,630		3,067
Net operating loss carryforwards		15,365		7,715
Total deferred tax assets before valuation allowance		23,436		12,354
Valuation allowance		(22,696)		(11,491)
Total deferred tax assets after valuation allowance		740		863
Technology deferred tax liability		(740)		(863)
Net deferred tax assets	$	—	$	—

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. At December 31, 2018 and 2017, management was unable to determine that it was more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

The Company’s effective tax rate is different from the federal statutory tax rate of 21% due primarily to net losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.

Presented below is the reconcilement of the difference between the tax rate computed by applying the U.S. federal statutory tax rate and the effective tax rate for the years ended December 31, 2018, 2017 and 2016:  

	Year Ended December 31,
	2018		2017		2016
U.S. federal statutory tax rate	(21.0)	%	(35.0)	%	(35.0)	%
Valuation allowance	28.0		23.0		42.0
Tax reform	(2.0)		18.0		—
Permanent differences	2.0		1.0		2.0
State tax benefit and other	(7.0)		(7.0)		(9.0)
Effective tax rate	—	%	—	%	—	%

At December 31, 2018, the Company had federal and California state net operating loss carryforwards of approximately $51.6 million and $51.0 million, respectively. The federal and state net operating loss carryforwards will begin to expire after 2034. At December 31, 2018, the Company had approximately $1.4 million and $1.2 million of federal and California R&D credits, respectively. The federal R&D credits begin to expire after 2035 and the California R&D credits have an indefinite carryforward period.

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These net operating loss carryforward and research and development credits amounts have full valuation allowances against them due to the remoteness of their expected utilization.

The Company’s activity related to unrecognized tax benefits are summarized below (in thousands):

	December 31,
	2018		2017
Balance at the beginning of the year	$	512	$	213
Gross increases - tax positions in prior periods		—		37
Gross decreases - tax positions in prior periods		—		—
Gross increases - tax position in current period		365		262
Settlements		—		—
Lapses in statutes of limitations		—		—
Balance at the end of the year	$	877	$	512

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next twelve months. During the years ended December 31, 2018, 2017 and 2016,  no interest or penalties were required to be recognized related to unrecognized tax benefits. Although the Company is not under examination, the tax years for 2014 and forward are subject to examination by United States tax authorities.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law and the new legistration contains several key tax provisions that affected the Company, including a reduction of the corporate income tax rate to 21%effective January 1, 2018, among others. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring the Company’s U.S. deferred tax assets and liabilities as well as reassessing the net realizability of the Company’s deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, the Company previously provided a provisional estimate of the effect of the Tax Act in our financial statements.

The key impact of the Tax Act on the Company’s financial statement for the year ended December 31, 2017, was the re-measurement of deferred tax balances to the new corporate tax rate. In order to calculate the effects of the new corporate tax rate on the Compnay’s deferred tax balances, ASC 740 “Income Taxes” (“ASC 740”) required the re-measurement of the Company’s deferred tax balances as of the enactment date of the Tax Act, based on the rates at which the balances are expected to reverse in the future. The re-measurement of the Company’s deferred tax balances resulted in a net reduction in deferred tax assets of $4.7 million offset with a corresponding adjustment to the valuation allowance. In the fourth quarter of 2018, the Company completed its analysis to determine the effect of the Tax Act and recorded no adjustments as of December 31, 2018.

The Company performed a formal analysis of the availability of these operating loss carryforwards at December 31, 2017 under Internal Revenue Code Sections 382 and 383, and management expects that the Company’s ability to use its net operating loss carryforwards may be limited in future periods.

11.  Related Party Transactions

Kenneth A. Clark, a director of the Company since November 2017, is a member of the law firm of Wilson Sonsini Goodrich and Rosati (“WSGR”), which is also serves as the outside corporate counsel to the Company. During the years ended December 31, 2018 and 2017, the Company incurred expenses reported in general and administrative expenses in the consolidated statement of operations for legal services rendered by WSGR totaling approximately$1.2 million and$0.7 million, respectively.  During the year ended December 31, 2018, the Company capitalized approximately $0.1 million for legal expenses incurred in connection with the rights offering (Note 8).

During December 2018, the Company completed a rights offering pursuant to which it sold an aggregate of 3,581,148 shares of its common stock, par value $0.001 per share, at a price per share of $12.57, for net proceeds of approximately $44.8 million. At the time of transaction, Robert W. Duggan, the Company’s Chairman of the Board of Directors and the

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beneficial owner of approximately 35% of the Company’s then outstanding common stock prior to the rights offering. After giving effect to the rights offering, Mr. Duggan was the beneficial owner or approximately 44% of the Company’s outstanding stock as of December 31, 2018.

MDB Capital Group, LLC (“MDB”) provided investment banking, executive recruiting and intellectual property management services to the Company. The Company’s former Chairman of the Board, Robert Levande, was a Senior Managing Director of MDB throughout his tenure on the Company’s Board. During the year ended December 31, 2016, the Company incurred $0.1 million for services rendered by MDB with respect to intellectual property management. The Company did not incur any amounts for intellectual property management services by MDB during the years ended December 31, 2017 or 2018.

In connection with the Company’s 2016 IPO (Note 8), the underwriting syndicate led by MDB received $1.8 million in underwriting discounts, $0.2 million in unaccountable expense reimbursements and warrants valued in the aggregate of $1.4 million.

12.  Commitments and Contingencies

Operating Leases

The Company leased approximately 4,300 square feet of corporate offices and research facilities in Burlingame, California, at a monthly cost of approximately $21,000. This lease expired on June 30, 2017.  

In January 2017, the Company entered into a new lease agreement for premises consisting of approximately 15,700 rentable square feet located in Hayward, California.Thelease commenced on July 1, 2017 and expires in August 2022, with an option to extend the lease term for an additional five years.  Under the terms of the lease agreement, the landlord provided an allowance for tenant improvements in the amount of$2.1 million, which was recorded as deferred rent at the inception of the lease term. Rent expense associated with the future minimum lease payment is reduced by amortization of tenant improvement allowance over the life of the lease. An offsetting amount was recorded as leasehold improvement at the inception of the lease term. Leasehold improvements are depreciated over the lease term.

During the years ended December 31, 2018, 2017 and 2016, rent expense, including common area maintenance charges, was $0.2 million, $0.3 million and $0.2 million, respectively.

Future minimum lease payments under the non-cancelable operating leases as of December 31, 2018 are as follows (in thousands):

Year Ending December 31:
2019	$	536
2020		554
2021		574
2022		392
Thereafter		—
	$	2,056

Indemnification

The Company and certain directors have received subpoenas from the Securities and Exchange Commission requesting documents and other information in connection with an investigation into trading in the Company’s stock in advance of the Company’s September 2017 private placement equity financing. The Company and its directors have cooperated with the investigation.

The Company maintains indemnification agreements with its directors and officers that may require the Company to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law.

At this time, the Company is unable to estimate a possible loss, if any, associated with the matter described above.

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From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normal course of our business in addition to governmental and other regulatory investigations and proceedings. In addition, third parties may, from time to time, assert claims against the Company in the form of letters and other communications. The Company currently believes that these ordinary course matters will not have a material adverse effect on our business; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 

13.  Employee Benefit Plans

The Company sponsors a defined contribution plan under which it may make discretionary contributions. The Company did not make any employer matching contributions to this plan during the years ended December 31, 2018, 2017 and 2016.

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14.  Selected Quarterly Financial Data (Unaudited)

During the quarters ended March 31, June 30 and September 30, 2017, patent legal costs of $0.1 million,  $0.2 million and $0.3 million, respectively, were reclassified from research and development costs to general and administrative costs. These changes did not impact loss from operations or net loss. The selected financial data below has been adjusted for such reclassifications.

The following table provides the selected quarterly financial data for the years ended December 31, 2018 and 2017 (in thousands, except per share data):

	Quarter Ended
	2018								2017
	December 31,		September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
Revenue	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Operating expenses:
General and administrative		3,814		5,675		5,173		5,383		5,801		4,434		3,924		1,344
Research and development		5,080		5,038		3,960		3,175		2,864		2,925		2,130		1,727
Amortization of intangible assets		166		166		167		166		166		166		167		166
Total operating expenses		9,060		10,879		9,300		8,724		8,831		7,525		6,221		3,237
Other income (expense):
Interest income		135		118		137		56		128		39		41		39
Other expense		(28)		—		—		—		—		—		—		—
Total other income (expense)		107		118		137		56		128		39		41		39
Loss from operations, before income taxes		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Income tax benefit		—		—		—		—		—		—		—		—
Net loss		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities, net of tax:		2		(3)		3		48		(49)		4		3		(2)
Comprehensive loss	$	(8,951)	$	(10,764)	$	(9,160)	$	(8,620)	$	(8,752)	$	(7,482)	$	(6,177)	$	(3,200)
Net loss per share
Basic and diluted net loss per share	$	(0.51)	$	(0.64)	$	(0.54)	$	(0.51)	$	(0.53)	$	(0.52)	$	(0.43)	$	(0.23)
Weighted average shares used to compute net loss per common share — basic and diluted		17,656		16,927		16,881		16,842		16,574		14,381		14,233		13,803

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

On April 6, 2018, our Audit Committee approved the selection of Deloitte & Touche LLP (“Deloitte”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018. There have been no disagreements with our former accountants on accounting and financial disclosure. For further information, please refer to form 8-K filed with the SEC on April 11, 2018.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive and principal financial officers, respectively, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective (a) to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) to include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of senior management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the evaluation under that framework and applicable SEC rules, our management concluded that our internal control over financial reporting was effective as of December 31, 2018.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2018, identified in connection with the evaluation required by Rule 13a‑15(d) and 15d‑15(d) of the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Item9B.Other Information

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2019 Annual Meeting of Stockholder to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2019Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2019Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 14. Principal Accounting Fees and Services

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

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Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K: 

1. Financial Statements: See Item 8 of this Annual Report on Form 10-K.

2. Financial Statement Schedules: All schedules are omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or notes thereto.

(b) The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

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Exhibit		Incorporation by Reference
Number	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
2.1	Plan of Conversion of Pulse Biosciences, Inc.	8-K12B	001-37744	2.1	June 18, 2018
3.1	Articles of Conversion	8-K12B	001-37744	3.1	June 18, 2018
3.2	Certificate of Conversion	8-K12B	001-37744	3.2	June 18, 2018
3.3	Certificate of Incorporation of Pulse Biosciences, Inc.	8-K12B	001-37744	3.3	June 18, 2018
3.4	Bylaws of Pulse Biosciences, Inc.	8-K12B	001-37744	3.4	June 18, 2018
4.1	Specimen Common Stock Certificate	8-K12B	001-37744	4.1	June 18, 2018
4.2	Form of Warrant dated November 9, 2014 issued to MDB Capital Group, LLC	S-1	333-208694	4.2	December 22, 2015
4.3	Form of Underwriters' Warrant	S-1	333-208694	4.3	March 28, 2016
4.4	Form of Registration Rights Agreement dated November 6, 2014, among the purchasers of common stock and the Registrant	S-1	333-208694	10.6	December 22, 2015
4.5	Form of Registration Rights Agreement dated November 6, 2014, among the holders of placement warrants and the Registrant	S-1	333-208694	10.7	December 22, 2015
10.1	Lease for facilities at 3955 Point Eden Way, Hayward, California, dated January 26, 2017	10-K	001-34899	10.1	March 20, 2017
10.2#	License Agreement among Old Dominion University Research Foundation, Eastern Virginia Medical School and the Registrant	S-1	333-208694	10.12	May 3, 2016
10.3	Amendments No. 1 to License Agreement among Old Dominion University Research Foundation, Eastern Virginia Medical School and the Registrant	S-1	333-208694	10.13	March 7, 2016
10.4#	License Agreement among University of Southern California, The Alfred Mann Institute and the Registrant	S-1	333-208694	10.14	May 3, 2016
10.5#	Amendment No. 1 to the License Agreement among University of Southern California, The Alfred Mann Institute and the Registrant	S-1	333-208694	10.15	May 3, 2016
10.6	Securities Purchase Agreement, dated February 7, 2017, by and between Pulse Biosciences, Inc. and certain purchasers	8-K	001-37744	10.1	February 10, 2017
10.7	Securities Purchase Agreement, dated September 24, 2017, by and between Pulse Biosciences, Inc. and certain purchasers	8-K	001-37744	10.1	September 25, 2017
10.8+	2015 Stock Incentive Plan	S-1	333-208694	10.2	December 22, 2015
10.9+	2017 Inducement Equity Incentive Plan and forms of agreements thereunder	8-K	001-37744	10.1	November 28, 2017
10.10+	2017 Equity Incentive Plan and forms of agreements thereunder	8-K	001-37744	10.1	May 19, 2017
10.11+	2017 Employee Stock Purchase Plan and forms of agreements thereunder	8-K	001-37744	10.2	May 19, 2017
10.12+	Form of Director Option Agreement, not issued under the 2015 Stock Incentive Plan	S-1	333-208694	10.3	December 22, 2015
10.13+	Executive Employment Agreement between Darrin R. Uecker and the Registrant	S-1	333-208694	10.9	December 22, 2015
10.14+	Amendment to Employment Agreement between Darrin R. Uecker and Pulse Biosciences, Inc. dated October 5, 2016	8-K	001-37744	10.1	October 11, 2016
10.15+	Executive Employment Agreement between Brian B. Dow and the Registrant	S-1	333-208694	10.14	December 22, 2015
10.16+	Form of At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement for Employees	S-1	333-208694	10.10	December 22, 2015
10.17	Commitment Letter dated October 26, 2018 from Robert W. Duggan	10-Q	001-37744	10.1	November 1, 2018
10.17*+	Executive Employment Agreement between Ed Ebbers and the Registrant
10.18	Form of Indemnification Agreement	8-K12B	001-37744	10.1	June 18, 2018
16.1	Letter from Gumbiner Savett Inc. to the Securities and Exchange Commission dated April 6, 2018	8-K	001-37744	16.1	April 11, 2018
21.1*	List of Subsidiaries
23.1*	Consent of Independent Registered Public Accounting Firm.
23.2*	Consent of Independent Registered Public Accounting Firm
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

82

31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Chief Executive and Chief Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
	* Filed herewith
	+ Indicates a management contract or compensatory plan or arrangement.
	# Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a grant of confidential treatment.

83

Item 16. Form 10-K Summary

None.

84

Signatures

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PULSE BIOSCIENCES, INC.
Date: March 14, 2019	By:	/s/    Brian B. Dow
		Brian B. Dow
		Chief Financial Officer, Senior Vice President of Finance and Administration, Secretary and Treasurer (Principal Financial and Principal Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Darrin R. Uecker and Brian B. Dow, jointly and severally, as his true and lawful attorney-in-fact and agent, with full power of substitution, each with power to act alone, to sign and execute on behalf of the undersigned any and all amendments to this Annual Report on Form 10-K, and to perform any acts necessary in order to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requested and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his or her substitutes, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated. 

Signature	Title	Date
/s/    Darrin R. Uecker Darrin R. Uecker	President, Chief Executive Officer and Director (Principal Executive Officer)	March 14, 2019
/s/    Brian B. Dow Brian B. Dow	Chief Financial Officer, Senior Vice President of Finance and Administration, Secretary and Treasurer (Principal Financial and Principal Accounting Officer)	March 14, 2019
/s/    Robert W. Duggan Robert W. Duggan	Chairman of the Board of Directors	March 14, 2019
/s/    Kenneth A. Clark Kenneth A. Clark	Director	March 14, 2019
/s/    Thomas J. Fogarty, M.D. Thomas J. Fogarty, M.D.	Director	March 14, 2019
/s/    Manmeet S. Soni Manmeet S. Soni	Director	March 14, 2019
/s/   Mahkam Zanganeh  Mahkam Zanganeh	Director	March 14, 2019

85

EX-10.17

Exhibit 10.17

PULSE BIOSCIENCES, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between Edward A. Ebbers (“Executive”) and Pulse Biosciences, Inc. (the “Company”), as of June 26, 2016.

1. Duties and Scope of Employment.

(a) Position and Duties.  As of July 11, 2016 (The “Start Date”), Executive will serve as the Company’s Vice President and General Manager, Dermatology and Aesthetics residing in the Company’s offices located in Burlingame, California.  Executive will render such business and professional services in the performance of his duties, consistent with Executive’s position within the Company.  Executive also will serve the Company in such other or alternativepositions as may reasonably be assigned to him by the company’s Chief Executive Officer (“CEO”) and Board of Directors (the “Board”), which positions may include director and additional or otherofficer positions of the Company and subsidiaries of the Company.  The period of Executive’s rendering of employment services under this Agreement is referred to herein as the “Employment Term.”

(b) Obligations.  During the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company.  For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board.

(c) Automatic Resignation.  At the end of the Employment Term, including upon any termination of employment for any reason, such ending or termination will be deemed to be an automatic resignation from all director and officer positions of the Company and any of its subsidiaries, unless the continuation of such appointments is specifically approved by a resolution of the Board of the respective corporation or its shareholders.

2. At-Will Employment.  The parties agree that Executive’s employment with the Company will be “at-will” employment and may be terminated at any time with or without cause or notice. However, as described in this Agreement, Executive may be entitled to severance benefits depending on the circumstances of Executive’s termination of employment with the Company.  Executive’s employment with the Company will also be terminated due to Executive’s death or disability. Neither the vesting of any option described in this agreement or any separate agreement (nor any other provision of this agreement or any other agreement between Executive and the Company), nor Executive’s participation in any stock option, incentive bonus, or other benefit program in the future, is to be regarded as assuring Executive of continuing employment for any particular period of time. The employment at-will status can only be modified in a written agreement signed by Executive and by an officer of the Company.

3. Compensation.

(a) Base Salary.  During the Employment Term, the Company will pay Executive an annual salary of $220,000 as compensation for Executive’s services (the “Base Salary”).  The Base Salary will be paid periodically (but not less frequently than monthly) in accordance with the Company’s normal payroll practices and be subject to the usual required withholdings.  Executive’s salary will be subject to review and adjustments on an annual basis.

(b) 2016 Bonus.  Executive will be eligible for a bonus of up to a maximum of  $25,000 contingent upon the attainment of goals and milestones specific to the Executive as agreed to by the Executive and CEO and approved by the Board.  Executive’s eligibility, and the terms and conditions, for this bonus will be documented and issued to Executive if and when approved by the board.  If awarded, this bonus will be paid not later than March 30 of the year following the fiscalyear for which the bonus is awarded, provided that the Employment Term extends through the dateof payment. 

(c) Annual Bonus.  Executive will be eligible for an annual bonus in respect of fiscalyear 2017 and each subsequent fiscal year of up to a maximum of 40% of the Base Salary for the fiscal year which will be contingent upon the attainment of annual designated corporate goals andmilestones, in each case set and measured in the good faith discretion of the Board.  Executive’seligibility, and the terms and conditions, for this bonus will be documented and issued to Executiveif

and when approved by the Board.  If awarded, this bonus will be paid not later than March 30 of the year following the fiscal year for which the bonus is awarded, provided that the EmploymentTerm extends through the date of payment.

(d) Start Date Options.  Promptly after the Start Date, Executive will be granted anoption (the “Start Date Option”) under the 2015 Stock Incentive Plan (“Plan”) to acquire 117,200shares of common stock of the Company equal to approximately 0.75% of the fully diluted capital ofthe Company.  The Start Date Option will have an exercise price per share equal to the closing priceat the date of grant.  The Start Date Option will vest 25% on the first anniversary of the Start Dateand thereafter75% will vest in equal amounts on a monthly basis over the three-year period startingwith the first anniversary of the Start Date with provision for accelerated vesting in the event of a change of control, and exercisable through the tenth anniversary on the Start Date.  This option willbe subject to the grant agreement and the Company’s standard terms and conditions under its optionplan.

4. Employee Benefits.  During the Employment Term, Executive will be entitled toparticipate in the employee benefit plans currently and hereafter maintained by the Company ofgeneral applicability to other senior executives of the Company.  The Company reserves the right tocancel or change the benefit plans and programs it offers to its employees at any time.

5. Vacation.  During the Employment Term, Executive will be entitled to paid vacationof not less than three weeks per year, in accordance with the Company’s vacation policy for seniorexecutive officers, with the timing and duration of specific vacations mutually and reasonably agreedto by the parties hereto.

6. Expenses.  The Company will reimburse Executive for reasonable travel,Entertainment or other expenses incurred by Executive in the furtherance of or in connection with thePerformance of Executive’s duties hereunder, inaccordance with the Company’s expensereimbursement policy as in effect from time to time.

7. Severance.  

(a) Termination without Cause or Resignation for Good Reason.  During theEmployment Term, if (i) the Company (or any parent or subsidiary or successor of the Company)terminates Executive’s employment for reasons other than Cause, death or Disability, or (ii) uponExecutive’s resignation from the Company (or any parent or subsidiary or successor of theCompany)for Good Reason, then, subject to the continued observance by Executive of Sections 8(severance conditions), 11(assignment), 12 (notices), 13 (arbitration), 14 (confidential informationagreement), 15 (non-competition), 17 (litigation cooperation), and 19 (miscellaneous) below afterthe termination of the rendering of employment services, Executive will receive the followingseverance from the Company:

i. Severance Payment

(1) If Executive has been employed for a Term hereunder of less thanone year from the Start Date, then Executive will receive the continuing payment of the Executive’sBase Salary (as in effect immediately prior to the Executive’s termination) equal to three (3) months.If Executive has been employed for a Term hereunder of one year or more from the Start Date, thenExecutive will receive six (6) months of continuing payment of Executive’s Base Salary (as in effectimmediately prior to Executive’s termination).  The Executive will also receive his Annual Bonusfor the year oftermination, prorated for the portion of the year served, payable with the firstseverance payment.  The payment of the continuing Base Salary and Bonus will be less applicablewithholding taxes and other legally required withholdings.

ii. Accelerated Vesting.

(1) Termination without Cause or Resignation for Good Reason not inconnection with a Change in Control.  The unvested portion of Executive’s then Board approved andissued and outstanding equity grants that would normally vest over the following twelve (12) monthsfrom the date of Executive’s termination will immediately vest prior to Executive’s termination andbecome exercisable.  The options will remain exercisable, to the extent applicable, following thedate of termination for the period prescribed in the Plan under which they are awarded.  If the priceof any option has not been set as of the date of acceleration, the price will be set equal to the fairvalue at the grant date as determined in the documented good faith discretion of the Board.

(2) Termination without Cause or Resignation for Good Reason inconnection with a Change in Control or within twelve (12) months of a Change in Control.  IfExecutive has been employed for a Term hereunder of less than one year from the Start Date, then50% of the unvested portion of Executive’s the Board approved and issued and outstanding equitygrants will immediately vest prior to Executive’s termination and become exercisable.  If Executivehas

been employed for a Termhereunder of one year or more from the Start Date, then the unvestedportion of Executive’s then Board approved and issued and outstanding grants willimmediately vest to Executive’s termination and become exercisable.  The options will remainexercisable, to the extent applicable, following the date of termination for the period prescribed inthe Plan under which they are awarded.  If the price of any option has not been set as of the date of acceleration, the price will be set equal to the fair value at the grant date as determined in the documented good faith discretion of the Board.

iii. Pursuant to the Consolidation Omnibus Budget Reconciliation Act of1985, as amended(“COBRA”) for Executive and Executive’s eligible dependents, the Companywill reimburse Executive for the monthly premiums under COBRA for such coverage (at thecoverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) thedate upon which Executive and/or Executive’s eligible dependents becomes covered under similarplans or (B) the date upon which Executive ceases to be eligible for coverage under COBRA.

iv. Resignation; Termination for Cause; Death or Disability.  If you resign(other than for Good Reason), or the Company terminates your employment for Cause, or youremployment terminates upon your death or Disability, the (i) you will no longer vest in the Optionor any other stock option otherwise held by you, (ii) all payments of compensation by the Companyto you hereunder will terminate immediately (except as to amounts already earned), and (iii) you willnot be entitled to any severance benefits.  Unless Executive waives this condition in writing, beforerefusing to pay severance benefits under this Agreement, Company shall obtain a determination froman arbitrator that Executive was terminated for Cause or that Executive has not resigned for GoodReason.

(b)Exclusive Remedy.  In the event of a termination of Executive’s employmentwith the Company (or any parent or subsidiary or successor of the Company), the provisions of this  Section 7 are intended to be and are exclusive and in lieu of any other rights or remedies to whichexecutive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, orunder this agreement.  Executive will be entitled to no severance or other benefits upon terminationof employment with respect to acceleration of award vesting or severance pay other than thosebenefits expressly set forth in this Section 7.

8. Conditions to Receipt of Severance; No Duty to Mitigate.

(a)Separation Agreement and Release of Claims.  The receipt of any severancePursuant to Section 7(a) or (b) will be subject to Executive signing and not revoking a separationagreement and release of claims in a form reasonably satisfactory to the Company and Executive(the “Release”).

(b)Confidential Information Agreement.   Executive’s receipt of any payments orbenefits under Section 7 will be subject to Executive continuing to comply with the terms of the Confidential information, Invention Assignment, andArbitration Agreement between the Executive and the Company and Section I 5 (non-competition) of this Agreement.

(c)Section 409A.

i. Notwithstanding anything to the contrary in this Agreement, noseverance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

ii. Any severance payments or benefits under this Agreement that wouldbe considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive's separation from service, or, if later, such time as required by Section 8(c)(iii). Except as required by Section 8(c)(iii), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive's separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executive's separation from service and the remaining payments shall be made as provided in this Agreement.

iii. Notwithstanding anything to the contrary in this agreement, ifExecutive is a “specified employee” within the meaning of Section 409A at the time of Executive's termination (other than due to death), then the Deferred Payments, if any,that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (l) day following the date of Executive's separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the

payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive's separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive's death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment, installment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

iv. Any amount paid under this Agreement that satisfies the requirementsof the “short-term deferral” rule set forth in Section 1.409A-l(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above. It is the intent of this Agreement that all cash severance payments under Section 7(a)(i) will satisfy the requirements of the“short-term deferral” rule.

v. Any amount paid under this Agreement that qualifies as a paymentmade as a result of an involuntary separation from service pursuant to Section I .409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409ALimit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.

vi. The foregoing provisions are intended to be exempt from or complywith the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

(d)No Duty to Mitigate.  Executive will not be required to mitigate the amount ofany payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

9. Limitation on Payments.  In the event that the severance and other benefits providedfor in this Agreement or otherwise payable to Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code and (ii)but for this Section 9, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severancebenefits will be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to the excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excisetax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in the severance and other benefits constituting “parachute payments” is necessary so that no portion of such severance benefits is subject to the excise tax under Section 4999 of the Code, the reduction shall occur in the following order: (l) reduction of the severance payments under Sections 7(a)(i) or 7(a)(ii); (2) reduction of other cash payments, if any; (3) cancellation of accelerated vesting of equity awards; and (4) reduction of continued employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive's equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. In no event shall the Executive have any discretion with respect to the ordering of payment reductions. Notwithstanding the foregoing, to the extent the Company submits any payment oi benefit payable to Executive under this Agreement or otherwise to the Company's stockholders for approval in accordance with Treasury Regulation Section 1.280G-l Q&A 7, the foregoing provisions shall not apply following such submission and such payments and benefits will be treated in accordance with the results of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be applied without any application of discretion by Executive and in the order prescribed by this Section 9.

Unless the Company and Executive otherwise agree in writing, any determination required under this Section 9 will be made in writing by an independent firm immediately prior to a Change of Control (the “Firm”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 9, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Firm such information and documents as the Firm may reasonably request in

order to make a determination under this Section 9. The Company will bear all costs the Firm may reasonably incur in connection with any calculations contemplated by this Section 9.

10. Definition of Terms.  The following terms referred to in this Agreement will have the following meanings:

(a) Cause. For purposes of this Agreement, “Cause” is defined as (i) Executive's conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, (ii) Executive's gross misconduct, (iii) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company orany other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with theCompany; (iv) Executive’s willful breach of any obligations under any written agreement or covenant with the Company thatis injurious to the Company; or (v) Executive's continued failure to perform his employment duties after Executive hasreceived a written demand of performance from the Company which specifically sets forth the factual basis for theCompany’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to theCompany’s satisfaction within 30 business days after receiving such notice.

(b)Change of Control.  For purposes of this Agreement, “Change of Control”  means the occurrence of any of the following events:

i. any “person” (as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding voting securities, other than the acquisition of 50% of the total voting power represented by the outstanding voting securities when sold by the Company in a capital raising transaction; or

ii. the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

iii. the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets in a transaction that has been approved bythe stockholders of the Company.

Notwithstanding the foregoing provisions of this definition, a transaction will not bedeemed a Change of Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

(c)Code.  For purposes of this Agreement, “Code” means the Internal RevenueCode of 1986, as amended.

(d)Disability.  For the purposes of this Agreement, “Disability” will mean thatExecutive has been unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months. Alternatively, Executive will be deemed disabled if determined to be totally disabled by the Social Security Administration. Termination resulting from Disability may only be effected after at least thirty (30) days' written notice by the Company of its intention to terminate Executive's employment, In the event that Executive resumes the performance of substantially all of Executive's duties hereunder before the termination of Executive's employment becomes effective, the notice of intent to terminate based on Disability will automatically be deemed to have been revoked.

(e)Good Reason.  For the purposes of this Agreement, “Good Reason” meansExecutive's resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Executive’s express written consent: (i) the assignment to Executive of any duties beyond the generally recognized scope of employment of a company Vice President and General Manager, Dermatology and Aesthetics or the reduction of Executive’s duties or the removal of Executive from his position and responsibilities as Vice President and General Manager, Dermatology and Aesthetics, either of which must result in a material diminution of Executive's authority, duties, or responsibilities with the Company in effect immediately prior to such assignment; provided, however, if the Executive is provided with an alternative executive type position within the Company or its subsidiaries at the same or better compensation as proved herein or that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity will not constitute “Good Reason”; (ii) a reduction in Executive’s Base Salary (except where there is a reduction applicable to the management team generally of not more than l0% of

Executive’s Base Salary); or (iii) a material change in the geographic location of Executive’s primary work facility or location; provided, that a relocation of less than fifty (50) miles from Executive’s then present work location will not be considered a material change in geographic location. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and providing a cure period of not less than thirty (30) days following the date of such notice and such grounds for “Good Reason” have not been cured during such cure period.

(f)Section 409A.  For purposes of this Agreement, “Section 409A” means CodeSection 409A, and the final regulations and any guidance promulgated thereunder or any state lawEquivalent.

(g)Section 409A Limit.  For purposes of this Agreement, “Section 409A Limit” willmean two (2) times the lesser of: (i) Executive's annualized compensation based upon the annual rate of pay paid to Executive during the Executive's taxable year preceding the Executive's taxable year of his or her separation from service, as determined under Treasury Regulation Section 1.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Executive's separation from service occurred.

11. Assignment.  This Agreement will be binding upon and inure to the benefit of (a) theheirs, executors and legal representatives of Executive upon Executive's death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, "successor' means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form o of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive's right to compensation or other benefits will be null and void.

12. Notice.  All notices, requests, demands and other communications called forhereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (l) day after being sent by a well-established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing.

If to the Company:

Pulse Biosciences, Inc.

849 Mitten Rd.

Burlingame, CA 94010

Attn:  Darrin R. Uecker, Chief Executive Officer

If to Executive:

at the last residential address known by the Company.

13. Arbitration.

(a)Arbitration.  In consideration of Executive’s employment with the Company,its promise to arbitrate all employment-related disputes, and Executive's receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in thefuture, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive's employment with the Company or termination thereof, including any breach of this Agreement. will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law. The Federal Arbitration Act shall also apply with full force and effect, notwithstanding the application of procedural rules set forth under the Act.

(b)Dispute Resolution.  Dispute that Executive agrees to arbitrate, and  thereby agrees to waive any right to a trial by jury, include any statutory claims under local,State, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and

RetrainingNotification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California FamilyRights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(c)Procedure.  Executive agrees that any arbitration will be administered by theJudicial Arbitration & Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”). The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The arbitrator shall have the power to award any remedies available under applicable law, and the arbitrator shall award attorneys' fees and costs to the prevailing party to the extent authorized by applicable law. The Company will pay for any administrative or hearing fees charged by the administrator or JAMS, and all arbitrator's fees, except that Executive shall pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fee as Executive would have instead paid had Executive filed a complaint in a court of law. Executive agrees that the arbitrator shall administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure and the California Evidence Code, and that the arbitrator shall apply substantive and procedural California law to any dispute or claim, without reference to the rules of conflict of law. To the event that the JAMS Rules conflict with California law, California law shall take precedence. The decision of the arbitrator shall be in w ting. Any arbitration under this Agreement shall be conducted in San Francisco County, California.

(d)Remedy.  Except as provided by the Act, arbitration shall be the sole,exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided by the Act and this Agreement, neitherExecutive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration.Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

(e)Administrative Relief.  Executive is not prohibited from pursuing anadministrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related toemployment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers' Compensation Board. However, Executive may not pursue court action regarding any such claim, except as permitted by law.

14. Confidential Information.  Executive agrees to enter into the Company's standardConfidential Information, Invention Assignment and Arbitration Agreement (the “Confidential Information Agreement”) and IPO lock up agreement upon commencing employment hereunder.

15. Non-Compete.  The Executive hereby agrees that during the period commencing onthe date hereof and ending on the first (1st) anniversary of the date on which the Executive's employment with the Company terminates for any reason (the “Non-Compete Period”), he will not, without the express written consent of the Company, directly or indirectly, anywhere in the United States, Mexico or Canada, engage in any activity which is, or participate or invest in, or provide or facilitate the provision of financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity), any business, organization or person other than the Company (or any subsidiary or affiliate of the Company), whose business, activities, products or services are directly competitive with any of the business, activities, products or services conducted by or in active planning by the Company (or any subsidiary or affiliate of the Company) on the date that the Executive's employment with the Company terminates and which are in the Company's Field of lnterest (defined below); provided that the Executive shall be permitted to be employed by an entity which operates an ancillary business in the Company's Field of lnterest so long as the Executive is not involved in such ancillary business. For purposes of this Agreement, the Company's “Field of Interest” shall include, without limitation. the development, implementation or licensing or sale of methods of using nanopulse electricity for bio-medical applications, including for diagnosis, detection. prevention treatment or cure of tumors or cancers of internal organs, or benign diseases that can be treated by the ablation of internal tissue as well as other dermatologic applications and any other business activity engaged in, conducted by or in active planning by the Company or its subsidiaries or affiliates on the date the Executive's employment with the Company terminates. Notwithstanding anything herein to the contrary, the Executive may make passive investments in any enterprise the shares of which are publicly traded if such investment constitutes less than three percent (3%) of the equity of such enterprise.

16. Business Opportunities.  The Executive agrees, during the Employment Term, tooffer or otherwise make known or available to it, as directed by the Chief Executive Officer or Board and without additional compensation or

consideration, any business prospects, contracts or other business opportunities that he may discover, find, develop or otherwise have available to him in the Company's Field of lnterest, and further agrees that any such prospects, contacts or other business opportunities shall be the property of the Company.

17. Litigation and Regulatory Cooperation.  During and after the Executive’s employmentwith the Company, the Executive shall cooperate fully with the Company and its affiliates in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company and its affiliates which relate to events or occurrences that transpired while the Executive was employed by the Company. The Executive's full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company and its affiliates at mutually convenient times. During and after the Executive's employment, the Executive also shall cooperate fully with the Company and its affiliates in connection with any such investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive's performance of obligations pursuant to this Section. If assistance is required after Executive is no longer employed by the Company, the Company agrees to compensate Executive by paying him a mutually agreed uponhourly rate for all time spent beyond five (5) hours. The performance by the Executive under this Section after the termination of the Executive's employment with the Company shall be subject to his other employment obligations.

18. Insurance.  The Executive agrees that the Company or its affiliates may from time totime and for the Company’s or the affiliates’  own benefit apply for and take out life insurance covering the Executive, either independently or together with others, in any amount and form which the Company or an affiliate may deem to be in its best interests. The Company or the respective affiliate shall own all rights in such insurance and in the cash values and proceeds thereof, and the Executive shall not have any right, title or interest therein. The Executive agrees to assist the Company and its affiliates, at the Company's expense, in obtaining any such insurance by, among things, submitting to customary examinations and correctly preparing, signing and delivering such applications and other documents as reasonably may be required. Nothing contained in this Section shall be construed as a limitation on the Executive's right to procure any life insurance for his own personal needs.

19. Miscellaneous Provisions.

(a)Amendment.  No provision of this Agreement will be modified, waived ordischarged unless themodification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of theCompany (other than Executive) that is expressly designated as an amendment to this Agreement.

(b)Waiver.  No waiver by either party of any breach of, or of compliance with,any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c)Headings.  All captions and section headings used in this Agreement are forConvenient reference only and do not form a part of this Agreement.

(d)Entire Agreement.  This Agreement, together with the Equity Plan, OptionAgreement, the Confidential Information Agreement (and its exhibits), lock up agreement, and any employment policy statements and employment manuals that the Company or its Board adopts from time to time represents the entire agreement and understanding between the parties with respect to Executive's employment by the Company and supersedes all prior or contemporaneous agreements whether written or oral. With respect to stock options granted on or after the date of this Agreement the acceleration of vesting provisions provided herein will apply to such stock options. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.

(e)Governing Law.  This Agreement will be governed by the laws of the State ofCalifornia (with theexception of its conflict of law’s provisions).

(f)Severability.  The invalidity or unenforceability of any provision or provisionsof this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(g)Withholding.  All payments made pursuant to this Agreement will be subjectto all applicable withholdings, including all applicable income and employment taxes, as determined in the Company's reasonable judgment.

(h)Acknowledgment.  Executive acknowledges that he has had the opportunity todiscuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

(i)Counterparts.  This Agreement may be executed in counterparts, and eachcounterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY	Pulse Biosciences, Inc.
		/s/ Darrin R. Uecker
	By:	Darrin R. Uecker
	Title:	Chief Executive Officer
		/s/ Edward A. Ebbers	6/29/16
EXECUTIVE	By:	Edward A. Ebbers

EX-21.1

Exhibit 21.1

List of Subsidiaries

Subsidiary	Jurisdiction of Incorporation	Ownership Position
Nanoblate Corp., a Delaware Corporation	Delaware	100%
BioElectroMed Corp., a California Corporation	California	100%

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Pulse Biosciences, Inc.

We hereby consent to the use in the Form 10-K for the year ended December 31, 2018 of our report dated March 16, 2018, relating to the consolidated balance sheet of Pulse Biosciences, Inc. as of December 31, 2017,and the related consolidated statements of operations and comprehensive loss, and cash flows for each of the two years in the period ended December 31, 2017, and stockholders’ equity for the year ended December 31, 2017, and the related notes, which is included in the Form 10-K for the year ended December 31, 2018. 

/s/ Gumbiner Savett Inc.

March 14, 2019

Santa Monica, California

EX-23.2

Exhibit 23.2

CONSENT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement Nos.333-227974, 333-224800, 333-219104 and 333-219096 on Form S-3 and Nos. 333-229320, 333-222582, 333-221788, 333-218164, and 333-216897 on Form S-8 of our report dated March 14,2019, relating to the financial statements of Pulse Biosciences, Inc. and its subsidiaries appearing in this Annual Report on Form 10-K of Pulse Biosciences, Inc. for the year ended December 31, 2018.

/s/DELOITTE & TOUCHE LLP

San Jose, California

March 14, 2019

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Darrin R. Uecker, President and Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Pulse Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

a) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March14, 2019	By:	/s/ Darrin R. Uecker
		DarrinR. Uecker
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian B. Dow, Chief Financial Officer, certify that:

1. I  have reviewed this Annual Report on Form 10-K of Pulse Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March14, 2019	By:	/s/ Brian B. Dow
		BrianB.Dow
		Chief Financial Officer and Senior Vice President of Finance and Administration, Secretary and Treasurer
		(Principal Financial and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Pulse Biosciences, Inc. (the “Company”) on Form 10-K for the fiscal year endedDecember 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

4
Date: March14, 2019	/s/ Darrin R. Uecker
	Darrin R. Uecker
	President and Chief Executive Officer
	(Principal Executive Officer)

4
	/s/ Brian B. Dow
	Brian B. Dow
	Chief Financial Officer, Senior Vice President of Finance and Administration, Secretary and Treasurer
	(Principal Financial and Principal Accounting Officer)

This certification is deemed furnished and not filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Pulse Biosciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporation language contained in such filing.

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Feb. 28, 2019	Jun. 29, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Pulse Biosciences, Inc.
Entity Filer Category	Accelerated Filer
Entity Central Index Key	0001625101
Trading Symbol	plse
Amendment Flag	false
Document Type	10-K
Document Fiscal Period Focus	FY
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		20,688,832
Entity Public Float			$ 159,262,000

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 51,103	$ 3,386
Investments	8,480	34,683
Prepaid expenses and other current assets	779	412
Total current assets	60,362	38,481
Property and equipment, net	2,173	2,570
Intangible assets, net	5,213	5,878
Goodwill	2,791	2,791
Other asset	101	101
Total assets	70,640	49,821
Current liabilities:
Accounts payable	1,272	782
Accrued expenses	1,421	1,034
Deferred rent, current	415	397
Total current liabilities	3,108	2,213
Deferred rent, less current	1,198	1,613
Total liabilities	4,306	3,826
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.001 par value; authorized – 50,000 shares; no shares issued and outstanding
Common stock, $0.001 par value; authorized – 500,000 shares; issued and outstanding – 20,593 shares and 16,819 shares at December 31, 2018 and 2017, respectively	21	17
Additional paid-in-capital	142,032	84,202
Accumulated other comprehensive loss	(1)	(51)
Accumulated deficit	(75,718)	(38,173)
Total stockholders' equity	66,334	45,995
Total liabilities and stockholders' equity	$ 70,640	$ 49,821

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	20,593,000	16,819,000
Common stock, shares outstanding	20,593,000	16,819,000

XML

Consolidated Statements Of Operations And Comprehensive Loss shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) $ / shares shares
Consolidated Statements Of Operations And Comprehensive Loss [Abstract]
Revenue
Operating expenses:
General and administrative	20,045
Research and development	17,253
Amortization of intangible assets	665
Total operating expenses	37,963
Other income (expense):
Interest income	446
Other	(28)
Total other income (expense)	418
Loss from operations, before income taxes	(37,545)
Income tax benefit
Net loss	(37,545)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities	50
Comprehensive loss	$ (37,495)
Net loss per share:
Basic and diluted net loss per share | $ / shares	$ (2.20)
Weighted average shares used to compute net loss per common share - basic and diluted | shares	17,078

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock Private Placement [Member]	Common Stock Warrants to purchase common stock [Member]	Common Stock Rights Offering [Member]	Common Stock	Additional Paid-in Capital [Member] Private Placement [Member]	Additional Paid-in Capital [Member] Warrants to purchase common stock [Member]	Additional Paid-in Capital [Member] Rights Offering [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member] Private Placement [Member]	Accumulated Other Comprehensive Loss [Member] Warrants to purchase common stock [Member]	Accumulated Other Comprehensive Loss [Member] Rights Offering [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member] Private Placement [Member]	Accumulated Deficit [Member] Warrants to purchase common stock [Member]	Accumulated Deficit [Member] Rights Offering [Member]	Accumulated Deficit [Member]	Private Placement [Member]	Warrants to purchase common stock [Member]	Rights Offering [Member]	Total
Balance at Dec. 31, 2016				$ 13				$ 37,898				$ (7)				$ (12,606)				$ 25,298
Balance, shares at Dec. 31, 2016				13,315,000
Shares issued	$ 3				$ 34,840												$ 34,843
Shares issued, shares	2,820,000
Shares issued upon exercise of stock options				$ 1		$ 50		488										$ 50		489
Shares issued upon exercise of stock options, shares		522,000		162,000
Stock-based compensation expense								10,926												10,926
Unrealized loss on available-for-sale securities, net of tax												(44)								(44)
Net loss																(25,567)				(25,567)
Balance at Dec. 31, 2017				$ 17				84,202				(51)				(38,173)				$ 45,995
Balance, shares at Dec. 31, 2017				16,819,000																16,819,000
Shares issued			$ 4				$ 44,782												$ 44,786
Shares issued, shares			3,581,000
Shares issued upon exercise of stock options								498												$ 498
Shares issued upon exercise of stock options, shares		24,000		145,000														36,224		144,508
Issuance of shares under employee stock plans								327												$ 327
Issuance of shares under employee stock plans, shares				24,000
Stock-based compensation expense								12,338												12,338
Tax payments related to shares withheld for vested restricted stock units								(115)												(115)
Unrealized loss on available-for-sale securities, net of tax												50								50
Net loss																(37,545)				(37,545)
Balance at Dec. 31, 2018				$ 21				$ 142,032				$ (1)				$ (75,718)				$ 66,334
Balance, shares at Dec. 31, 2018				20,593,000																20,593,000

XML

Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Private Placement [Member]
Issuance costs		$ 199
Rights [Member]
Price per share	$ 12.57
Issuance costs	$ 213

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net loss	$ (37,545)	$ (25,567)	$ (9,518)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	645	336	94
Amortization of intangible assets	665	665	665
Loss on disposal of fixed assets	28
Stock-based compensation	12,338	10,926	870
Net premium amortization on investments	(140)	26	4
Landlord incentive for tenant improvements		2,119
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(367)	(144)	(415)
Accounts payable	490	517	3
Accrued expenses	387	245	246
Other asset		(101)
Deferred rent	(397)	(109)
Net cash used in operating activities	(23,896)	(11,087)	(8,051)
Cash flows from investing activities:
Purchases of property and equipment	(276)	(2,551)	(64)
Purchases of available-for-sale securities	(40,297)	(43,595)	(19,067)
Maturities of available-for-sale securities	41,815	23,148	4,750
Sales of investments	24,875
Net cash provided by investing activities	26,117	(22,998)	(14,381)
Cash flows from financing activities:
Proceeds from exercises of stock options and warrants	498	539
Proceeds from issuance of common stock from private offering, net of issuance costs		34,843
Proceeds from issuance of common stock from initial public offering, net of issuance costs			20,915
Proceeds from issuance of common stock under employee stock plan	327
Proceeds from issuance of common stock from rights offering, net of issuance costs	44,786
Tax payments related to shares withheld for vested restricted stock units	(115)
Net cash provided by financing activities	45,496	35,382	20,915
Net increase in cash and cash equivalents	47,717	1,297	(1,517)
Cash and cash equivalents at beginning of period	3,386	2,089	3,606
Cash and cash equivalents at end of period	51,103	3,386	2,089
Supplemental disclosure of noncash investing and financing activities:
Reclassification of deferred offering costs to additional paid-in capital upon initial public offering			627
Equipment purchased in accounts payable and accrued expenses	$ 33	$ 38	$ 18

XML

Description Of The Business

12 Months Ended

Dec. 31, 2018

Description Of The Business [Abstract]

Description Of The Business

1.  Description of the Business

Pulse Biosciences, Inc.,is a clinical stage medical therapy company pursuing commercial introduction of its proprietary CellFX™ System utilizing the Company’s proprietary Nano-Pulse Stimulation™ (NPS™) platform technology. The Company’s CellFX System provides a novel, precise, non-thermal cellular treatment technology delivering nanosecond duration energy pulses that impact cells in treated tissue while sparing surrounding non-cellular tissue. The novel characteristics of the Company’s CellFX System mechanism of action has the potential to significantly benefit patients across multiple medical applications, including dermatology, the Company’s first planned commercial application.

The Company was incorporated in Nevada on May 19, 2014. On June 18, 2018, the Company reincorporated from the State of Nevada to the State of Delaware. The Company’s headquarters and research facility are located in Hayward, California.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will need to raise additional capital to finance its operations. However, there can be no assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements.

XML

Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

2.  Summary of Significant Accounting Policies 

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities Exchange Commission (the “SEC”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affect the amounts reported in the financial statements and accompanying notes to the financial statements.  Estimates include, but are not limited to, the valuation of investments, clinical trial accruals, the valuation and recognition of stock-based compensation and useful lives assigned to long-lived assets. Actual amounts could differ from these estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and investments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses since inception.

Fair Value of Financial Instruments

TheCompany believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of such instruments.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company has designated all investments as available-for-sale and therefore, such investments are reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income (loss) (“OCI”) in stockholders’ equity. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is included in other income, net. Realized gains and losses, as well as interest income, on available-for-sale securities are also included in other income, net. The Company includes all of its available-for-sale securities in current assets.

All of the Company’s investments are subject to a periodic impairment review. The Company recognizes an impairment loss when a decline in the fair value of its marketable investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the marketable investments fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security and whether or not the Company will be required to sell the security before the recovery of its amortized cost. No impairment losses were incurred during the periods presented.

Property and Equipment

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from three to five years.

Intangible Assets

The Company’s intangible assets consist of acquired patents and licenses, which are being amortized over their estimated useful lives of twelve years.

Long-Lived Assets

The Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment during each fiscal year or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during the periods presented.

Goodwill

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting until level at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. To date, there has been no impairment of goodwill.

Stock-Based Compensation

The Company recognizes the cost of stock-based compensation in the financial statements based upon fair value. The fair value of stock options is determined as of the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock unit (RSU) awards is determined based on the number of units granted and the closing price of the Company’s common stock on the grant date. The fair value of each purchase under the employee stock purchase plan (ESPP) is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company’s determination of the fair value of equity-settled awards is impacted by the price of the Company's common stock as well as changes in assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected term that awards will remain outstanding, expected common stock price volatility over the term of the awards, risk-free interest rates and expected dividends. The fair value of an award is recognized over the period during which service is required to be performed in exchange for the award, the requisite service period (usually the vesting period) on a straight-line basis.

Equity instruments issued to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as the underlying equity instruments vest. The fair value of these equity instruments are expensed over the service period.

Estimates of the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, are affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affect the fair value of the award and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. The Company determines the volatility factor based on the historical volatilities of comparable public companies in similar industries. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award. For all stock options granted to date, the Company used the simplified method to calculate the expected term, which is the average of the contractual term and vesting period. Prior to the Company’s initial public offering, the fair value of common stock was determined by reference to either recent or anticipated cash transactions involving the sale of the Company’s common stock.

The Company recognizes the fair value of stock-based compensation costs in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations.

Research and Development Costs

Research and development costs consist primarily of compensation costs, fees paid to consultants and outside service providers and organizations (including university research institutes), costs associated with clinical trials, development prototypes and other expenses relating to the acquisition, design, development and testing of the Company’s product candidates. Research and development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate.

Patent Costs

The Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs not related to acquired patents, including patent-related legal fees, filing fees and other costs, including internally generated costs, are expensed as incurred. During the years ended December 31, 2018, 2017 and 2016, patent costs totaled $0.6 million, $0.8 million and $0.5 million, respectively. Patent costs are included in general and administrative costs in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company is subject to U.S. federal income taxes and income taxes in California. As the Company’s net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company is not currently under examination by any tax authority.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. At December 31, 2018 and 2017, the Company had not recorded any liability for uncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of income tax expense.

Comprehensive Loss

Comprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Company displays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.

Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

Basic and diluted net loss per common share is the same for all periods presented because all warrants, stock options and restricted stock units outstanding are anti-dilutive.

The following outstanding stock options, warrants and restricted stock units to purchase common stock were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

	Year Ended December 31,
	2018		2017		2016
Common stock warrants		213,485		249,709		874,610
Common stock options		2,956,687		2,598,659		1,229,355
Restricted stock units		222,606		229,774		—
Total		3,392,778		3,078,142		2,103,965

Segment and Geographical Information

The Company operates and manages its business as one reportable and operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s assets are based in the United States.

Reclassification

Certain items in prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position.

Recent Accounting Pronouncements

During May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update to periods beginning after December 15, 2017. This updated standard became effective for the Company in the first quarter of fiscal year 2018. Since the Company has not recognized or generated revenue to date, the adoption of this pronouncement did not have any impact to its financial statements.

During February 2016, the FASB issued ASU No. 2016-02, Leases, which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019. The Company generally does not finance purchases of equipment or other capital, but does lease its facilities. The adoption of the new standard will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (See Note 12 – Commitments and Contingencies). The Company adopted the new standard effective January 1, 2019 and will not restate comparative periods. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance.  The Company will elect the package of practical expedients permitted under the transition guidance and as such, the adoption of this ASU will not change the classification of any of the Company’s leases.  The Company estimates that approximately $1.7 million will be recognized as total lease liabilities and approximately $0.1 million will be recognized as total rights-of-use assets on the Company’s consolidated balance sheet as of January 1, 2019.

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Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2018

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

3. Investments and Fair Value of Financial Instruments

Investments

The Company’s investments have been classified and accounted for as available-for-sale. The Company’s investments consisted of the following (in thousands):

		December 31, 2018
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	8,481		—		(1)	$	8,480
Total assets measured at fair value	$	8,481	$	—	$	(1)	$	8,480

		December 31, 2017
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial paper	$	7,216	$	—	$	(6)	$	7,210
Corporate bonds		19,524		—		(33)		19,491
Asset-backed securities		7,994		—		(12)		7,982
Total assets measured at fair value	$	34,734	$	—	$	(51)	$	34,683

The contractual maturities of the Company’s investments were as follows (in thousands):

	December 31,
Investments	2018		2017
Due in one year	$	8,480	$	30,096
Due in one to two years		—		4,587
Total	$	8,480	$	34,683

Fair Value of Financial Instruments

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 -  Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include money market funds.

Level 2 - Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include commercial paper, corporate bonds and asset-backed securities.

Level 3 - Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. The Company did not classify any of its investments within Level 3 of the fair value hierarchy.

The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

			December 31, 2018
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	50,703		—		—	$	50,703
U.S. Treasury Securities	Investments		—		8,480		—		8,480
Total assets measured at fair value		$	50,703	$	8,480	$	—	$	59,183

			December 31, 2017
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	2,758	$	—	$	—	$	2,758
Commercial paper	Investments		—		7,210		—		7,210
Corporate bonds	Investments		—		19,491		—		19,491
Asset-backed securities	Investments		—		7,982		—		7,982
Total assets measured at fair value		$	2,758	$	34,683	$	—	$	37,441

During year ended December 31, 2018 and 2017, the Company did not record impairment charges related to its marketable investments. During the year ended December 31, 2018 and 2017, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2018 or December 31, 2017.

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Property And Equipment, Net

12 Months Ended

Dec. 31, 2018

Property And Equipment, Net [Abstract]

Property And Equipment, Net

4.  Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	December 31,
	2018		2017
Leasehold improvements	$	2,248	$	2,257
Laboratory equipment		518		484
Furniture, fixtures and equipment		248		231
Software		118		79
Construction in progress		33		—
		3,165		3,051
Less: Accumulated depreciation and amortization		(992)		(481)
	$	2,173	$	2,570

During June 2017, the Company prepared to move into new office space in Hayward, California, and its landlord provided $2.1 million for leasehold improvements pursuant to the tenant allowance clause in the lease agreement between the Company and its landlord which has been capitalized and amortized over the shorter of the lease term or estimated useful life.

Depreciation expense for the years ended December 31, 2018, 2017, and 2016 was $0.6 million, $0.3 million, and $0.1 million, respectively.

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Intangible Assets, Net

12 Months Ended

Dec. 31, 2018

Intangible Assets, Net [Abstract]

Intangible Assets, Net

5.  Intangible Assets, Net

Intangible assets primarily consist of a license to utilize certain patents, know-how and technology relating to the Company’s NPS for biomedical applications acquired from Old Dominion University Research Foundation (“ODURF”), Eastern Virginia Medical School, and the University of Southern California. In addition, the Company entered into a Sponsored Research Agreement with Old Dominion University’s Frank Reidy Research Center for Bioelectrics, a leading research organization in the field, which includes certain intellectual property rights arising from the research.

Intangible assets, net consisted of the following (in thousands):

	December 31,
	2018		2017
Acquired patents and licenses	$	7,985	$	7,985
Less: Accumulated amortization		(2,772)		(2,107)
	$	5,213	$	5,878

A  schedule of the amortization of intangible assets for the five years ending December 31, 2019 through 2023 and thereafter is as follows (in thousands):

Year Ending December 31:
2019	$	665
2020		665
2021		665
2022		665
2023		665
Thereafter		1,888
	$	5,213

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Goodwill

12 Months Ended

Dec. 31, 2018

Goodwill [Abstract]

Goodwill

6.  Goodwill

In 2014, the Company acquired three companies (the “acquisitions”) for aggregate consideration of $5.5 million. In accordance with ASC Topic 805, Business Combinations, the Company recorded goodwill of $2.8 million in connection with the acquisitions as the consideration paid exceeded the fair value of the net tangible assets and the intangible assets acquired.

The Company reviews goodwill for impairment at least annually or whenever changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Based on the Company’s annual impairment test as of December 31, 2018, 2017 and 2016, the Company determined that no impairment of goodwill existed, and was not aware of any indicators of impairment at such date.

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Accrued Expenses

12 Months Ended

Dec. 31, 2018

Accrued Expenses [Abstract]

Accrued Expenses

7.  Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	December 31,
	2018		2017
Compensation expense	$	938	$	685
Accrued clinical		156		21
Professional fees		274		211
Supplies		53		65
Other		—		52
	$	1,421	$	1,034

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Stockholders' Equity And Stock-Based Compensation

12 Months Ended

Dec. 31, 2018

Stockholders' Equity And Stock-Based Compensation [Abstract]

Stockholders' Equity And Stock-Based Compensation

8.  Stockholders’ Equity and Stock-Based Compensation

Preferred Stock

The Company has authorized a total of 50,000,000 shares of preferred stock, par value $0.001 per share, none of which were outstanding at December 31, 2018 and 2017. The Company’s Board of Directors has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights, without any further vote or action by the Company’s stockholders.

Common Stock

The Company has authorized a total of 500,000,000shares of common stock, par value $0.001 per share.

Initial Public Offering

During May 2016 through June 2016, the Company closed its initial public offering (“IPO”), whereby the Company sold 5,749,846 shares of common stock at $4.00 per share. The Company received net proceeds of approximately $20.3 million from the IPO, including proceeds from the exercise of the overallotment option granted to the underwriters, net of underwriting discounts and commissions and other offering costs.

Private Placements

During February 2017, the Company entered into a securities purchase agreement, pursuant to which the Company, in a private placement, issued and sold an aggregate of 819,673 shares of the Company’s common stock, par value $0.001 per share, at a price per share of $6.10, for net proceeds of approximately $5.0 million.

During September 2017, the Company entered into a securities purchase agreement with an existing investor, pursuant to which the Company, in a private placement, issued and sold an aggregate of 2,000,000 shares of the Company’s common stock, par value $0.001 per share, at a price per share of $15.02, for net proceeds of approximately $29.9 million.

Rights Offering

On October 25, 2018, the Company commenced a rights offering pursuant to which stockholders of record as of November 19, 2018, were issued, at no charge, one subscription right for each share of common stock then outstanding. Each right entitled the holder to purchase 0.19860755 share of the Company’s common stock for $12.57 per share (the “Rights Offering”).

Stockholders who exercised their rights in full were also permitted an over-subscription right to purchase additional shares of common stock that remained unsubscribed at the expiration of the Rights Offering, subject to the availability of shares and a pro rata allocation of shares among persons exercising the oversubscription right.

Upon the closing of the Rights Offering on December 6, 2018, the Rights Offering was oversubscribed. A total of 3,581,148 shares of the Company’s common stock were issued and sold in the Rights Offering for net proceeds of approximately $44.8 million. Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 35% of the Company’s outstanding common stock prior to the Rights Offering, participated in the Rights Offering and purchased an aggregate of 3,146,226 shares for an additional investment of approximately $39.5 million.

Common Stock Warrants

In connection with a private placement offering of the Company’s shares of common stock, par value $0.001 per share in 2014, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its common stock at a price of $2.67 per share (the “Private Placement Warrants”). The Private Placement Warrants are exercisable for a period of seven years. As of December 31, 2018, there were a total of 91,876 of Private Placement Warrants outstanding.

In connection with the closing of the Company’s initial public offering in 2016, the Company issued warrants as compensation to its underwriters, as representatives of the underwriters of its initial public offering to purchase a total of 574,985 shares of its common stock at a price of $5.00 per share (“the IPO Warrants”). The IPO Warrants are exercisable for a period of five years. As of December 31, 2018, there were a total of 121,609 of the IPO Warrants outstanding. 

A summary of warrant activity for the year ended December 31, 2018 is presented below:

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Shares	Exercise Price		Life (in Years)
Warrants outstanding at December 31, 2017	249,709	$	4.14	3.56
Issued	—
Exercised	(36,224)		5.00
Expired/terminated	—
Warrants outstanding and exercisable at December 31, 2018	213,485	$	4.00	2.37

During the year ended December 31, 2018, warrants to purchase 36,224 shares of common stock were net exercised, resulting in the issuance of approximately 23,957 shares of common stock.

The intrinsic value of exercisable in-the-money stock warrants was approximately $1.6 million as of December 31, 2018.

Equity Plans

2017 Equity Incentive Plan and 2017 Inducement Equity Incentive Plan

The Board of Directors (the “Board”) of the Company previously adopted, and the Company’s stockholders approved, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”).

The 2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board may determine. Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under the Company’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), and shares reserved but not issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the 2017 Plan. The 2017 Plan is administered by the Board’s Compensation Committee. Effective January 1, 2019, the number of shares of common stock available under the 2017 Plan increased by 823,716 shares pursuant to the evergreen provision of the 2017 Plan. Pursuant to the 2017 Plan, the 2019 share increase is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. As of December 31, 2018, 539,436 shares of common stock remained available for issuance under the 2017 Plan.

During November 2017, the Board of the Company adopted the 2017 Inducement Equity Incentive Plan (the “Inducement Plan”) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval.

The Inducement Plan has a 10-year term, and provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan may have a term up to ten years and have variable vesting provisions. New hire grants generally vest 25% upon the first anniversary of the grant and 1/48th monthly thereafter, over the subsequent 36 months. Equity-based awards issued under the Inducement Plan are only issuable to individuals not previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’s adoption date. As of December 31, 2018, 541,625 shares of common stock were available for issuance under the Inducement Plan.

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”).

The 2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the 2017 ESPP. In January 2019, the Board determined not to increase the number of shares of common stock available under the 2017 ESPP pursuant to the evergreen provision of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. During the year ended December 31, 2018, the Company issued 23,869 shares of common stock under the 2017 ESPP. As of December 31, 2018, 478,474 shares of common stock remained available for issuance under the 2017 ESPP.

A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the year ended

December 31, 2018 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares	Price		Life (in Years)
Balances - December 31, 2017	2,598,659	$	16.88	8.2
Options granted	657,375		15.18
Options exercised	(144,508)		3.44
Options canceled	(147,839)		19.04
Options expired	(7,000)		19.99
Balances - December 31, 2018	2,956,687	$	17.04	7.6
Stock options exercisable at December 31, 2018	1,513,617	$	15.70	6.6

The exercise prices of stock options outstanding and exercisable are as follows at December 31, 2018:

Options Outstanding				Options Exercisable
		Weighted average
	Number	remaining contractual	Weighted average	Number	Weighted average
Exercise Price	outstanding	life (in years)	exercise price	vested	exercise price
$2.67 - $4.28	732,842	6.0	$                   3.84	579,735	$                   3.79
$4.67 - $7.55	218,359	7.7	5.27	105,633	5.42
$11.00 - $16.52	471,375	9.6	13.49	53,634	14.71
$19.35 - $30.99	1,534,111	7.7	26.12	774,615	26.08
	2,956,687	7.6	$                 17.04	1,513,617	$                 15.70

The tables above exclude 42,500 performance stock options granted during the year ended December 31, 2018 for which the performance criteria had not been established as of December 31, 2018.

The intrinsic value of stock options exercised during the year ended December 31, 2018, 2017 and 2016 was $1.8 million, $3.8 million, and $0, respectively.

The fair value of employee stock options was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

	Year Ended December 31,
	2018		2017		2016
Expected term in years		5.3 - 6.1		0.4 - 6.1		6.1
Expected volatility		70%		70% - 90%		80%
Risk-free interest rate		2.6 - 3.0%		1.0% - 2.2%		1.2% - 1.5%
Dividend yield		—		—		—

The fair value of the stock options granted to employees and directors during the years ended December 31, 2018, 2017 and 2016, calculated pursuant to the Black-Scholes option-pricing model, was $6.4 million, $26.8 million, and $1.2 million, respectively.

The fair value of ESPP was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

	Year Ended December 31,
	2018		2017		2016
Expected term in years		0.5 - 1.0		0.5 - 1.3		—
Expected volatility		70%		95%		—
Risk-free interest rate		1.9% - 2.5%		1.1% - 1.2%		—
Dividend yield		—		—		—

Total stock-based compensation expense consisted of the following (in thousands):

	Year Ended December 31,
	2018		2017		2016
General and administrative	$	9,004	$	9,136	$	674
Research and development		3,334		1,790		196
Total stock-based compensation expense	$	12,338	$	10,926	$	870

The fair value of restricted stock unit (“RSUs”) awards is determined based on the number of units granted and the closing price of the Company’s common stock as of the grant date.  The estimated fair value of RSUs is recognized on a straight-line basis over the requisite service period. During 2017, the Company granted 160,974 RSUs all of which vested pursuant to which no shares were issued, during June 2018. Additional paid in capital was reduced by $0.1 million for tax payments related to shares withheld in connection with the vesting of the RSUs. The stock-based compensation expense related to these RSUs was approximately $2.1 million and $2.9 million during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was no unrecognized compensation expense related to these RSUs.

During the year ended December 31, 2017, the Company granted 68,800 RSUs to certain employees which vest 50% on June 1, 2019 with the remaining 50% vesting on June 1, 2021. In the event of a change in control, these RSUs vest 100%. The stock-based compensation expense recorded in 2018 and 2017 related to these RSUs was approximately $0.4 million and $0.1 million, respectively. As of December 31, 2018, there was $0.9 million of unrecognized compensation expense related to these RSUs.

During November 2017, the Board of Directors of the Company accepted resignations of certain members of its board of directors resulting in the full vesting of their outstanding equity awards. This resulted in the Company recording an additional $1.2 million of stock-based compensation expense for the year ended December 31, 2017.

At December 31, 2018, there was $17.1  million of unrecognized compensation cost related to unvested stock-based compensation arrangements, which is expected to be recognized over a weighted average period of 2.3 years.

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Research Grants And Agreements

12 Months Ended

Dec. 31, 2018

Research Grants And Agreements [Abstract]

Research Grants And Agreements

9.  Research Grants and Agreements

Sponsored Research Agreement

The Company entered into a Sponsored Research Agreement (“SRA”) with Old Dominion University Research Foundation (“ODURF”) during 2014 pursuant to which the Company sponsors research activities performed by ODURF’s Frank Reidy Center. ODURF is compensated by the Company for its conduct of each study in accordance with the budget and payment terms set forth in the applicable task order. During the years ended December 31, 2018, 2017 and 2016, the Company agreed to sponsor $0.8 million,$0.7 million and $1.0 million, respectively, in research during the subsequent 12-month period to be funded through monthly payments made upon ODURF certifying, to the Company’s reasonable satisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principal investigator may transfer funds with the budget as needed without the Company’s approval so long as the obligations of ODURF under the task order and statement of work remain unchanged and unimpaired. As of December 31, 2018, $0.6 million remained payable under this research agreement.

In addition, during the year ended December 31, 2017, the Company agreed to provide $0.3 million in research funding to researchers affiliated with ODURF and Eastern Virginia Medical School matching funds made available to those researchers by the Virginia Biosciences Health Research Corporation. The Company’s sponsorship affords access to certain intellectual property, if any, developed during the project. As of December 31, 2018, there was approximately $0.1 million remained payable under this agreement.

During the years ended December 31, 2018, 2017 and 2016, the Company incurred costs relating to the SRA equal to $0.7 million, $0.8 million and $0.9 million, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Income Taxes

10. Income Taxes

The income tax provision for the years ended December 31, 2018 and 2017 was $0 and $0, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at December 31, 2018 and 2017 are summarized below (in thousands):

	December 31,
	2018		2017
Temporary differences	$	111	$	36
Credits		5,330		1,536
Stock compensation		2,630		3,067
Net operating loss carryforwards		15,365		7,715
Total deferred tax assets before valuation allowance		23,436		12,354
Valuation allowance		(22,696)		(11,491)
Total deferred tax assets after valuation allowance		740		863
Technology deferred tax liability		(740)		(863)
Net deferred tax assets	$	—	$	—

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. At December 31, 2018 and 2017, management was unable to determine that it was more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

The Company’s effective tax rate is different from the federal statutory tax rate of 21% due primarily to net losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.

Presented below is the reconcilement of the difference between the tax rate computed by applying the U.S. federal statutory tax rate and the effective tax rate for the years ended December 31, 2018, 2017 and 2016:

	Year Ended December 31,
	2018		2017		2016
U.S. federal statutory tax rate	(21.0)	%	(35.0)	%	(35.0)	%
Valuation allowance	28.0		23.0		42.0
Tax reform	(2.0)		18.0		—
Permanent differences	2.0		1.0		2.0
State tax benefit and other	(7.0)		(7.0)		(9.0)
Effective tax rate	—	%	—	%	—	%

At December 31, 2018, the Company had federal and California state net operating loss carryforwards of approximately $51.6 million and $51.0 million, respectively. The federal and state net operating loss carryforwards will begin to expire after 2034. At December 31, 2018, the Company had approximately $1.4 million and $1.2 million of federal and California R&D credits, respectively. The federal R&D credits begin to expire after 2035 and the California R&D credits have an indefinite carryforward period.

These net operating loss carryforward and research and development credits amounts have full valuation allowances against them due to the remoteness of their expected utilization.

The Company’s activity related to unrecognized tax benefits are summarized below (in thousands):

	December 31,
	2018		2017
Balance at the beginning of the year	$	512	$	213
Gross increases - tax positions in prior periods		—		37
Gross decreases - tax positions in prior periods		—		—
Gross increases - tax position in current period		365		262
Settlements		—		—
Lapses in statutes of limitations		—		—
Balance at the end of the year	$	877	$	512

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next twelve months. During the years ended December 31, 2018, 2017 and 2016, no interest or penalties were required to be recognized related to unrecognized tax benefits. Although the Company is not under examination, the tax years for 2014 and forward are subject to examination by United States tax authorities.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law and the new legistration contains several key tax provisions that affected the Company, including a reduction of the corporate income tax rate to 21%effective January 1, 2018, among others. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring the Company’s U.S. deferred tax assets and liabilities as well as reassessing the net realizability of the Company’s deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, the Company previously provided a provisional estimate of the effect of the Tax Act in our financial statements.

The key impact of the Tax Act on the Company’s financial statement for the year ended December 31, 2017, was the re-measurement of deferred tax balances to the new corporate tax rate. In order to calculate the effects of the new corporate tax rate on the Compnay’s deferred tax balances, ASC 740 “Income Taxes” (“ASC 740”) required the re-measurement of the Company’s deferred tax balances as of the enactment date of the Tax Act, based on the rates at which the balances are expected to reverse in the future. The re-measurement of the Company’s deferred tax balances resulted in a net reduction in deferred tax assets of $4.7 million offset with a corresponding adjustment to the valuation allowance. In the fourth quarter of 2018, the Company completed its analysis to determine the effect of the Tax Act and recorded no adjustments as of December 31, 2018.

The Company performed a formal analysis of the availability of these operating loss carryforwards at December 31, 2017 under Internal Revenue Code Sections 382 and 383, and management expects that the Company’s ability to use its net operating loss carryforwards may be limited in future periods.

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Related Party Transactions

12 Months Ended

Dec. 31, 2018

Related Party Transactions [Abstract]

Related Party Transactions

11.  Related Party Transactions

Kenneth A. Clark, a director of the Company since November 2017, is a member of the law firm of Wilson Sonsini Goodrich and Rosati (“WSGR”), which is also serves as the outside corporate counsel to the Company. During the years ended December 31, 2018 and 2017, the Company incurred expenses reported in general and administrative expenses in the consolidated statement of operations for legal services rendered by WSGR totaling approximately $1.2 million and $0.7 million, respectively. During the year ended December 31, 2018, the Company capitalized approximately $0.1 million for legal expenses incurred in connection with the rights offering (Note 8).

During December 2018, the Company completed a rights offering pursuant to which it sold an aggregate of 3,581,148 shares of its common stock, par value $0.001 per share, at a price per share of $12.57, for net proceeds of approximately $44.8 million. At the time of transaction, Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 35% of the Company’s then outstanding common stock prior to the rights offering. After giving effect to the rights offering, Mr. Duggan was the beneficial owner or approximately 44% of the Company’s outstanding stock as of December 31, 2018.

MDB Capital Group, LLC (“MDB”) provided investment banking, executive recruiting and intellectual property management services to the Company. The Company’s former Chairman of the Board, Robert Levande, was a Senior Managing Director of MDB throughout his tenure on the Company’s Board. During the year ended December 31, 2016, the Company incurred $0.1 million for services rendered by MDB with respect to intellectual property management. The Company did not incur any amounts for intellectual property management services by MDB during the years ended December 31, 2017 or 2018.

In connection with the Company’s 2016 IPO (Note 8), the underwriting syndicate led by MDB received $1.8 million in underwriting discounts, $0.2 million in unaccountable expense reimbursements and warrants valued in the aggregate of $1.4 million.

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2018

Commitments And Contingencies [Abstract]

Commitments And Contingencies

12.  Commitments and Contingencies

Operating Leases

The Company leased approximately 4,300 square feet of corporate offices and research facilities in Burlingame, California, at a monthly cost of approximately $21,000. This lease expired on June 30, 2017.  

In January 2017, the Company entered into a new lease agreement for premises consisting of approximately 15,700 rentable square feet located in Hayward, California. The lease commenced on July 1, 2017 and expires in August 2022, with an option to extend the lease term for an additional five years. Under the terms of the lease agreement, the landlord provided an allowance for tenant improvements in the amount of $2.1 million, which was recorded as deferred rent at the inception of the lease term. Rent expense associated with the future minimum lease payment is reduced by amortization of tenant improvement allowance over the life of the lease. An offsetting amount was recorded as leasehold improvement at the inception of the lease term. Leasehold improvements are depreciated over the lease term.

During the years ended December 31, 2018, 2017 and 2016, rent expense, including common area maintenance charges, was $0.2 million, $0.3 million and $0.2 million, respectively.

Future minimum lease payments under the non-cancelable operating leases as of December 31, 2018 are as follows (in thousands):

Year Ending December 31:
2019	$	536
2020		554
2021		574
2022		392
Thereafter		—
	$	2,056

Indemnification

The Company and certain directors have received subpoenas from the Securities and Exchange Commission requesting documents and other information in connection with an investigation into trading in the Company’s stock in advance of the Company’s September 2017 private placement equity financing. The Company and its directors have cooperated with the investigation.

The Company maintains indemnification agreements with its directors and officers that may require the Company to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law.

At this time, the Company is unable to estimate a possible loss, if any, associated with the matter described above.

From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normal course of our business in addition to governmental and other regulatory investigations and proceedings. In addition, third parties may, from time to time, assert claims against the Company in the form of letters and other communications. The Company currently believes that these ordinary course matters will not have a material adverse effect on our business; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2018

Employee Benefit Plans [Abstract]

Employee Benefit Plans

13.  Employee Benefit Plans

The Company sponsors a defined contribution plan under which it may make discretionary contributions. The Company did not make any employer matching contributions to this plan during the years ended December 31, 2018, 2017 and 2016.

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Selected Quarterly Financial Data

12 Months Ended

Dec. 31, 2018

Selected Quarterly Financial Data [Abstract]

Selected Quarterly Financial Data

14.  Selected Quarterly Financial Data (Unaudited)

During the quarters ended March 31, June 30 and September 30, 2017, patent legal costs of $0.1 million, $0.2 million and $0.3 million, respectively, were reclassified from research and development costs to general and administrative costs. These changes did not impact loss from operations or net loss. The selected financial data below has been adjusted for such reclassifications.

The following table provides the selected quarterly financial data for the years ended December 31, 2018 and 2017 (in thousands, except per share data):

	Quarter Ended
	2018								2017
	December 31,		September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
Revenue	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Operating expenses:
General and administrative		3,814		5,675		5,173		5,383		5,801		4,434		3,924		1,344
Research and development		5,080		5,038		3,960		3,175		2,864		2,925		2,130		1,727
Amortization of intangible assets		166		166		167		166		166		166		167		166
Total operating expenses		9,060		10,879		9,300		8,724		8,831		7,525		6,221		3,237
Other income (expense):
Interest income		135		118		137		56		128		39		41		39
Other expense		(28)		—		—		—		—		—		—		—
Total other income (expense)		107		118		137		56		128		39		41		39
Loss from operations, before income taxes		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Income tax benefit		—		—		—		—		—		—		—		—
Net loss		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities, net of tax:		2		(3)		3		48		(49)		4		3		(2)
Comprehensive loss	$	(8,951)	$	(10,764)	$	(9,160)	$	(8,620)	$	(8,752)	$	(7,482)	$	(6,177)	$	(3,200)
Net loss per share
Basic and diluted net loss per share	$	(0.51)	$	(0.64)	$	(0.54)	$	(0.51)	$	(0.53)	$	(0.52)	$	(0.43)	$	(0.23)
Weighted average shares used to compute net loss per common share — basic and diluted		17,656		16,927		16,881		16,842		16,574		14,381		14,233		13,803

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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2018

Summary Of Significant Accounting Policies [Abstract]

Use Of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affect the amounts reported in the financial statements and accompanying notes to the financial statements.  Estimates include, but are not limited to, the valuation of investments, clinical trial accruals, the valuation and recognition of stock-based compensation and useful lives assigned to long-lived assets. Actual amounts could differ from these estimates.

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities Exchange Commission (the “SEC”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.

Concentration Of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and investments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses since inception.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

TheCompany believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of such instruments.

Cash, Cash Equivalents, And Investments

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company has designated all investments as available-for-sale and therefore, such investments are reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income (loss) (“OCI”) in stockholders’ equity. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is included in other income, net. Realized gains and losses, as well as interest income, on available-for-sale securities are also included in other income, net. The Company includes all of its available-for-sale securities in current assets.

All of the Company’s investments are subject to a periodic impairment review. The Company recognizes an impairment loss when a decline in the fair value of its marketable investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the marketable investments fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security and whether or not the Company will be required to sell the security before the recovery of its amortized cost. No impairment losses were incurred during the periods presented.

Property and Equipment

Property and Equipment

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from three to five years.

Intangible Assets

Intangible Assets

The Company’s intangible assets consist of acquired patents and licenses, which are being amortized over their estimated useful lives of twelve years.

Long-Lived Assets

Long-Lived Assets

The Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment during each fiscal year or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during the periods presented.

Goodwill

Goodwill

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting until level at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. To date, there has been no impairment of goodwill.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes the cost of stock-based compensation in the financial statements based upon fair value. The fair value of stock options is determined as of the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock unit (RSU) awards is determined based on the number of units granted and the closing price of the Company’s common stock on the grant date. The fair value of each purchase under the employee stock purchase plan (ESPP) is estimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company’s determination of the fair value of equity-settled awards is impacted by the price of the Company's common stock as well as changes in assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected term that awards will remain outstanding, expected common stock price volatility over the term of the awards, risk-free interest rates and expected dividends. The fair value of an award is recognized over the period during which service is required to be performed in exchange for the award, the requisite service period (usually the vesting period) on a straight-line basis.

Equity instruments issued to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as the underlying equity instruments vest. The fair value of these equity instruments are expensed over the service period.

Estimates of the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, are affected by assumptions regarding a number of complex variables. Changes in the assumptions can materially affect the fair value of the award and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. The Company determines the volatility factor based on the historical volatilities of comparable public companies in similar industries. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award. For all stock options granted to date, the Company used the simplified method to calculate the expected term, which is the average of the contractual term and vesting period. Prior to the Company’s initial public offering, the fair value of common stock was determined by reference to either recent or anticipated cash transactions involving the sale of the Company’s common stock.

The Company recognizes the fair value of stock-based compensation costs in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations.

Research And Development Costs

Research and Development Costs

Research and development costs consist primarily of compensation costs, fees paid to consultants and outside service providers and organizations (including university research institutes), costs associated with clinical trials, development prototypes and other expenses relating to the acquisition, design, development and testing of the Company’s product candidates. Research and development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate.

Patent Costs

Patent Costs

The Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costs not related to acquired patents, including patent-related legal fees, filing fees and other costs, including internally generated costs, are expensed as incurred. During the years ended December 31, 2018, 2017 and 2016, patent costs totaled $0.6 million, $0.8 million and $0.5 million, respectively. Patent costs are included in general and administrative costs in the consolidated statements of operations and comprehensive loss.

Income Taxes

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company is subject to U.S. federal income taxes and income taxes in California. As the Company’s net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company is not currently under examination by any tax authority.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. At December 31, 2018 and 2017, the Company had not recorded any liability for uncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of income tax expense.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Company displays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.

Net Loss Per Share

Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

Basic and diluted net loss per common share is the same for all periods presented because all warrants, stock options and restricted stock units outstanding are anti-dilutive.

The following outstanding stock options, warrants and restricted stock units to purchase common stock were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

	Year Ended December 31,
	2018		2017		2016
Common stock warrants		213,485		249,709		874,610
Common stock options		2,956,687		2,598,659		1,229,355
Restricted stock units		222,606		229,774		—
Total		3,392,778		3,078,142		2,103,965

Segment And Geographical Information

	Year Ended December 31,
	2018		2017		2016
Common stock warrants		213,485		249,709		874,610
Common stock options		2,956,687		2,598,659		1,229,355
Restricted stock units		222,606		229,774		—
Total		3,392,778		3,078,142		2,103,965

Segment and Geographical Information

The Company operates and manages its business as one reportable and operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s assets are based in the United States.

Reclassification

Reclassification

Certain items in prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

During May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update to periods beginning after December 15, 2017. This updated standard became effective for the Company in the first quarter of fiscal year 2018. Since the Company has not recognized or generated revenue to date, the adoption of this pronouncement did not have any impact to its financial statements.

During February 2016, the FASB issued ASU No. 2016-02, Leases, which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019. The Company generally does not finance purchases of equipment or other capital, but does lease its facilities. The adoption of the new standard will require the recognition of a right-of-use asset and a lease obligation for the Company’s leases (See Note 12 – Commitments and Contingencies). The Company adopted the new standard effective January 1, 2019 and will not restate comparative periods. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance.  The Company will elect the package of practical expedients permitted under the transition guidance and as such, the adoption of this ASU will not change the classification of any of the Company’s leases.  The Company estimates that approximately $1.7 million will be recognized as total lease liabilities and approximately $0.1 million will be recognized as total rights-of-use assets on the Company’s consolidated balance sheet as of January 1, 2019.

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Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Summary Of Significant Accounting Policies [Abstract]

Anti-Dilutive Shares Excluded From Computation Of Diluted Net Loss Per Share

	Year Ended December 31,
	2018		2017		2016
Common stock warrants		213,485		249,709		874,610
Common stock options		2,956,687		2,598,659		1,229,355
Restricted stock units		222,606		229,774		—
Total		3,392,778		3,078,142		2,103,965

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Fair Value Of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value Of Financial Instruments [Abstract]

Schedule Of Available-For-Sale Securities

		December 31, 2018
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	8,481		—		(1)	$	8,480
Total assets measured at fair value	$	8,481	$	—	$	(1)	$	8,480

		December 31, 2017
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial paper	$	7,216	$	—	$	(6)	$	7,210
Corporate bonds		19,524		—		(33)		19,491
Asset-backed securities		7,994		—		(12)		7,982
Total assets measured at fair value	$	34,734	$	—	$	(51)	$	34,683

Schedule Of Contractual Maturities

	December 31,
Investments	2018		2017
Due in one year	$	8,480	$	30,096
Due in one to two years		—		4,587
Total	$	8,480	$	34,683

Fair Value Of Financial Assets Measured On A Recurring Basis

			December 31, 2018
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	50,703		—		—	$	50,703
U.S. Treasury Securities	Investments		—		8,480		—		8,480
Total assets measured at fair value		$	50,703	$	8,480	$	—	$	59,183

			December 31, 2017
Assets	Classification		Level 1		Level 2		Level 3		Total
Money market funds	Cash and cash equivalents	$	2,758	$	—	$	—	$	2,758
Commercial paper	Investments		—		7,210		—		7,210
Corporate bonds	Investments		—		19,491		—		19,491
Asset-backed securities	Investments		—		7,982		—		7,982
Total assets measured at fair value		$	2,758	$	34,683	$	—	$	37,441

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Property And Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2018

Property And Equipment, Net [Abstract]

Schedule Of Property And Equipment, Net

	December 31,
	2018		2017
Leasehold improvements	$	2,248	$	2,257
Laboratory equipment		518		484
Furniture, fixtures and equipment		248		231
Software		118		79
Construction in progress		33		—
		3,165		3,051
Less: Accumulated depreciation and amortization		(992)		(481)
	$	2,173	$	2,570

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Intangible Assets, Net (Tables)

12 Months Ended

Dec. 31, 2018

Intangible Assets, Net [Abstract]

Schedule Of Intangible Assets, Net

	December 31,
	2018		2017
Acquired patents and licenses	$	7,985	$	7,985
Less: Accumulated amortization		(2,772)		(2,107)
	$	5,213	$	5,878

Schedule Of Amortization Of Intangible Assets

Year Ending December 31:
2019	$	665
2020		665
2021		665
2022		665
2023		665
Thereafter		1,888
	$	5,213

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Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2018

Accrued Expenses [Abstract]

Schedule Of Accrued Expenses

	December 31,
	2018		2017
Compensation expense	$	938	$	685
Accrued clinical		156		21
Professional fees		274		211
Supplies		53		65
Other		—		52
	$	1,421	$	1,034

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Stockholders' Equity And Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2018

Stockholders' Equity [Line Items]

Summary Of Stock Warrant Activity

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Shares	Exercise Price		Life (in Years)
Warrants outstanding at December 31, 2017	249,709	$	4.14	3.56
Issued	—
Exercised	(36,224)		5.00
Expired/terminated	—
Warrants outstanding and exercisable at December 31, 2018	213,485	$	4.00	2.37

Summary Of Stock Option Activity

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares	Price		Life (in Years)
Balances - December 31, 2017	2,598,659	$	16.88	8.2
Options granted	657,375		15.18
Options exercised	(144,508)		3.44
Options canceled	(147,839)		19.04
Options expired	(7,000)		19.99
Balances - December 31, 2018	2,956,687	$	17.04	7.6
Stock options exercisable at December 31, 2018	1,513,617	$	15.70	6.6

Summary Of Exercise Price Outstanding And Exercisable

Options Outstanding				Options Exercisable
		Weighted average
	Number	remaining contractual	Weighted average	Number	Weighted average
Exercise Price	outstanding	life (in years)	exercise price	vested	exercise price
$2.67 - $4.28	732,842	6.0	$                   3.84	579,735	$                   3.79
$4.67 - $7.55	218,359	7.7	5.27	105,633	5.42
$11.00 - $16.52	471,375	9.6	13.49	53,634	14.71
$19.35 - $30.99	1,534,111	7.7	26.12	774,615	26.08
	2,956,687	7.6	$                 17.04	1,513,617	$                 15.70

Summary Of Stock-Based Compensation Expense

	Year Ended December 31,
	2018		2017		2016
General and administrative	$	9,004	$	9,136	$	674
Research and development		3,334		1,790		196
Total stock-based compensation expense	$	12,338	$	10,926	$	870

Options outstanding [Member]

Stockholders' Equity [Line Items]

Schedule Of Fair Value Of Employee Stock Options

	Year Ended December 31,
	2018		2017		2016
Expected term in years		5.3 - 6.1		0.4 - 6.1		6.1
Expected volatility		70%		70% - 90%		80%
Risk-free interest rate		2.6 - 3.0%		1.0% - 2.2%		1.2% - 1.5%
Dividend yield		—		—		—

2017 Employee Stock Purchase Plan [Member]

Stockholders' Equity [Line Items]

Schedule Of Fair Value Of Employee Stock Options

	Year Ended December 31,
	2018		2017		2016
Expected term in years		0.5 - 1.0		0.5 - 1.3		—
Expected volatility		70%		95%		—
Risk-free interest rate		1.9% - 2.5%		1.1% - 1.2%		—
Dividend yield		—		—		—

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Components Of Deferred Tax Assets

	December 31,
	2018		2017
Temporary differences	$	111	$	36
Credits		5,330		1,536
Stock compensation		2,630		3,067
Net operating loss carryforwards		15,365		7,715
Total deferred tax assets before valuation allowance		23,436		12,354
Valuation allowance		(22,696)		(11,491)
Total deferred tax assets after valuation allowance		740		863
Technology deferred tax liability		(740)		(863)
Net deferred tax assets	$	—	$	—

Reconcilement Of Tax Rates

	Year Ended December 31,
	2018		2017		2016
U.S. federal statutory tax rate	(21.0)	%	(35.0)	%	(35.0)	%
Valuation allowance	28.0		23.0		42.0
Tax reform	(2.0)		18.0		—
Permanent differences	2.0		1.0		2.0
State tax benefit and other	(7.0)		(7.0)		(9.0)
Effective tax rate	—	%	—	%	—	%

Reconciliation Of Unrecognized Tax Benefit Accounts

	December 31,
	2018		2017
Balance at the beginning of the year	$	512	$	213
Gross increases - tax positions in prior periods		—		37
Gross decreases - tax positions in prior periods		—		—
Gross increases - tax position in current period		365		262
Settlements		—		—
Lapses in statutes of limitations		—		—
Balance at the end of the year	$	877	$	512

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Commitments And Contingencies (Tables)

12 Months Ended

Dec. 31, 2018

Commitments And Contingencies [Abstract]

Schedule Of Future Minimum Lease Payments

Year Ending December 31:
2019	$	536
2020		554
2021		574
2022		392
Thereafter		—
	$	2,056

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Selected Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2018

Selected Quarterly Financial Data [Abstract]

Schedule Of Selected Quarterly Financial Data

	Quarter Ended
	2018								2017
	December 31,		September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
Revenue	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Operating expenses:
General and administrative		3,814		5,675		5,173		5,383		5,801		4,434		3,924		1,344
Research and development		5,080		5,038		3,960		3,175		2,864		2,925		2,130		1,727
Amortization of intangible assets		166		166		167		166		166		166		167		166
Total operating expenses		9,060		10,879		9,300		8,724		8,831		7,525		6,221		3,237
Other income (expense):
Interest income		135		118		137		56		128		39		41		39
Other expense		(28)		—		—		—		—		—		—		—
Total other income (expense)		107		118		137		56		128		39		41		39
Loss from operations, before income taxes		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Income tax benefit		—		—		—		—		—		—		—		—
Net loss		(8,953)		(10,761)		(9,163)		(8,668)		(8,703)		(7,486)		(6,180)		(3,198)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities, net of tax:		2		(3)		3		48		(49)		4		3		(2)
Comprehensive loss	$	(8,951)	$	(10,764)	$	(9,160)	$	(8,620)	$	(8,752)	$	(7,482)	$	(6,177)	$	(3,200)
Net loss per share
Basic and diluted net loss per share	$	(0.51)	$	(0.64)	$	(0.54)	$	(0.51)	$	(0.53)	$	(0.52)	$	(0.43)	$	(0.23)
Weighted average shares used to compute net loss per common share — basic and diluted		17,656		16,927		16,881		16,842		16,574		14,381		14,233		13,803

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Summary Of Significant Accounting Policies (Narrative) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Summary Of Significant Accounting Policies [Line Items]
General and administrative	$ 3,814,000	$ 5,675,000	$ 5,173,000	$ 5,383,000	$ 5,801,000	$ 4,434,000	$ 3,924,000	$ 1,344,000	$ 20,045,000	$ 15,503,000	$ 3,415,000
Long-lived asset impairment									0	0	0
Patent costs									600,000	800,000	$ 500,000
Liability for Uncertainty in Income Taxes, Noncurrent	$ 0				$ 0				$ 0	$ 0
Acquired Patents And Licenses [Member]
Summary Of Significant Accounting Policies [Line Items]
Intangible asset useful life									12 years
Maximum [Member] | Equipment [Member]
Summary Of Significant Accounting Policies [Line Items]
Useful life									5 years
Minimum [Member] | Equipment [Member]
Summary Of Significant Accounting Policies [Line Items]
Useful life									3 years

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Summary Of Significant Accounting Policies (Anti-Dilutive Shares Excluded From Computation Of Diluted Net Loss Per Share) (Details) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	3,392,778	3,078,142	2,103,965
Warrants to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	213,485	249,709	874,610
Options outstanding [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	2,956,687	2,598,659	1,229,355
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	222,606	229,774

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Fair Value Of Financial Instruments (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Fair Value Of Financial Instruments [Abstract]
Impairment on investments	$ 0	$ 0
Transfers between level 1, 2, or 3	$ 0	$ 0

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Investments And Fair Value Of Financial Instruments (Schedule Of Available-For-Sale Securities) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Schedule Of Available For Sale Securities [Line Items]
Cost	$ 8,481	$ 34,734
Gross Unrealized Losses	(1)	(51)
Fair Value	8,480	34,683
Commercial paper [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost	8,481	7,216
Gross Unrealized Losses	(1)	(6)
Fair Value	$ 8,480	7,210
Corporate Bonds [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost		19,524
Gross Unrealized Losses		(33)
Fair Value		19,491
Asset backed securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Cost		7,994
Gross Unrealized Losses		(12)
Fair Value		$ 7,982

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Investments And Fair Value Of Financial Instruments (Schedule Of Contractual Maturities) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Fair Value Of Financial Instruments [Abstract]
Due in one year	$ 8,480	$ 30,096
Due in one to two years		4,587
Total	$ 8,480	$ 34,683

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Fair Value Of Financial Instruments (Fair Value Of Financial Assets Measured On A Recurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
ASSETS
Total assets measured at fair value	$ 59,183	$ 37,441
Cash and cash equivalents [Member] | Cash and money market funds [Member]
ASSETS
Total cash and cash equivalents	50,703	2,758
Investments [Member] | U.S. government and agency securities [Member]
ASSETS
Total investments	8,480
Investments [Member] | Commercial paper [Member]
ASSETS
Total investments		7,210
Investments [Member] | Corporate Bonds [Member]
ASSETS
Total investments		19,491
Investments [Member] | Asset backed securities [Member]
ASSETS
Total investments		7,982
Level 1 [Member]
ASSETS
Total assets measured at fair value	50,703	2,758
Level 1 [Member] | Cash and cash equivalents [Member] | Cash and money market funds [Member]
ASSETS
Total cash and cash equivalents	50,703	2,758
Level 2 [Member]
ASSETS
Total assets measured at fair value	8,480	34,683
Level 2 [Member] | Investments [Member] | U.S. government and agency securities [Member]
ASSETS
Total investments	$ 8,480
Level 2 [Member] | Investments [Member] | Commercial paper [Member]
ASSETS
Total investments		7,210
Level 2 [Member] | Investments [Member] | Corporate Bonds [Member]
ASSETS
Total investments		19,491
Level 2 [Member] | Investments [Member] | Asset backed securities [Member]
ASSETS
Total investments		$ 7,982

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Property And Equipment, Net (Narrative) (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property And Equipment, Net [Abstract]
Landlord reimbursement of leasehold improvements	$ 2,100
Depreciation expense		$ 645	$ 336	$ 94

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Property And Equipment, Net (Schedule Of Property And Equipment, Net) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Equipment, gross	$ 3,165	$ 3,051
Less: Accumulated depreciation	(992)	(481)
Equipment, net	2,173	2,570
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Equipment, gross	2,248	2,257
Laboratory Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment, gross	518	484
Furniture, Fixtures, And Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment, gross	248	$ 231
Software [Member]
Property, Plant and Equipment [Line Items]
Equipment, gross	$ 33

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Intangible Assets, Net (Schedule Of Intangible Assets, Net) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Less: Accumulated amortization	$ (2,772)	$ (2,107)
Intangible assets, net	5,213	5,878
Acquired Patents And Licenses [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 7,985	$ 7,985

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Intangible Assets, Net (Schedule Of Amortization Of Intangible Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Intangible Assets, Net [Abstract]
2019	$ 665
2020	665
2021	665
2022	665
2023	665
Thereafter	1,888
Intangible assets, net	$ 5,213	$ 5,878

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Goodwill (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2014
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Goodwill	$ 2,791,000	$ 2,791,000
Goodwill impairment	$ 0	$ 0	$ 0
TPI, BEM And NB [Member]
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Aggregate consideration				$ 5,500,000
Goodwill				$ 2,800,000

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Accrued Expenses (Schedule Of Accrued Expenses) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accrued Expenses [Abstract]
Compensation expense	$ 938	$ 685
Accrued clinical	156	21
Professional fees	274	211
Supplies	53	65
Other		52
Accrued expenses	$ 1,421	$ 1,034

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Stockholders' Equity And Stock-Based Compensation (Narrative) (Details) - USD ($)					1 Months Ended	2 Months Ended	12 Months Ended
	Jan. 01, 2019	Dec. 06, 2018	Sep. 24, 2017	Feb. 07, 2017	Nov. 30, 2017	Jun. 30, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2014	Oct. 25, 2018
Stockholders' Equity [Line Items]
Common stock, par value							$ 0.001	$ 0.001
Common stock, shares issued							20,593,000	16,819,000
Options granted							657,375
Warrants exercised							144,508
Exercise price							$ 15.70
Total intrinsic value of options exercised							$ 1,800,000	$ 3,800,000	$ 0
Fair value of options vested							6,400,000	26,800,000	1,200,000
Total stock-based compensation expense							12,338,000	$ 10,926,000	870,000
Unrecognized compensation cost							$ 17,100,000
Weighted average remaining contractual life							2 years 3 months 18 days
2017 Employee Stock Purchase Plan [Member]
Stockholders' Equity [Line Items]
Common stock, shares issued							23,869
Shares authorized								250,000
Increase in shares available for issuance threshold of common stock outstanding, number of shares								450,000
Increase in shares available for issuance threshold of common stock outstanding, percent outstanding								1.50%
Shares available for grant							478,474
2017 Inducement Equity Incentive Plan [Member]
Stockholders' Equity [Line Items]
Term period								10 years
Shares authorized					1,000,000
2017 Plan [Member]
Stockholders' Equity [Line Items]
Term period								10 years
Shares authorized								1,500,000
Increase in shares available for issuance threshold of common stock outstanding, number of shares								1,200,000
Increase in shares available for issuance threshold of common stock outstanding, percent outstanding								4.00%
Shares available for grant							539,436
First Vesting Portion [Member] | 2017 Inducement Equity Incentive Plan [Member]
Stockholders' Equity [Line Items]
Vesting percentage								25.00%
Second Vesting Portion (Per Month) [Member] | 2017 Inducement Equity Incentive Plan [Member]
Stockholders' Equity [Line Items]
Vesting period								36 months
Vesting percentage								8.33%
Sales, general and administrative [Member]
Stockholders' Equity [Line Items]
Total stock-based compensation expense							$ 9,004,000	$ 9,136,000	674,000
Research and development [Member]
Stockholders' Equity [Line Items]
Total stock-based compensation expense							3,334,000	$ 1,790,000	$ 196,000
Restricted Stock Units [Member]
Stockholders' Equity [Line Items]
Units granted during period								0
Reduction to APIC from shares withheld for tax								$ 100,000
Total stock-based compensation expense							$ 2,100,000	$ 2,900,000
Warrants to purchase common stock [Member]
Stockholders' Equity [Line Items]
Options granted
Warrants exercised							36,224
Aggregate intrinsic value exercisable options							$ 1,600,000
Performance Shares [Member]
Stockholders' Equity [Line Items]
Options granted							42,500
Subsequent Event [Member] | 2017 Plan [Member]
Stockholders' Equity [Line Items]
Additional common stock reserved for issuance	823,716
Initial Public Offering [Member]
Stockholders' Equity [Line Items]
Proceeds from issuance of common stock						$ 20,300,000
Common stock, shares issued						5,749,846
Directors [Member]
Stockholders' Equity [Line Items]
Total stock-based compensation expense					$ 1,200,000
Officer [Member] | Restricted Stock Units [Member]
Stockholders' Equity [Line Items]
Cliff vest date							Jun. 30, 2018
Shares available for grant								160,974
Unrecognized compensation cost							$ 0
Certain Employees [Member] | Restricted Stock Units [Member]
Stockholders' Equity [Line Items]
Shares available for grant								68,800
Total stock-based compensation expense							400,000	$ 100,000
Unrecognized compensation cost							$ 900,000
Certain Employees [Member] | Restricted Stock Units [Member] | First Vesting Portion [Member]
Stockholders' Equity [Line Items]
Vesting percentage								50.00%
Cliff vest date							Jun. 01, 2019
Certain Employees [Member] | Restricted Stock Units [Member] | Second Vesting Portion (Per Month) [Member]
Stockholders' Equity [Line Items]
Vesting percentage								50.00%
Cliff vest date							Jun. 01, 2021
Certain Employees [Member] | Restricted Stock Units [Member] | Change In Control [Member]
Stockholders' Equity [Line Items]
Vesting percentage								100.00%
Common Stock
Stockholders' Equity [Line Items]
Warrants exercised							145,000	162,000
Number of common shares called by issuance of warrants							23,957
Common Stock | 2017 Inducement Equity Incentive Plan [Member]
Stockholders' Equity [Line Items]
Shares authorized							541,625
Common Stock | Rights Offering [Member]
Stockholders' Equity [Line Items]
Net proceeds		$ 44,800,000
Right entitlement to holder		3,581,148									0.19860755
Exercise price of warrants/rights		$ 12.57									$ 12.57
Common Stock | Warrants to purchase common stock [Member]
Stockholders' Equity [Line Items]
Warrants exercised							24,000	522,000
Common Stock | Initial Public Offering [Member]
Stockholders' Equity [Line Items]
Price per share						$ 4.00
Common Stock | Private Placement [Member]
Stockholders' Equity [Line Items]
Shares sold			2,000,000	819,673
Common stock, par value			$ 0.001	$ 0.001
Price per share			$ 15.02	$ 6.10
Net proceeds			$ 29,900,000	$ 5,000,000
Shares issued								2,820,000
Common Stock | Chairman, Robert W. Duggan [Member] | Rights Offering [Member]
Stockholders' Equity [Line Items]
Ownership percentage		35.00%					44.00%
Shares purchased		3,146,226
Investment		$ 39,500,000
MDB Capital Group, LLC [Member] | Initial Public Offering [Member]
Stockholders' Equity [Line Items]
Price per share									$ 5.00
Value of warrants/rights							$ 1,400,000
Warrants/rights outstanding							121,609
Exercisable period of warrants or rights							5 years
Number of common shares called by issuance of warrants									574,985
MDB Capital Group, LLC [Member] | Private Placement [Member]
Stockholders' Equity [Line Items]
Price per share										$ 2.67
Warrants/rights outstanding							91,876
Exercisable period of warrants or rights										7 years
Number of common shares called by issuance of warrants										299,625

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Stockholders' Equity And Stock-Based Compensation (Summary Of Stock Warrant Activity) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Beginning Balance, Number of shares	2,598,659
Options granted, Number of shares	657,375
Options exercised, Number of shares	(144,508)
Options canceled, Number of shares	(147,839)
Options expired, Number of shares	(7,000)
Ending Balance, Number of shares	2,956,687	2,598,659
Beginning Balance, Weighted average exercise price per share	$ 16.88
Options granted, Weighted average exercise price per share	15.18
Options exercised, Weighted average exercise price per share	3.44
Options expired, Weighted average exercise price per share	19.99
Ending Balance, Weighted average exercise price per share	$ 17.04	$ 16.88
Weighted average remaining life	7 years 7 months 6 days	8 years 2 months 12 days
Warrants to purchase common stock [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Beginning Balance, Number of shares	249,709
Options granted, Number of shares
Options exercised, Number of shares	(36,224)
Options expired, Number of shares
Ending Balance, Number of shares	213,485	249,709
Beginning Balance, Weighted average exercise price per share	$ 4.14
Options granted, Weighted average exercise price per share
Options exercised, Weighted average exercise price per share	5.00
Options expired, Weighted average exercise price per share
Ending Balance, Weighted average exercise price per share	$ 4.00	$ 4.14
Weighted average remaining life	2 years 4 months 13 days	3 years 6 months 22 days

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Stockholders' Equity And Stock-Based Compensation (Summary Of Stock Option Activity) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Beginning Balance, Number of shares	2,598,659
Options granted, Number of shares	657,375
Options exercised, Number of shares	(144,508)
Options canceled, Number of shares	(147,839)
Options expired, Number of shares	(7,000)
Ending Balance, Number of shares	2,956,687	2,598,659
Exercisable, Number of shares	1,513,617
Beginning Balance, Weighted average exercise price per share	$ 16.88
Options granted, Weighted average exercise price per share	15.18
Options exercised, Weighted average exercise price per share	3.44
Options canceled, Weighted average exercise price per share	19.04
Options expired, Weighted average exercise price per share	19.99
Ending Balance, Weighted average exercise price per share	17.04	$ 16.88
Exercisable, Weighted average exercise price per share	$ 15.70
Weighted average remaining life	7 years 7 months 6 days	8 years 2 months 12 days
Weighted average remaining life, exercisable	6 years 7 months 6 days
$2.67 - $4.28 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercisable, Weighted average exercise price per share	$ 3.79
Weighted average remaining life	6 years

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Stockholders' Equity And Stock-Based Compensation (Summary Of Exercise Price Of Stock Options Outstanding And Exercisable) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Number outstanding	2,956,687
Weighted average remaining contractual life (in years)	7 years 7 months 6 days	8 years 2 months 12 days
Weighted average exercise price	$ 17.04
Number vested	1,513,617
Weighted average exercise price	$ 15.70
$2.67 - $4.28 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Exercise price, lower range	2.67
Exercise price, upper range	$ 4.28
Number outstanding	732,842
Weighted average remaining contractual life (in years)	6 years
Weighted average exercise price	$ 3.84
Number vested	579,735
Weighted average exercise price	$ 3.79
$4.67 - $7.55 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Exercise price, lower range	4.67
Exercise price, upper range	$ 7.55
Number outstanding	218,359
Weighted average remaining contractual life (in years)	7 years 8 months 12 days
Weighted average exercise price	$ 5.27
Number vested	105,633
Weighted average exercise price	$ 5.42
$11.00 - $16.52 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Exercise price, lower range	11.00
Exercise price, upper range	$ 16.52
Number outstanding	471,375
Weighted average remaining contractual life (in years)	9 years 7 months 6 days
Weighted average exercise price	$ 13.49
Number vested	53,634
Weighted average exercise price	$ 14.71
$19.35 - $30.99 [Member]
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Exercise price, lower range	19.35
Exercise price, upper range	$ 30.99
Number outstanding	1,534,111
Weighted average remaining contractual life (in years)	7 years 8 months 12 days
Weighted average exercise price	$ 26.12
Number vested	774,615
Weighted average exercise price	$ 26.08

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Stockholders' Equity And Stock-Based Compensation (Schedule Of Fair Value Of Employee Stock Options) (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Options outstanding [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term in years			6 years 1 month 6 days
Expected volatility	70.00%		80.00%
Options outstanding [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term in years	5 years 3 months 18 days	4 months 24 days	6 years 1 month 6 days
Expected volatility		70.00%	80.00%
Risk-free interest rate	2.60%	1.00%	1.20%
Options outstanding [Member] | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term in years	6 years 1 month 6 days	6 years 1 month 6 days
Expected volatility		90.00%
Risk-free interest rate	3.00%	2.20%	1.50%
2017 Employee Stock Purchase Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected volatility	70.00%	95.00%
2017 Employee Stock Purchase Plan [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term in years	6 months	6 months
Risk-free interest rate	1.90%	1.10%
2017 Employee Stock Purchase Plan [Member] | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term in years	1 year	1 year 3 months 18 days
Risk-free interest rate	2.50%	1.20%

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Stockholders' Equity And Stock-Based Compensation (Summary Of Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Total stock-based compensation expense	$ 12,338	$ 10,926	$ 870
Sales, general and administrative [Member]
Total stock-based compensation expense	9,004	9,136	674
Research and development [Member]
Total stock-based compensation expense	$ 3,334	$ 1,790	$ 196

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Research Grants And Agreements (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense	$ 5,080	$ 5,038	$ 3,960	$ 3,175	$ 2,864	$ 2,925	$ 2,130	$ 1,727	$ 17,253	$ 9,646	$ 5,506
Sponsored Research Agreement ("SRA") [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expense									$ 700	800	900
ODURF [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Period of time for Sponsored Research Agreement ("SRA")									12 months
ODURF [Member] | Sponsored Research Agreement ("SRA") [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development budget									$ 600
Research and development expense									800	$ 700	$ 1,000
Remaining sponsorship	$ 100								$ 100

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Income Taxes (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Taxes [Line Items]
Income tax provision (benefit)
Federal statutory tax rate	21.00%	35.00%	35.00%
Total unrecognized tax benefit	$ 877,000	$ 512,000	$ 213,000
Accrued interest or penalties	0	$ 0	$ 0
Reduction in deferred tax assets due to tax act	$ 4,700,000
Scenario, Plan [Member]
Income Taxes [Line Items]
Federal statutory tax rate	21.00%
Federal And California [Member]
Income Taxes [Line Items]
Net operating loss carryforward, expiration	2034
Federal [Member]
Income Taxes [Line Items]
Net operating loss carryforwards	$ 51,600,000
Research and development credit carryforward	$ 1,400,000
Research and developmen tax credit carryforward, expiration	2035
California [Member]
Income Taxes [Line Items]
Net operating loss carryforwards	$ 51,000,000
Research and development credit carryforward	$ 1,200,000

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Income Taxes (Components Of Deferred Tax Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Income Taxes [Abstract]
Temporary differences	$ 111	$ 36
Credits	5,330	1,536
Stock compensation	2,630	3,067
Net operating loss carryforwards	15,365	7,715
Total deferred tax assets	23,436	12,354
Valuation allowance	(22,696)	(11,491)
Technology deferred tax liability	(740)	(863)
Net deferred tax assets	$ 740	$ 863

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Income Taxes (Reconcilement Of Tax Rates) (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Taxes [Abstract]
U.S. federal statutory tax rate	(21.00%)	(35.00%)	(35.00%)
Valuation allowance	28.00%	23.00%	42.00%
Tax reform	(2.00%)	18.00%
Permanent differences	2.00%	1.00%	2.00%
State tax benefit and other	(7.00%)	(7.00%)	(9.00%)

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Income Taxes (Reconciliation Of Unrecognized Tax Benefit Accounts) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Taxes [Abstract]
Unrecognized tax benefit, Beginning balance	$ 512	$ 213
Gross increases - tax positions in prior periods		37
Gross decreases - tax positions in prior periods
Gross increases - tax position in current period	365	262
Settlements
Lapses in statutes of limitations
Unrecognized tax benefit, Ending balance	$ 877	$ 512

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Related Party Transactions (Narrative) (Details) - USD ($)		12 Months Ended
	Dec. 06, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Oct. 25, 2018
Related Party Transaction [Line Items]
Common stock, par value		$ 0.001	$ 0.001
MDB Capital Group, LLC [Member] | Initial Public Offering [Member]
Related Party Transaction [Line Items]
Related party expenses		$ 200,000
Underwriting discounts		1,800,000
Wilson Sonsini Goodrich And Rosati (WSGR) [Member]
Related Party Transaction [Line Items]
Related party expenses		1,200,000	$ 700,000
Intellectual Property Related Services [Member] | MDB Capital Group, LLC [Member]
Related Party Transaction [Line Items]
Related party expenses		$ 0	$ 0	$ 100,000
Common Stock | Chairman, Robert W. Duggan [Member] | Rights Offering [Member]
Related Party Transaction [Line Items]
Ownership percentage	35.00%	44.00%
Rights Offering [Member] | Common Stock
Related Party Transaction [Line Items]
Right entitlement to holder	3,581,148				0.19860755
Exercise price of warrants/rights	$ 12.57				$ 12.57
Net proceeds	$ 44,800,000

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Commitments And Contingencies (Narrative) (Details) $ in Millions	12 Months Ended
	Dec. 31, 2018 USD ($) ft² $ / mo	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Jul. 01, 2017	Jan. 31, 2017 ft²
Commitments and Contingencies [Line Items]
Rent expense, including common area maintenance charges | $	$ 0.2	$ 0.3	$ 0.2
Burlingame, CA [Member]
Commitments and Contingencies [Line Items]
Lease expiration date	Jun. 30, 2017
Area Of Lease | ft²	4,300
Monthly Expense, Operating Leases | $ / mo	21,000
Hayward, CA [Member]
Commitments and Contingencies [Line Items]
Lease expiration date	Aug. 31, 2022
Area Of Lease | ft²					15,700
Lease renewable term				5 months
Landlord [Member] | Hayward, CA [Member]
Commitments and Contingencies [Line Items]
Initial tenant leashold improvements | $	$ 2.1

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Commitments And Contingencies (Schedule Of Future Minimum Lease Payments) (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments And Contingencies [Abstract]
2019	$ 536
2020	554
2021	574
2022	392
Total minimum lease payments	$ 2,056

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Employee Benefit Plans (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Employee Benefit Plans [Abstract]
Employer matching contributions	$ 0	$ 0	$ 0

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Selected Quarterly Financial Data (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Selected Quarterly Financial Data [Abstract]
Research and development costs reclassified to general and administrative costs	$ 0.3	$ 0.2	$ 0.1

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Selected Quarterly Financial Data (Schedule Of Selected Quarterly Financial Data) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Selected Quarterly Financial Data [Abstract]
Revenue
Operating expenses:
General and administrative	$ 3,814	$ 5,675	$ 5,173	$ 5,383	$ 5,801	$ 4,434	$ 3,924	$ 1,344	20,045	15,503	3,415
Research and development	5,080	5,038	3,960	3,175	2,864	2,925	2,130	1,727	17,253	9,646	5,506
Amortization of intangible assets	166	166	167	166	166	166	167	166	665	665	665
Total operating expenses	9,060	10,879	9,300	8,724	8,831	7,525	6,221	3,237	37,963	25,814	9,586
Other income (expense):
Interest income	135	118	137	56	128	39	41	39	446	247	68
Total other income (expense)	107	118	137	56	128	39	41	39	418	247	68
Loss from operations, before income taxes	(8,953)	(10,761)	(9,163)	(8,668)	(8,703)	(7,486)	(6,180)	(3,198)	(37,545)	(25,567)	(9,518)
Income tax benefit
Net loss	(8,953)	(10,761)	(9,163)	(8,668)	(8,703)	(7,486)	(6,180)	(3,198)	(37,545)	(25,567)	(9,518)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities, net of tax	2	(3)	3	48	(49)	4	3	(2)	50	(44)	(7)
Comprehensive loss	$ (8,951)	$ (10,764)	$ (9,160)	$ (8,620)	$ (8,752)	$ (7,482)	$ (6,177)	$ (3,200)	$ (37,495)	$ (25,611)	$ (9,525)
Basic and diluted net loss per share	$ (0.51)	$ (0.64)	$ (0.54)	$ (0.51)	$ (0.53)	$ (0.52)	$ (0.43)	$ (0.23)	$ (2.20)	$ (1.73)	$ (0.86)
Weighted average shares used to compute net loss per common share - basic and diluted	17,656	16,927	16,881	16,842	16,574	14,381	14,233	13,803	17,078	14,754	11,009