Pulse Biosciences
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549____________________________________________Form 10-K____________________________________________(Mark One)☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018or☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number 001-34899____________________________________________Pulse Biosciences, Inc.(Exact name of registrant as specified in its charter)____________________________________________​Delaware46-5696597(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)​ 3957 Point Eden WayHayward, CA94545(Address of principal executive offices)(Zip Code)(Registrant’s telephone number, including area code): (510) 906-4600Securities registered pursuant to Section 12(b) of the Act: Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per shareThe Nasdaq Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate 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 1934during 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 filingrequirements 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 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). 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, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment 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 anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growthcompany” 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 anynew 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 ofCommon Stock on such date as reported by Nasdaq Capital Market, was approximately $159,262,000. Shares of voting stock held by each officer anddirector have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusivedetermination for other purposes.Number of shares outstanding of the issuer’s common stock as of February 28, 2019: 20,688,832DOCUMENTS 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 incorporatedby reference into Part III of this Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commissionwithin 120 days after the end of the fiscal year to which this report relates. Table of Contents TABLE OF CONTENTS PagePART I Item 1.Business3 Item 1A.Risk Factors14 Item 1B.Unresolved Staff Comments41 Item 2.Properties41 Item 3.Legal Proceedings41 Item 4.Mine Safety Disclosures41 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities42 Item 6.Selected Financial Data44 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations45 Item 7A.Quantitative and Qualitative Disclosures about Market Risk54 Item 8.Financial Statements and Supplementary Data55 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure78 Item 9A.Controls and Procedures78 Item 9B.Other Information79 PART III Item 10.Directors, Executive Officers and Corporate Governance80 Item 11.Executive Compensation80 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters80 Item 13.Certain Relationships and Related Transactions, and Director Independence80 Item 14.Principal Accounting Fees and Services80 PART IV Item 15.Exhibits, Financial Statement Schedules81 Item 16.Form 10-K Summary84 ​Signatures 85 2 Table of Contents SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, or Annual Report, contains “forward-looking statements” that involve substantial risks anduncertainties. 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 containthese words. These statements relate to future events or our future financial performance or condition and involve known andunknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement todiffer 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 theunderstanding that our actual results may differ materially from what we expect as expressed or implied by our forward-lookingstatements. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should notplace undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieveour objectives and plans in any specified timeframe, or at all. We discuss many of these risks and uncertainties in greater detail inthis Annual Report, particularly in Part I. Item 1A. “Risk Factors.” These forward-looking statements represent our estimates andassumptions only as of the date of this Annual Report regardless of the time of delivery of this Annual Report. Except as requiredby law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of newinformation, future events or otherwise after the date of this Annual Report. Part I Item 1. BusinessIn this Annual Report on Form 10-K, references to “Pulse,” “Pulse Biosciences,” “we,” “us,” “our” and the “Company” refer toPulse Biosciences, Inc. and its wholly owned subsidiaries, unless expressly indicated or the context otherwise requires. PulseBiosciences, Pulse TX, CellFX, Nano-Pulse Stimulation, NPS and the stylized logos are among the trademarks and/or registeredtrademarks of Pulse Biosciences, Inc. in the United States and other countries.OverviewPulse Biosciences, Inc. is a clinical stage medical therapy company pursuing commercial introduction of our proprietaryCellFX™ System utilizing our patent-protected Nano-Pulse Stimulation™ (NPS™) platform technology. With our proprietaryCellFX System, we can deliver a unique cell-focused effect on dysfunctional cells while preserving surrounding non-cellulartissue, a combination that may potentially lead to both improved efficacy and less collateral tissue damage. It also causes a processof 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 improvepatient 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 anumber of compelling indications. The CellFX System is the only tunable nanosecond pulsed energy system designedfor use in human medicine of which we are aware. Our proprietary CellFX System allows for the adjustment of four keypulsing parameters: pulse duration, pulse amplitude, pulse frequency, and the number of pulses, depending on the tissueand desired treatment outcome. We have conducted or are conducting several clinical studies, including studies inSeborrheic Keratosis (SK), the most common benign raised pigmented lesion, Sebaceous Hyperplasia (SH), a common butdifficult to treat facial lesion, Basal Cell Carcinoma (BCC), the most common form of skin cancer, cutaneous warts, andacne. We expect to conduct clinical studies on an ongoing basis to continue to demonstrate the value of our CellFXSystem across a growing list of valuable applications;·Commercialize our proprietary CellFX System and applications for its use across a broad array of clinicalindications. During February 2019 we submitted a Pre-Market Notification 510(k) to the U.S. Food and DrugAdministration (FDA) seeking clearance to commercialize our CellFX System. Our FDA filing requests clearance of theCellFX System for commercial use in common dermatologic procedures to remove general benign lesions including SHand SK. Pending regulatory clearance, we plan to launch our CellFX System in the United States. 3 Table of Contents Our Proprietary Nano-Pulse Stimulation Technology PlatformOur proprietary CellFX™ System leverages our patented NPS™ technology platform. NPS technology is characterized byultrafast electrical energy pulses, with pulse durations from billionths up to a millionth of a second. When applied to targetedtissue, our NPS energy pulses enter cells and we believe alter the function of the internal cellular organelles, including themitochondria and endoplasmic reticulum, without disrupting extracellular tissue, leading to regulated cell death (RCD), a processexhibited 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 disruptionbrought about by the tunable speed and amplitude of our NPS pulses interacting with the physical structure of cells. While ourCellFX 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 CellFXSystem, 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 caseof cancer this regulated cell death process may result in immunogenic cell death that stimulates the immune system to mount asystemic immune response against antigens, or markers, in those cancer cells.Aesthetic Dermatology Procedure MarketWe believe our CellFX System has high potential to offer improved clinical outcomes for a broad range of dermatologyconditions and aesthetic skin applications for which targeted clearance of cellular lesions or structures is medically or cosmeticallydesirable. 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) or cold (e.g. cryoablation). These thermal methods of tissuedestruction affect both cellular and non-cellular tissue components indiscriminately, which can lead to collateral damage of thedermal foundation in the skin.Based on our clinical data demonstrating the unique, non-thermal, cell targeting NPS mechanism, we believe there is asignificant opportunity for our CellFX System in aesthetic and medical dermatology in the United States. According to the 2017Consumer Survey by the American Society for Dermatologic Surgery (ASDS) the number of consumers considering a cash-paycosmetic procedure has more than doubled, from 30% in 2013 to 70% in 2017. The survey also highlighted that consumers rankedtheir 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 andits unique NPS mechanism of action would offer a high value proposition. Initial Aesthetic Dermatology ApplicationsSebaceous HyperplasiaSebaceous Hyperplasia (SH) is a common, benign condition of sebaceous glands in adults of middle age or older. SH occurswhen the sebaceous glands become enlarged, creating small, shiny, yellowish lesions or bumps, usually 2-4 millimeters indiameter and typically on the face. Results from our research have demonstrated that NPS has a unique ability to target cellularstructures located within the dermis of the skin, such as the sebaceous gland, without damaging the dermis, making it a potentiallyunique 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 thetreatment of SH. Results from our clinical study, including 73 patients and 222 treated SH lesions, indicate that NPS technology iseffective for eliminating SH. Over 99% of treated SH lesions (221 of 222) were rated clear or mostly clear by investigators at the60-day post treatment follow-up evaluation. Approximately 92% (n=203) of treated lesions were assessed as clear or mostly clearafter 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 inan area of unmet need and substantiates the unique ability of NPS pulses to penetrate the dermis and target deeper cellularstructures without damaging the surrounding dermis.Seborrheic Keratosis 4 Table of Contents Seborrheic Keratosis (SK) is one of the most common non-cancerous skin growths in older adults. SK usually appear as abrown, black or light tan growth on the face, chest, shoulders or back and has a waxy, scaly, slightly elevated appearance. SK arenormally 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 forthe treatment of SK. Results from our clinical study, including 58 patients and 174 treated SK lesions, indicate that a single NPStreatment is effective for eliminating SK. 82% of treated SK lesions (143 of 174) were rated clear or mostly clear by investigators atthe 106-day post treatment follow-up evaluation. Patients in the study rated 78% of treatment outcomes as satisfied or mostlysatisfied.We believe that the results of this clinical study provide support to pursue commercial opportunities for theCellFX System in the treatment of SK.Future Dermatology Application Feasibility StudiesWe expect to conduct clinical studies on an ongoing basis to continue to evaluate clinical opportunities for and demonstratethe value of our CellFX System across a growing list of valuable indications: Cutaneous WartsDuring 2018 we initiated a 20 patient multi-center clinical feasibility study evaluating the safety and effectiveness of ourCellFX System for the treatment of non-genital cutaneous warts. Non-genital cutaneous warts are benign grainy skin growths thatare typically caused by the human papillomavirus (HPV). Results from this study will inform decisions regarding opportunities forfuture clinical studies for the treatment of warts.AcneDuring early 2019 we initiated a multi-center clinical feasibility study evaluating the safety and effectiveness of our CellFXSystem for the treatment of acne on the back. Back acne is characterized by eruptions of pimples, pustules, blackheads and/orcysts, often on the upper back, and is generally caused by the same factors that trigger facial acne, namely overactive sebaceousglands that lead to the proliferation of acne related bacteria. Our unique ability to target the sebaceous gland, as evidenced by theimpressive results from our sebaceous hyperplasia study, led our dermatology advisory board to encourage us to pursue afeasibility study in acne, based on the role of the sebaceous glands in chronic acne eruptions. Nano-Pulse Stimulation Initiated Immunogenic Cell DeathIn previously published preclinical models of cancerous lesions, NPS treatment has been shown to induce immunogenic celldeath (ICD), a process that leads to the exposure of the unique cancer cell antigens to the immune system, resulting in thegeneration of cytotoxic T-cells and the mounting of an adaptive immune response targeted against those cells, without anyobserved toxic side effects. Based on this foundation of preclinical evidence, we believe NPS technology has the potential to playa role in immuno-oncology. Applications in immuno-oncology are a longer-term potential opportunity and may require the use ofadjuvants or other agents in combination with NPS. We continue to evaluate NPS technology and our CellFX System in clinicaland preclinical studies.During 2018 we commenced a clinical biomarker study to evaluate the CellFX System and NPS technology in Basal CellCarcinoma (BCC), the most prevalent form of skin cancer. We believe BCC represents a bridge between our developments indermatology and those in oncology. This is our first human study in cancer and it will allow us to look at both the ability ofCellFX System and NPS pulses to treat BCC lesion cells and the immune response changes as a result of treatment. This is not atherapeutic endpoint study, but it is an important first step that enables us to move quickly to demonstrate safety and NPStechnology effect in treating skin cancer while providing necessary information to inform decisions relative to next steps towards afollow-on study aimed at a therapeutic endpoint.Our CellFX SystemWe have developed and plan to commercialize our proprietary CellFX System into the large and growing aestheticprocedure market as our first commercial market. The CellFX System is a platform, designed to support a wide array of 5 Table of Contents applications in aesthetic dermatology and potentially in other medical disciplines. We believe our CellFX System is the onlytunable nanosecond pulsed energy delivery system designed and used in human medicine. Our CellFX System allows for theadjustment 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 dermatologytreatment tips. The system is designed to operate in a variety of medical environments, including a physician’s office or clinic, aswell as outpatient surgery centers or hospitals. The system is a mobile cart-based system that can easily be transported from roomto 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 ourCellFX System when they are plugged into the handpiece. This enables the use of automated treatment settings based on thetreatment tip being utilized.The CellFX System and its component parts are engineered for volume manufacturing and the use of outsourced contractmanufacturing partners to ensure our ability to meet anticipated demand while effectively managing underlying system costs thatsupport a profitable sale of the CellFX System at competitive price points.Safety Profile of Our NPS Technology PlatformDuring the course of conducting human clinical studies in dermatology with the NPS platform to supportan FDA filing at leading dermatology research centers across the United States, no serious adverse events havebeen reported and patient tolerance to the procedure has been very high. A histological study of treated humantissue examined by experts in dermatopathology revealed a unique and consistent cell-specific mechanism ofaction and a predictable healing response that spared non-cellular dermal tissue across a wide range of skintypes and patient demographics. Commercialization StrategyDuring February 2019 we submitted a Pre-Market Notification 510(k) to the FDA seeking clearance to commercialize ourCellFX System. Pending regulatory clearance, we plan to launch our CellFX System in the United States during 2019. Thecommercialization 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 indelivering products and applications into the aesthetic dermatology market and have long-standing relationshipswith the key opinion leaders, clinics and customers. We plan to scale our sales and marketing infrastructure alongwith the growth of the business;·We intend to leverage and expand our existing relationships with our KOL advisors. These opinion leaders havesignificant influence on their peers and on the adoption of new technologies and treatment modalities throughpodium 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 whichour 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 thathave 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 CellFXSystem to patients, success of early adopter KOLs, and the increasing utility of our CellFX System with meaningful clinical datagreatly enhances our ability to attract customers and promote ongoing utilization of installed systems.Intellectual PropertyWe maintain a portfolio of intellectual property surrounding our CellFX System and our NPS technology platform. As amedical technology company our current patents and ongoing intellectual property development are, and will continue to be, apriority for our business. We believe our intellectual property is an important competitive advantage for us. We also rely on tradesecrets, know-how, continuing technological innovations and licensing opportunities to further develop, maintain and strengthenour 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 tosensitive information. 6 Table of Contents We own or have a license to 89 issued patents worldwide and have 79 patent applications pending worldwide, with theearliest expiration of a United States issued patent, in this case a licensed patent, in 2020 and the latest in 2035. As we have overthe 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 beutilized in many different applications and incorporate several patentable features, and our strategy will be to always strive toprotect our products and technologies with multiple patents directed to the variety of features and applications, in order toestablish a strong defense against competitors and such that an expiration of a single patent does not lessen our overallcomprehensive coverage. We believe our NPS platform and current CellFX System are protected by several issued patents coveredin multiple pending applications we are pursuing.Research and DevelopmentSince inception, the majority of our business has focused on the development of our CellFX System and earlier clinicalversions of the system, conducting clinical studies, including dermatology studies in SK, SH, warts, acne and BCC, and preclinicaland basic research into the unique mechanism of action of our Nano-Pulse Stimulation technology platform. We continue toconduct research and development activities in pursuit of commercial applications for our CellFX System, but have not yetcommercialized 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 itspredecessors; clinical research specialists to plan and conduct clinical studies; and research scientists to assess and interpret thefocal and systemic biological effects of our technology. We believe we can expand the potential of our CellFX System throughongoing innovation and additional clinical studies demonstrating safety and efficacy in additional dermatologic conditions andadditional therapeutic areas. CompetitionThe applications we intend to target are subject to intense competition from rapidly evolving companies and new scientificdiscoveries. We compete against well-established incumbent technologies offering products in oncology, dermatology andaesthetics, minimally invasive treatments, and veterinary applications. Given the broad scope of our technology, we facecompetition ranging from large manufacturers with multiple business lines to small companies with focused products, as well asproviders of other medical therapies and therapeutics for conditions that we intend to treat. Some of these companies currentlyhave greater financial, technical, research and/or other resources than we do and have larger and more established manufacturingcapabilities and marketing, sales and support functions. Our future success will depend on our ability to establish and maintain acompetitive position in current and future technologies. Our technology is unique and differentiated in that NPS technologystimulates primarily intracellular cell death which we believe would be less traumatic to treated tissue and would result in lessscarring or collateral damage to surrounding tissues.Government RegulationThe 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 theUnited States. The laws and regulations govern, among other things, product design and development, pre-clinical and clinicaltesting, 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 twoprimary pathways for a medical device to be commercialized: a successful pre-market approval application, or PMA, or PremarketNotification, or 510(k) clearance. The FDA has established three different classes of medical devices, based on the level of riskassociated 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. MostClass 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 issubstantially equivalent (SE) to a legally marketed device that is not subject to premarket approval, or a predicate. Companiesmaking a 510(k) submission must compare their 510(k) device to a predicate device. A device recently cleared under 510(k) isusually used as a predicate device. However, any legally U.S. marketed device that has the same intended use and sametechnological characteristics may be used as a predicate device. The FDA has a 90-calendar day 7 Table of Contents review goal from the date of receipt of the 510(k) to either authorize or decline commercial distribution of the device, butclearance generally takes longer than 90 days. If the FDA decides that the product is not substantially equivalent to a predicatedevice, 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 the submission of aPMA application for approval. Class III devices generally include life-sustaining, life-supporting, or implantable devices ordevices 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 determinesthe application is sufficient complete to commence a substantive review, it has 180 days to review the submission, but it cantypically take longer (up to several years) as this regulatory body can request additional data, including clinical data orclarifications. The FDA may also impose additional regulatory scrutiny for a PMA, including the institution of an outside advisorycommittee (panel review) to assess the application or provide recommendations as to whether to approve the device. Although theFDA is not required to follow the recommendation of an advisory panel, it generally does. As part of the review, the FDA will alsoinspect 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 oreffectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or PMASupplemental approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review anysuch decision and can disagree with a manufacturer’s determination. If the FDA disagrees with the determination not to seek a new510(k) clearance or PMA Supplement, the FDA may retroactively require a new 510(k) clearance or PMA Supplements to besubmitted. The FDA could also require a manufacturer to cease marketing and distribution and/or recall the modified device untilclearance 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 RegulationAfter 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-partymanufacturers, to follow stringent design, testing, control, documentation and other quality assuranceprocedures 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 devicemay have caused or contributed to a death or serious injury or malfunctioned in a way that would likely causeor 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 provideadditional 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 theFDA and the Food and Drug Branch of the California Department of Public Health to determine our compliance with the QSR andother 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 anyof 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 ormodifications to existing products; 8 Table of Contents ·withdrawing 510(k) clearance or premarket approval that has already been granted; and·criminal prosecution.Regulatory System for Medical Devices in EuropeThe European Union (EU) consists of 28-member states and has a coordinated system for the authorization of medicaldevices. Marketing medical devices in the EU is subject to compliance with the Medical Devices Directive 93/92/EEC (MDD). Amedical device may be placed on the market within the EU only if it conforms to certain “essential requirements” and bears the CEMark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such a waythat it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, thedevice must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in asuitable manner.Manufacturers must demonstrate that their devices conform to the relevant essential requirements through a conformityassessment procedure. The nature of the assessment depends upon the classification of the device. The classification rules aremainly based on three criteria: the length of time the device is in contact with the body, the degree of invasiveness and the extentto which the device affects the anatomy. Conformity assessment procedures for all but the lowest risk classification of deviceinvolve a notified body. Notified bodies are often private entities and are authorized or licensed to perform such assessments bygovernment authorities. Manufacturers usually have some flexibility to select a notified body for the conformity assessmentprocedures for a particular class of device and to reflect their circumstances, e.g., the likelihood that the manufacturer will makefrequent 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 mayreview the manufacturer’s quality systems. If satisfied that the product conforms to the relevant essential requirements, the notifiedbody issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity andapplication of the CE Mark. Application of the CE Mark allows the general commercializing of a product in the EU. The productcan 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 theMDD 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 devicesand pre-market regulatory review of high-risk devices. The MDR also envisages greater control over notified bodies and theirstandards, increased transparency, more robust device vigilance requirements and clarification of the rules for clinicalinvestigations. Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May26, 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 onthe market in the EU.Health Insurance Portability and Accountability ActThe Health Insurance Portability and Accountability Act of 1996, or HIPAA, impacts the transmission, maintenance, use anddisclosure of certain individually identifiable health information (referred to as protected health information, or PHI). Since HIPAAwas enacted in 1996, numerous implementing regulations have been issued, including, but not limited to: (1) standards for theprivacy of individually identifiable health information (the Privacy Rule), (2) standards to protect the confidentiality, integrityand security of electronic protected health information (the Security Rule), (3) standards for electronic transactions, (4) a standardunique national provider identifier for providers and health plans, and (5) the HHS Breach Notification Rule. We refer to theserules, as well as similar state laws applicable to our operations, as the HIPAA Rules. HHS has also issued regulations governing theenforcement 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 breachrequirements. 9 Table of Contents The HIPAA Rules apply to “covered entities,” which includes healthcare providers who conduct certain transactionselectronically, including but not limited to the electronic submission of health care claims to an insurance carrier. We also provideservices to customers that are directly regulated entities under HIPAA and the HIPAA Rules, and we are required to providesatisfactory written assurances to these customers through our written agreements that we will provide our services in accordancewith HIPAA and the HIPAA Rules. As such, HIPAA and the HIPAA Rules apply to various aspects of our business and we arerequired 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 HealthAct, or HITECH, provisions of the American Recovery and Reinvestment Act of 2009. This law includes strengthened federalprivacy and security provisions to protect personally-identifiable health information, such as the notification requirements setforth in the Breach Notification Rule. On January 25, 2013, the Office for Civil Rights (OCR) of the Department of Health andHuman Services published its final rule to modify the HIPAA Privacy, Security, Breach and Enforcement Rules, including mostrevisions/additions made by the HITECH Act. The rule became effective on March 23, 2013, and entities and business associatescovered 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 HumanServices, or HHS, HITECH-mandated audit program. We may also be audited in connection with a privacy complaint. We aresubject to prosecution and/or administrative enforcement and increased civil and criminal penalties for non-compliance, includinga new, four-tiered system of monetary penalties adopted under HITECH. We are also subject to enforcement by state attorneysgeneral who were given authority to enforce HIPAA under HITECH. To avoid penalties under the HITECH breach notificationprovisions, 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, wemay 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 healthinformation and personal data that are applicable to clinical laboratories. The compliance requirements of these laws, includingadditional breach reporting requirements, and the penalties for violation vary widely and new privacy and security laws in thisarea are evolving. Requirements of these laws and penalties for violations vary widely. We believe that we have taken the stepsrequired of us to comply with health information privacy and security statutes and regulations in all jurisdictions, both state andfederal. However, we may not be able to maintain compliance in all jurisdictions where we do business. Failure to maintaincompliance, or changes in state or federal laws regarding privacy or security, could result in civil and/or criminal penalties andcould 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 subjectto penalties, including civil and criminal penalties, fines, and exclusion from participation in U.S. federal or state health careprograms, and the curtailment or restructuring of our operations. HITECH increased the civil and criminal penalties that may beimposed against Covered Entities, their Business Associates and possibly other persons, and gave state attorneys general newauthority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’sfees 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 informationprivacy requirements that are applicable to us.Federal, State and Foreign Fraud and Abuse LawsBecause of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, andactively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs. Our business is subject tocompliance with these laws. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Healthcare andEducation Affordability Reconciliation Act, which we refer to collectively as the Affordable Care Act, was enacted in the UnitedStates. The provisions of the Affordable Care Act are effective on various dates. The Affordable Care Act expands thegovernment’s investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments toboth the Anti-Kickback Statute and the False Claims Act, to make it easier to bring suit under these statutes. The Affordable CareAct also allocates additional resources and tools for the government to police healthcare fraud, with expanded subpoena power forHHS, additional funding to investigate fraud and abuse across the healthcare system and expanded use of recovery auditcontractors for enforcement.Anti-Kickback Statutes. The federal healthcare programs’ Anti-Kickback Statute prohibits persons from knowingly andwillfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce 10 Table of Contents either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under afederal 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 ofpayments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangementinvolving remuneration is to induce referrals of federal healthcare covered businesses, the statute has been violated. Penalties forviolations 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 FederalFalse Claims Act, discussed in more detail below.The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are otherwise lawful in businessesoutside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit manyinnocuous or beneficial arrangements, Congress authorized the Office of Inspector General, or OIG, of HHS to issue a series ofregulations known as “safe harbors.” These safe harbors set forth provisions that, if all their applicable requirements are met, willassure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute. The failure of atransaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or thatprosecution will be pursued. However, conduct and business arrangements that do not fully satisfy an applicable safe harbor mayresult 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 ofrecipients 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, amongother activities, and recently have brought cases against companies, and certain individual sales, marketing and executivepersonnel, 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 FalseClaims Act, and in particular, action brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions. TheFalse 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 aprivate individual to bring actions on behalf of the federal government alleging that the defendant has violated the False ClaimsAct and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by privateindividuals has increased dramatically. In addition, various states have enacted false claims laws analogous to the False ClaimsAct, and many of these state laws apply where a claim is submitted to any third-party payor and not just a federal healthcareprogram.When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actualdamages sustained by the government, plus civil penalties of between $11,181 and $22,363 for each separate instance of falseclaim. As part of any settlement, the government may ask the entity to enter into a corporate integrity agreement, which imposescertain 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 thefederal 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 additionto the more predictable allegations as to misrepresentations with respect to the services rendered. In addition, the federalgovernment has prosecuted companies under the False Claims Act in connection with off-label promotion of products. Our futureactivities relating to the reporting of wholesale or estimated retail prices of our products, the reporting of discount and rebateinformation and other information affecting federal, state and third-party reimbursement of our products and the sale andmarketing 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 FalseClaims Act or a similar state law, or the impact of such actions. However, the costs of defending such claims, as well as anysanctions 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 AffordableCare Act, requires manufacturers of prescription drugs, devices, biologics or other medical supplies available for coverage byMedicare, Medicaid or the Children’s Health Insurance Program to report annually to the Secretary of HHS: (i) payments or othertransfers of value made by that entity, or by a third-party as directed by that entity, to physicians and 11 Table of Contents teaching hospitals or to third parties on behalf of physicians or teaching hospitals; and (ii) physician ownership (includingimmediate family ownership) and investment interests in the entity. The statute requires the federal government to make reportedinformation available to the public starting September 2014, which it has. Failure to comply with the reporting requirements canresult in significant civil monetary penalties ranging from $1,000 to $10,000 for each payment or other transfer of value that is notreported (up to a maximum per annual report of $150,000) and from $10,000 to $100,000 for each knowing failure to report (up toa maximum per annual report of $1.0 million). Additionally, there are criminal penalties if an entity intentionally makes falsestatements in such reports. We are subject to the Sunshine Act and the information we disclose may lead to greater scrutiny, whichmay result in modifications to established practices and additional costs. Additionally, similar reporting requirements have alsobeen enacted on the state level domestically, and an increasing number of countries worldwide either have adopted or areconsidering 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 orbusiness from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreignofficial, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist theindividual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in theUnited States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflectall transactions of the corporation, including international subsidiaries, if any, and to devise and maintain an adequate system ofinternal accounting controls for international operations.International Laws. In Europe, various countries have adopted anti-bribery laws providing for severe consequences, in theform of criminal penalties and/or significant fines, for individuals and/or companies committing a bribery offense. Violations ofthese anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations andreputation. For instance, in the United Kingdom, under the Bribery Act 2010, which went into effect in July 2011, a bribery occurswhen a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to improperlyperform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also fallswithin the scope of the Bribery Act 2010. Under the new regime, an individual found in violation of the Bribery Act of 2010, facesimprisonment of up to 10 years. In addition, the individual can be subject to an unlimited fine, as can commercial organizationsfor failure to prevent bribery.There are also international privacy laws that impose restrictions on the access, use, and disclosure of health information. Allof these laws may impact our business. Our failure to comply with these privacy laws or significant changes in the laws restrictingour ability to obtain required patient information could significantly impact our business and our future business plans.U.S. Healthcare ReformChanges in healthcare policy could increase our costs and subject us to additional regulatory requirements that mayinterrupt commercialization of our current and future solutions. Changes in healthcare policy could increase our costs, decreaseour revenues and impact sales of and reimbursement for our current and future solutions. The Affordable Care Act substantiallychanges the way healthcare is financed by both governmental and private insurers, and significantly impacts our industry. The Actcontains 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 toreduce costs while expanding individual healthcare benefits. Certain of these changes could impose additional limitations on theprices we will be able to charge for our current and future solutions or the amounts of reimbursement available for our current andfuture solutions from governmental agencies or third-party payors. While in general it is too early to predict specifically whateffect the Affordable Care Act and its implementation or any future healthcare reform legislation or policies will have on ourbusiness, current and future healthcare reform legislation and policies could have a material adverse effect on our business andfinancial condition.EnvironmentalWe 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 inconnection with our operations. Although we believe that we have complied with these laws and regulations in all materialrespects and, to date, have not been required to take any action to correct any noncompliance, there can be no assurance that wewill not be required to incur significant costs to comply with environmental regulations in the future. 12 Table of Contents InsuranceWe maintain product and clinical trial liability insurance coverage which includes a maximum of per claim and an annualaggregate policy limits, subject to self-insured retentions. The policy covers, subject to policy conditions and exclusions, claimsof 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 ofcoverage 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 moreexpensive, if available at all.EmployeesAs of December 31, 2018, we had 54 full-time employees. Of these employees, 41 were in research and development and 13were 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 theiremployment. We have not experienced any work stoppages, and we consider our relationship with our employees to be good.Available InformationEffective June 18, 2018, Pulse Biosciences reincorporated as a Delaware Corporation. We were originally incorporated inNevada 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 notincorporated 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 filedor furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of chargethrough the “Investor Relations” section of our website as soon as reasonably practicable after we electronically file such materialwith, 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 FactorsInvesting in our common stock involves a high degree of risk. You should consider carefully the risks and uncertaintiesdescribed below, together with all of the other information in this Annual Report, including our financial statements and relatednotes, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Therisks described below are not the only risks facing us. Risks and uncertainties not currently known to us or that we currently deemto 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 toevaluate 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 ofthe early parts of our business plan. We have incurred significant operating losses in each year since our inception and we expectto continue to incur additional losses for the next several years. In addition, a high percentage of our 13 Table of Contents expenses will continue to be fixed; accordingly, our losses may be greater than expected and our operating results may suffer. Wehave 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 ouroperations. 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 expendsignificant resources on hiring of personnel, continued scientific and product research and development, potential product testingand preclinical and clinical investigation, intellectual property development and prosecution, marketing and promotion, capitalexpenditures, working capital, general and administrative expenses, and fees and expenses associated with our capital raisingefforts. 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 areincurring significant operating losses, we expect to continue to incur additional losses for at least the next several years, and wecannot assure you that we will generate revenue or be profitable in the future. Our future products may never be approved orbecome commercially viable or accepted for use. Even if we find commercially viable applications for our technology, which mayinclude licensing, we may never recover our research and development expenses.Investment in medical technology is highly speculative, because it entails substantial upfront capital expenditures andsignificant risk that any potential product will fail to demonstrate adequate efficacy or clinical utility. Investors should evaluate aninvestment in us in light of the uncertainties encountered by developing medical technology companies in a competitiveenvironment. There can be no assurance that our efforts will be successful or that we will ultimately be able to achieveprofitability. 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 significantlyimpair 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 maynot 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 weimplement our business plan. Currently, we have no revenue and do not have arrangements in place for all the anticipatedfinancing that would be required to fully implement our business plan. Our prior losses combined with expected future losses, havehad and will continue to have, for the foreseeable future, an adverse effect on our stockholders’ equity and working capital. Whilewe believe we have the resources necessary to fund operations for the next twelve months from the date of issuance of this AnnualReport, our inability to raise capital in the future could have a material adverse effect on our business, financial condition andresults of operations. We plan to raise additional funds in the near future and intend to finance our operations through equityfinancings.We cannot give any assurance that we will be able to obtain all the necessary funding that we may need. In addition, webelieve that we will require additional capital in the future to fully develop our technologies and planned products to the stage ofa commercial launch. We have pursued and may pursue additional funding through various financing sources, including theprivate sale of our equity and debt securities, licensing fees for our technology, joint ventures with capital partners and projecttype financing. If we raise funds by issuing equity or equity-linked securities, dilution to our stockholders will result. Any equitysecurities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. The terms ofdebt securities issued or borrowings could impose significant restrictions on our operations. We also may seek government basedfinancing, such as development and research grants. There can be no assurance that funds will be available on commerciallyreasonable terms, if at all.The incurrence of indebtedness or the issuance of certain equity securities could result in increased fixed paymentobligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issueadditional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions thatcould adversely affect our ability to conduct our business. In addition, the issuance of additional equity securities by us, or thepossibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter intocollaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms. These agreements mayrequire that we relinquish, or license to a third party on unfavorable terms, our rights to technologies or product candidates that weotherwise would seek to develop or commercialize ourselves, or reserve certain opportunities for future 14 Table of Contents potential arrangements when we might otherwise be able to achieve more favorable terms. In addition, we may be forced to workwith a partner on one or more of our products or market development programs, which could lower the economic value of thoseprograms to us.If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, we may terminate ordelay the development of one or more of our products, delay clinical trials necessary to market our products, or delayestablishment 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 beunable 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 couldcause 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 futureoperating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control and may bedifficult to predict, including:·the timing and cost of, and level of investment in, research, development and commercialization activitiesrelating 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 theUnited 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, andpotential 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 varydepending 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 andtechnologies;·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 commercialand 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 orcompeting product candidates, or any other change in the competitive landscape of our industry, includingconsolidation among our competitors or partners.The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annualoperating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors shouldnot 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 analystsor investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below anyforecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts orinvestors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we havemet any previously publicly stated revenue or earnings guidance we may provide. 15 Table of Contents If we lose key management personnel, our ability to identify, develop and commercialize new or next generation productcandidates 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 significantexperience and knowledge with sub-microsecond pulsed electric fields and more broadly in aesthetics, dermatology, life sciencesand medical technologies. The loss of any team member could impair our ability to design, identify, and develop new intellectualproperty and new scientific or product ideas. The loss of a key employee, the failure of a key employee to perform in his or hercurrent position or our inability to attract and retain skilled employees could result in our inability to continue to grow ourbusiness or to implement our business strategy. We compete for qualified management and scientific personnel with other lifescience companies, academic institutions and research institutions. Our employees could leave our company with little or no priornotice and may be free to work for a competitor. If one or more of our senior executives or other key personnel were unable orunwilling to continue in their present positions, we may not be able to replace them easily or at all, and other senior managementmay be required to divert attention from other aspects of the business. In addition, we do not have “key person” life insurancepolicies covering any member of our management team or other key personnel. The loss of any of these individuals or anyinability to attract or retain qualified personnel, including scientists, engineers and others, could prevent us from pursuingcollaborations and materially and adversely affect our product development and introductions, business growth prospects, resultsof operations and financial condition. There is a limited talent pool of experienced professionals in our industry. If we are not able to retain and recruitpersonnel 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 successdepends 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 certaincontractual obligations. Given the scarcity of professionals with the scientific knowledge that we require and the competition forqualified personnel among life science businesses, we may not succeed in attracting or retaining the personnel we require tocontinue 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 productintroductions and enhancements and evolving industry standards. Our future success will depend on our ability to continuallydevelop and then improve the products that we design and to develop and introduce new products that address the evolving needsof our customers on a timely and cost-effective basis. We also will need to pursue new market opportunities that develop as a resultof technological and scientific advances. These new market opportunities may be outside the scope of our proven expertise or inareas which have unproven market demand. Any new products developed by us may not be accepted in the intended markets. Ourinability 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 medicaltechnology, 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 anddynamic competition to develop new technologies and proprietary therapies. We face competition from a number of sources, suchas pharmaceutical companies, medical device companies, generic drug companies, biotechnology companies and academic andresearch 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 competitiveadvantage;·greater experience in obtaining patents and regulatory approvals for product candidates and other resources; 16 Table of Contents ·greater experience in conducting research and development, manufacturing, clinical trials, obtaining regulatoryapproval 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 developmentssurrounding electro-signaling therapeutics continue to accelerate. While we will seek to expand our technological capabilities toremain competitive, research and development by others may render our technology or product candidates obsolete ornoncompetitive or result in treatments or cures superior to any therapy developed by us. In addition, certain of our productcandidates, if approved, may compete with other dermatological products, including over-the-counter, or OTC, treatments, for ashare of some patients’ discretionary budgets and for physicians’ attention within their clinical practices. Even if a generic productor an OTC product is less effective than our product candidates, a less effective generic or OTC product may be more quicklyadopted by physicians and patients than our competing product candidates based upon cost or convenience. As a result, we maynot 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 notperform satisfactorily. We do not currently conduct any aspects of sales, marketing, large-scale manufacturing or distribution. To be able tocommercialize our planned products, we may elect to internally develop all of the foregoing or utilize third parties with respect toone or more of these items. Our reliance on these third parties may reduce our control over these activities; however, reliance onthird parties does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientificstandards. Any failure of these third parties to perform satisfactorily and in compliance with relevant laws and regulations couldlead to delays in the development of our planned products, including delays in our clinical trials, or failure to obtain regulatoryapproval for our planned products, or failure to successfully commercialize our planned products or other future products. Some ofthese events could be the basis for FDA or other regulatory action, including injunction, recall, seizure or total or partialsuspension of production.We do not have any corporate experience in establishing these capabilities, and therefore, we may be unsuccessful inachieving commercialization and earning revenues. We believe that setting up the commercialization aspects of a company willtake a substantial amount of capital and commitment of time and effort. We may seek development and marketing partners andlicense our technology to others in order to avoid our having to provide the marketing, manufacturing and distributioncapabilities within our organization. There can be no assurance that we will find any development and marketing partners orcompanies 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, andmay not become profitable.If we are unable to manage the anticipated growth of our business, our future revenue and operating results may beharmed.We have experienced and continue to experience rapid growth in our business. Recent and future growth imposes significantadded responsibilities on management, including the need to identify, recruit, train and integrate additional employees. Rapidexpansion in personnel could mean that less experienced people carry out our research and development activities, manufacture,market and sell CellFX System 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 andoperational infrastructure, and the failure to continue to upgrade our technical, administrative, operating and financial controlsystems or the occurrence of unexpected expansion difficulties could have a material adverse effect on our business, financialcondition and results of operations and our ability to timely execute our business plan. If we are unable to manage our growtheffectively, 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 ofoperations. 17 Table of Contents Our results of operations could be adversely affected by general conditions in the global economy and in the globalfinancial markets. Furthermore, the market for aesthetic medical procedures may be particularly vulnerable to unfavorableeconomic conditions. In particular, insurance coverage and reimbursement for aesthetic dermatology proceduresusing CellFX System may not be available, and, as a result, demand for this product will be tied to discretionary spending levels ofour targeted patient population. A global financial crisis or a global or regional political disruption could cause extreme volatilityin the capital and credit markets. A severe or prolonged economic downturn or political disruption could result in a variety of risksto our business, including weakened demand for our lead product candidates or any future product candidates, if approved, andour ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or politicaldisruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delaymaking payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in whichthe 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 sensitiveinformation related to our business or prevent us from accessing critical information and expose us to liability, which couldadversely 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 ourtrials, intellectual property, and our proprietary business and financial information. We manage and maintain our applications anddata utilizing a combination of on-site and vendor-owned systems. We face a number of risks related to our protection of, and ourservice providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorizedaccess, 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 informationtechnology 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, ournetworks 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 orproceedings, liability under laws that protect the privacy of personal information, such as the federal Health Insurance Portabilityand Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical HealthAct 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 theadministrative 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 theUnited States are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in amanner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that wechange our practices, which could adversely affect our business. Complying with these various laws could cause us to incursubstantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to ourbusiness.Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of anyproducts 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 plannedproducts in human clinical studies. For example, we may be sued if any of our product candidates, including any that aredeveloped 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, defectsin design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. We may alsobe subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannotsuccessfully 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; 18 Table of Contents ·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 NPStechnology 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 berelated to our CellFX System or our NPS technology. Such events could subject us to costly litigation, require us to pay substantialamounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approvalto market those products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which wedo not believe that an adverse event is related to our product, the investigation into the circumstance may be time-consuming orinconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval processes, or impact and limit thetype of regulatory approvals our products could receive or maintain. As a result of these factors, a product liability claim, even ifsuccessfully defended, could harm our business.We currently maintain product liability insurance coverage, which may not be adequate to cover all liabilities that we mayincur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or inan 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 securitieslaws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normalcourse of our business in addition to governmental and other regulatory investigations and proceedings. In addition, third partiesmay, 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 tochange 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 isinherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on ourbusiness, financial condition, results of operations and prospects. See the section entitled “Legal Proceedings” for more detail onour 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 theforeseeable future. If not utilized, the federal and state NOL carryforwards will begin to expire in various years beginning after2034. Under the Internal Revenue Code of 1986, as amended, or the Code, and certain similar state tax provisions, a corporation isgenerally allowed a deduction for net operating losses, or NOLs, carried over from a prior taxable year. Under those provisions, wecan carry forward our NOLs to offset our future taxable income, if any, until such NOLs are used or expire. The same is true of otherunused tax attributes, such as tax credits.In addition, under Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subjectto limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset future taxable income. We believe thatwe have had one or more ownership changes, and, as a result, a portion of our existing NOLs may be subject to limitation. Futurechanges in our stock ownership could result in additional limitations. We may not be able to utilize a material portion of our NOLseven 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 waspartially effective in 2017 and fully effective in 2018. The primary impacts to us include a decrease of the corporate income taxrate structure and NOL limitations. These changes may have a material impact to the value of deferred tax assets and liabilities andour future taxable income and effective tax rate. We are assessing the TCJA with professional advisers, and believe that the impactof the TCJA on our business may not be fully known for some time, and until such analysis is 19 Table of Contents 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 anypotential impacts.We have a substantial amount of goodwill and intangible assets which over time may have to be written down as we makethe 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 businessacquisitions. We review goodwill for impairment at least annually or whenever changes in circumstances indicate that the carryingvalue of the goodwill may not be recoverable. We also review our intangible assets for impairment at each fiscal year end or whenevents or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. If we take animpairment charge for either goodwill or intangible assets, the overall assets will be reduced. Such an impairment charge mayresult in a change in the perceived value of the company and ultimately may be reflected as a reduction in the market price of oursecurities. 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 overfinancial reporting in the future, we may not be able to accurately or timely report our financial condition or results ofoperations, 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 materialweaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine theeffectiveness of our internal control over financial reporting and provide a management report on internal control over financialreporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such thatthere is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on atimely basis. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we canproduce accurate financial statements on a timely basis is a costly and time-consuming effort. Our internal control over financialreporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements in accordance with GAAP. We may not be able to complete our evaluation, testing and any requiredremediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in ourinternal 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 amaterial weakness in our internal control over financial reporting. The material weakness related to a lack of effective controls toadequately 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 toavoid potential future material weaknesses. The existence of one or more material weaknesses could preclude a conclusion that wemaintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that amaterial 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, ourindependent registered public accounting firm will not be required to report on the effectiveness of our internal control overfinancial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company” asdefined in the Jumpstart Our Business Startups Act, or JOBS Act if we continue to take advantage of the exemptions contained inthe JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it isnot satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable usto avoid a material weakness in the future. If we are unable to assert that our internal control over financial reporting is effective, orwhen required in the future, if our independent registered public accounting firm is unable to express an opinion as to theeffectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness ofour financial reports and the market price of our common stock could be adversely affected, and we could become subject toinvestigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which couldrequire additional financial and management resources. 20 Table of Contents Our facilities in California are located near known earthquake faults, and the occurrence of an earthquake or othercatastrophic 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 damagefrom 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 wouldbe seriously, or potentially completely, impaired. In addition, the nature of our activities could cause significant delays in ourresearch programs and commercial activities and make it difficult for us to recover from a disaster. The insurance we maintain maynot be adequate to cover our losses resulting from disasters or other business interruptions. Accordingly, an earthquake or otherdisaster could materially and adversely harm our ability to conduct business. 21 Table of Contents Risks Related to Product DevelopmentWe currently do not have any products approved or cleared by the FDA or other similar foreign regulatory authorities forcommercial sale or any commercialized products. To date, we have invested a substantial amount of time and capital to research and develop the foundations of ourtechnology and potential applications. For us to develop any products that might ultimately be commercialized, we will have toinvest further time and capital in research and product development, obtaining regulatory approval or clearance, implementingregulatory compliance standards, and market development. Therefore, we may never develop any products that can becommercialized. All of our development efforts will require substantial additional investment, which may never result in anyrevenue. 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 clearances for our planned products, or the approved or clearedindications may be narrower than we seek;·we may experience delays in our development program, clinical trials and the regulatory approval or clearanceprocess;·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 beinsufficient 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 byphysicians 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 andproducts obsolete.Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studiesand 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 delaycan occur at any time during the clinical trial process. Success in nonclinical studies and early feasibility clinical studies does notensure that expanded clinical trials that will be used to support regulatory submissions will be successful. These setbacks havebeen caused by, among other things, nonclinical findings made while clinical trials were underway, and safety or efficacyobservations made in clinical trials, including previously unreported adverse events. Even if our clinical trials are completed, theresults 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 maychange as more patient data become available and are subject to audit and verification procedures that could result in materialchanges in the final data.From time to time, we may publish interim top-line or preliminary results from our clinical trials. Interim results fromclinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change aspatient enrollment continues and more patient data become available. Preliminary or top-line results also remain subject to auditand verification procedures that may result in the final data being materially different from the preliminary data we previouslypublished. As a result, interim and preliminary data should be viewed with caution until the final data are available. Differencesbetween preliminary or interim data and final data could significantly harm our business prospects and may cause the trading priceof our common stock to fluctuate significantly.If we fail to obtain and maintain necessary regulatory clearances or approvals for our devices, or if clearances orapprovals 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. 22 Table of Contents Our product candidates under development are medical devices that are subject to extensive regulation by FDA in theUnited States and by regulatory agencies in other countries where we plan to do business. Government regulations specific tomedical 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 companymust first submit and receive either 510(k) clearance or premarketing approval, or PMA from the FDA, unless an exemptionapplies. In the 510(k) clearance process, the FDA will determine that a proposed device is “substantially equivalent” to a devicelegally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, inorder to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMApathway requires an applicant to demonstrate with reasonable scientific data the safety and effectiveness of the device based onextensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMAprocess is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting orimplantable devices. Products that are approved through a PMA application generally need FDA approval before they can bemodified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). Either process canbe expensive, lengthy and unpredictable. We may not be able to obtain the necessary clearances or approvals or may be undulydelayed 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 ensurethat the claims we make are consistent with our regulatory clearances, that there are adequate and reasonable data to substantiatethe claims and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTCdetermines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may besubject to enforcement actions, including FDA warning letters, and we may be required to revise our promotional claims and makeother corrections or restitutions.FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirementscould 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 toexisting 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 thedevelopment of our CellFX System, may be affected by unanticipated technical or other problems, among other 23 Table of Contents development and research issues, and the possible insufficiency of funds needed in order to complete development of theseproducts or devices. Regulatory and clinical hurdles or challenges also may result in delays and cause us to incur additionalexpenses that may increase our need for capital and result in additional losses. In addition, the potential indications for our NPStechnology are numerous, and we may fail to pursue the most optimal indications. If we cannot complete, or if we experiencesignificant 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 gatheredregarding its use. Furthermore, there are only a relatively small number of scientists and researchers who can be considered expertsin the use of this emerging technology. A full understanding of a future product’s mechanism of action and a large scale ofscientific experts are typically believed to make product development less risky. The FDA or similar foreign regulatory authoritiesmay view this as increasing the potential risks, and diminishing the potential benefits, of products based on NPS technology. Inaddition, potential partners may view this as a limitation of the program, and it may be more challenging for us to obtain apartnership on favorable terms as a result.Our planned products may cause serious adverse side effects or have other properties that could delay or prevent theirregulatory approval, limit the commercial desirability of an approved label or result in significant negative consequencesfollowing 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 ofanimal testing, and we have only completed a limited number of feasibility studies in humans. It is difficult to predict when or ifthis or any planned products will prove safe enough to receive regulatory approval or clearance. Undesirable side effects caused byNPS pulses or any of our planned products could cause us or regulatory authorities to interrupt, delay or halt clinical trials. Theycould result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreignregulatory authority. Additionally, if any of our planned products receive marketing approval or clearance but, we or others later identifyundesirable 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 thecommercial success of such products;·the FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or othercommunications 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, ifapproved.Our business is dependent upon physicians adopting our CellFX System and NPS technology, and if we fail to obtainbroad adoption, our business would be adversely affected. If we obtain regulatory approval or clearance for our CellFX System, our success will depend on our ability to educatephysicians regarding the benefits of CellFX treatments over existing treatment modalities and to persuade them to prescribe 24 Table of Contents CellFX treatments for their patients. We do not know if the CellFX System or NPS technology will be successful over the longterm, and market acceptance may be hindered if physicians are not presented with compelling data demonstrating the efficacy andsafety of our products compared to alternative treatments. Any studies we, or third parties, may conduct comparing our CellFXSystem 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 attractcash payments from patients or to obtain sufficient reimbursement from third party commercial payors, and the Centers forMedicare & Medicaid Services, or CMS, for the professional services they provide in administering CellFX treatments. Theefficacy, safety, performance and cost-effectiveness of our CellFX System, NPS technology, or other potential products based onNPS technology, on a stand-alone basis and relative to competing services, will determine the availability and level ofreimbursement received by us and providers. If physicians do not adopt and prescribe our future products, we may never becomeprofitable.We may find it difficult to enroll patients in our clinical trials. If we cannot enroll a sufficient number of eligible patientsto participate in the clinical trials, we may not be able to initiate or continue clinical trials, which could delay or preventdevelopment of our product candidates. Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. Thetiming of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidatesas well as completion of required follow-up periods. In general, if patients are unwilling to participate in our trials because ofnegative publicity from adverse events in the life sciences industry or for other reasons, including competitive clinical trials forsimilar patient populations, the timeline for recruiting patients, conducting trials and obtaining regulatory approval or clearance ofplanned products may be delayed. If there are delays in accumulating the required patients and patient data, there may be delays incompleting the trial. Further, if any of our clinical trial sites fail to comply with required good clinical practices, or GCPs, we maybe unable to use the data gathered at those sites. If our clinical investigators fail to carry out their contractual duties or regulatoryobligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due totheir failure to adhere to our clinical protocols or for other reasons, our clinical trials may be delayed. These delays could result inincreased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or terminationof the clinical trials altogether.Laboratory conditions differ from commercial conditions and field conditions, and the safety and effectiveness of ourplanned 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 inbroader 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 oftraining and practice to administer correctly. Treatment results achieved during the laboratory or in clinical trials conducted by usor other investigators may not be representative of the results actually encountered during commercial use of our products due tovariability in administration technique. The training and skills of investigators in our clinical trials may not be representative ofthe training and skills of future product users, which could negatively affect treatment results. In addition, there may be a selectionbias 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 runby the microprocessors embedded in the device and associated software. This firmware and software is proprietary to us. While wehave made efforts to test the firmware and software extensively, it is potentially subject to malfunction which in turn may harm apatient. 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 confidentialmedical, 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 onthird-party suppliers for critical materials needed to manufacture our CellFX System and related applicators. Any problemsexperienced by these suppliers could result in a delay or interruption of their supply to us, and as a result, we may face delays inthe development and commercialization of planned products. We perform final assembly of our devices to support our current research and development activities at our facility inCalifornia. We believe we have adequate manufacturing capacity for these purposes. However, if demand for our planned productsincreases significantly, we will need to either expand our manufacturing capabilities or outsource to other manufacturers. We haveno corporate experience in commercial-scale manufacturing of our planned products, and we 25 Table of Contents currently rely upon third-party suppliers to manufacture and supply components for our CellFX System. The manufacture of theseproducts in compliance with the FDA’s regulations requires significant expertise and capital investment, including thedevelopment of advanced manufacturing techniques and process controls. Manufacturers of medical device products oftenencounter difficulties in production, including difficulties with production costs and yields, quality control, quality assurancetesting, shortages of qualified personnel, as well as compliance with strictly enforced FDA requirements, other federal and stateregulatory requirements, and foreign regulations.We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners forcompliance with the regulatory requirements, and if our contract manufacturers cannot successfully manufacture our productcandidates that conform to our specifications and the strict regulatory requirements of the FDA or comparable regulatoryauthorities in foreign jurisdictions, we may not be able to rely on their manufacturing facilities for the manufacture of our productcandidates. In addition, we have limited control over the ability of our contract manufacturers to maintain adequate qualitycontrol, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds these facilitiesinadequate for the manufacture of our product candidates or if such facilities are subject to enforcement action in the future or areotherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability todevelop, 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 withmost of the suppliers of these materials. If suppliers were to delay or stop producing our components, or if the prices they charge uswere to increase significantly, or if they elected not to sell to us, we would need to identify other suppliers. We could experiencedelays 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 anadequate 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 ourcommercial success as a company, may be affected by the availability of government reimbursement and medical insurancecoverage and reimbursement for newly approved medical therapies, technologies and devices. Insurance coverage andreimbursement is not assured. It typically takes a period of use in the market place before coverage and reimbursement is granted, ifit is granted at all. In the United States and other jurisdictions in Europe and other regions, physicians and other healthcareproviders generally rely on insurance coverage and reimbursement for their revenues, therefore this is an important factor in theoverall commercialization plans of a proposed product and whether it will be accepted for use in the marketplace. Withoutinsurance coverage and reimbursement for our planned products, we would expect to earn only diminished revenues, if anyrevenues are earned.Medicare, Medicaid, health maintenance organizations and other third-party payers are increasingly attempting to containhealthcare 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 satisfactoryreimbursement arrangements, we may have to agree to a fee or sales price lower than the fee or sales price we might otherwisecharge. 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 adequatereimbursement will be applied consistently or obtained at all. Even if Medicare and other third-party payers decide to coverprocedures 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 payersprovide adequate coverage and reimbursement for our devices and products, some physicians may be discouraged from usingthem, and our sales would suffer.Medicare reimburses for medical technologies and products in a variety of ways, depending on where and how the item isused. However, Medicare only provides reimbursement if CMS determines that the item should be covered and that the use of thedevice or product is consistent with the coverage criteria. A coverage determination can be made at the local level by the Medicareadministrative contractor, a private contractor that processes and pays claims on behalf of CMS for the geographic area where theservices were rendered, or at the national level by CMS through a national coverage determination. There are statutory provisionsintended to facilitate coverage determinations for new technologies, but it is unclear how these new provisions will beimplemented and it is not possible to indicate how they might apply to any of our proposed devices and products, as they are stillin the development stages. Coverage presupposes that the technology, device, or product has been cleared or approved by the FDAand further, that the coverage will be no broader than the approved intended uses of the device or product as approved or clearedby the FDA, but coverage can be narrower. A coverage determination may be so limited that relatively few patients will qualify fora covered use of a device or product. 26 Table of Contents Obtaining a coverage determination, whether local or national, is a time-consuming, expensive and highly uncertainproposition, especially for a new technology, and inconsistent local determinations are possible. On average, Medicare coveragedeterminations for medical devices and products lag behind FDA approval or clearance. The Medicare statutory framework is alsosubject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made underMedicare. 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 Healthand Human Services (HHS). Medicaid generally reimburses at lower levels than Medicare. Moreover, Medicaid programs andprivate insurers are frequently influenced by Medicare coverage determinations.We work with outside scientists and their institutions in developing product candidates. These scientists may have othercommitments or conflicts of interest, which could limit our access to their expertise, harm our ability to leverage our discoveryplatforms, or negatively impact our clinical trials. We work with scientific advisors and collaborators at academic research institutions in connection with our productdevelopment. These scientists and collaborators are not our employees, but they serve as either independent contractors orresearchers under research agreements that we have with their sponsoring clinic, academic institution or research institution. Suchscientists and collaborators may have other commitments that would limit their availability to us. Although our scientific advisorsgenerally agree not to do competing work, if an actual or potential conflict of interest between their work for us and their work foranother entity arises, we may lose their services. It is also possible that some of our valuable proprietary knowledge may becomepublicly known through these scientific advisors if they breach their confidentiality agreements with us, which would causecompetitive harm to our business. To the extent these scientists and collaborators may receive cash or equity compensation inconnection with such services from time to time, these relationships and any related compensation may result in perceived oractual conflicts of interest, or a regulatory authority to conclude that the financial relationship may have affected the interpretationof the trial, such that the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of theclinical trial itself may be jeopardized, which could result in the delay or rejection of the marketing application we submit.Risks Related to Intellectual PropertyIf we or our licensors are unable to protect our/their intellectual property, then our financial condition, results ofoperations 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 companiesis dependent upon the proprietary nature of our technologies. We also rely upon trade secrets, know-how, continuingtechnological innovations and licensing opportunities to develop, maintain and strengthen our competitive position. We seek toprotect these, in part, through confidentiality agreements with certain employees, consultants and other parties. Our success willdepend in part on the ability of our licensors and us to obtain, to maintain (including making periodic filings and payments) andto 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 ifpatents are issued in respect of these patent applications, we or our licensors may fail to maintain these patents, may determine notto pursue litigation against entities that are infringing upon these patents, or may pursue such enforcement less aggressively thanwe ordinarily would for our own patents. Without adequate protection for the intellectual property that we own or license, othercompanies might be able to offer substantially identical products for sale, which could unfavorably affect our competitive businessposition and harm our business prospects. Even if issued, patents may be challenged, invalidated, or circumvented, which couldlimit our ability to stop competitors from marketing similar products or limit the length of term of patent protection that we mayhave for our products.Litigation or third-party claims of intellectual property infringement or challenges to the validity of our patents wouldrequire us to use resources to protect our technology and may prevent or delay our development, regulatory approval orcommercialization 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 ofothers 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 productcandidates. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop ordelay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. 27 Table of Contents If we or our collaborators experience patent infringement claims, or if we elect to avoid potential claims others may be ableto assert, we or our collaborators may choose to seek, or be required to seek, a license from the third-party and would most likely berequired to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we orour collaborators were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to thesame intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspectof our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable toenter into licenses on acceptable terms. This could harm our business significantly. The cost to us of any litigation or otherproceeding, regardless of its merit, even if resolved in our favor, could be substantial. Some of our competitors may be able to bearthe 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 adverseeffect on our ability to compete in the marketplace. Intellectual property litigation and other proceedings may, regardless of theirmerit, 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 commercializationrights 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”) tointellectual property relating to the sub-microsecond electric field technology, as well as applicator design and configuration, andpulse generators in addition to the intellectual property that we own for these things. For the continuance of the license withODURF and EVMS, we must continue to comply with the various obligations set forth in the license. If we fail to meet theseobligations, 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 whichwe can use the licensed technology. Therefore, in order for us to use such licensed technology in potential future applications thatare outside the licensed field of use, we may be required to negotiate new licenses with our licensors or expand our rights under ourexisting licenses. We cannot assure you that we will be able to obtain such licenses or expanded rights on reasonable terms or atall. In the event a dispute with our licensors were to occur, our licensors may seek to renegotiate the terms of our licenses, increasethe royalty rates that we pay to obtain and maintain those licenses, limit the field or scope of the licenses, or terminate the licenseagreements. In addition, we have limited rights to participate in the prosecution and enforcement of the patents and patentapplications that we have licensed. As a result, we cannot be certain that these patents and applications will be prosecuted andenforced in a manner consistent with the best interests of our business. Further, because of the rapid pace of technological changein our industry, we may need to rely on key technologies developed or licensed by third parties, and we may not be able to obtainlicenses and technologies from these third parties at all or on reasonable terms. The occurrence of these events may have a materialadverse 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 rightshave limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The followingexamples are illustrative:·others may be able to make products that are similar to our product candidates but that are not covered by the claims ofthe patents that we own or have exclusively licensed;·others may independently develop similar or alternative technologies without infringing on our intellectual propertyrights;·issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or maybe 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 suchpatents, and because patents have a limited life, which may begin to run prior to the commercial sale of the relatedproduct, the commercial value of our patents may be limited; 28 Table of Contents ·our competitors might conduct research and development activities in countries where we do not have patent rightsand then use the information learned from such activities to develop competitive products for sale in our majorcommercial 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 ofthe United States, or we may fail to apply for or obtain adequate intellectual property protection in all the jurisdictionsin which we operate; and·the patents of others may have an adverse effect on our business, for example by preventing us from marketing one ormore 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 technologyand products could be adversely affected. In addition to patented technology, we rely upon, among other things, unpatented proprietary technology, processes, tradesecrets and know-how. Any involuntary disclosure to or misappropriation by third-parties of our confidential or proprietaryinformation could enable competitors to duplicate or surpass our technological achievements, potentially eroding our competitiveposition in our market. We seek to protect confidential or proprietary information in part by confidentiality agreements with ouremployees, consultants and third-parties. While we require all of our employees, consultants, advisors and any third-parties whohave access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot becertain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access toour trade secrets or independently develop substantially equivalent information and techniques. These agreements may beterminated or breached, and we may not have adequate remedies for any such termination or breach. Furthermore, these agreementsmay not provide meaningful protection for our trade secrets and know-how in the event of unauthorized use or disclosure. To theextent 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 developmentactivities for us.If we are unable to protect the intellectual property used in our products, others may be able to copy our innovations whichmay 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 patentapplications may be challenged or our patent applications may fail to result in issued patents and our existing or future patentsmay be too narrow to prevent third-parties from developing or designing around our intellectual property and in that event we maylose competitive advantage and our business may suffer. Further, the patent applications that we license or have filed may fail toresult in issued patents. The claims may need to be amended. Even after amendment, a patent may not issue and in that event wemay not obtain the use of the intellectual property that we seek and may lose competitive advantage which could result in harm toour business.We may become involved in future lawsuits to protect or enforce our patents or the patents of our licensors, which could beexpensive, time consuming and unsuccessful. Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we or ourlicensors may file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, acourt 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 fromusing the technology at issue on the grounds that our patents do not cover the technology in question. If we or any currentlicensors or future licensees or licensors with rights to prosecute, assert or defend patents related to our product candidates fail toappropriately prosecute and maintain patent protection for patents covering any of our product candidates, or if patents coveringany of our product candidates are asserted against infringers or defended against claims of invalidity or unenforceability in amanner which adversely affects such coverage, our ability to develop and commercialize any such product candidate may beadversely affected and we may not be able to prevent competitors from making, using and selling competing products. An adverseresult in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpretednarrowly 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 inventionsdescribed in or otherwise affecting our patents and patent applications or those of our collaborators or licensors. 29 Table of Contents An unfavorable outcome could require us to cease using the technology or to attempt to license rights to it from the prevailingparty. Our business could be harmed if a prevailing party does not offer us a license on terms that are acceptable to us. Litigation orinterference proceedings may fail and, even if successful, may result in substantial costs and distraction of our management andother 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 andother 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 businessstrategy and product candidates in order to protect our competitive position, which are difficult to protect. As we collaborate withvarious third parties on the research and development of our planned products, we must, at times, share trade secrets with them. Inthe course of our research and development activities and our business activities, we rely on confidentiality agreements to protectour proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors or potential strategiccollaborators. In addition, each of our employees and consultants is required to sign a confidentiality agreement and inventionassignment agreement upon joining our company. Our employees, consultants, contractors, business partners or outside scientificcollaborators might intentionally or inadvertently disclose our trade secret information in breach of these confidentialityagreements or our trade secrets may otherwise be misappropriated. Our collaborators might also have rights to publish data, and wemight fail to apply for patent protection prior to such publication. It is possible that a competitor will make use of suchinformation, and that our competitive position will be compromised. In addition, to the extent that our employees, consultants orcontractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resultingknow-how and inventions. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensiveand time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willingthan U.S. courts to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methodsand know-how, and our trade secrets cannot be enforced against such independently developed knowledge. If we cannot maintainthe confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection orto 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 disclosedconfidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of theirformer employers. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with ourindependent contractors, collaborators and other third parties with whom we do business include provisions requiring such partiesto assign rights in inventions to us, we may also be subject to claims that former employees, collaborators or other third partieshave an ownership interest in our patents or other intellectual property. We may be subject to ownership disputes in the futurearising, 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 indefending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such asexclusive ownership of, or right to use, valuable intellectual property. Such an outcome could harm our business. Even if we aresuccessful in defending against such claims, litigation could result in substantial costs and be a distraction to management andother 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 beprohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive thanthose in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the sameextent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing ourinventions in all countries outside the United States, or from selling or importing products made using our inventions in and intothe United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patentprotection to develop their own products and further, may export otherwise infringing products to territories where we have patentprotection, but enforcement is not as strong as that in the United States. These products may compete with our current or futureproduct candidates, if any, and our patents or other intellectual property rights may not be effective or sufficient to prevent themfrom competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreignjurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement ofpatents, trade secrets and other intellectual property protection, particularly those relating to biotechnology 30 Table of Contents products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products inviolation of our proprietary rights generally. We believe this is caused by both the technical nature of the subject matter and ageneral enthusiasm for generic competition in developing countries, and is not a concern that is specific to any particular foreignjurisdiction. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our effortsand attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and ourpatent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in anylawsuits 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 commercialadvantage 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 registrationscould adversely affect our business. If our trademarks and trade names are not adequately protected, then we may not be able tobuild 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 orconflict with third-party rights. We may not be able to protect our rights to these trademarks and trade names, which we need tobuild name recognition by potential partners or customers in our markets of interest. Additionally, if we apply to register ourtrademarks in all of our potential markets, our applications may not be allowed for registration, and our registered trademarks maynot be maintained or enforced. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreignjurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registeredtrademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive suchproceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against thirdparties than we otherwise would. In such cases, over the long term, if we are unable to establish name recognition based on ourtrademarks 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 existingand future products. Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent applications andthe enforcement or defense of issued patents. In 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signedinto law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affectthe way patent applications are prosecuted and also may affect patent litigation. These also include provisions that switched theUnited States from a “first-to-invent” system to a “first-to-file” system, allow third party submission of prior art to the USPTOduring patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered postgrant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file apatent application generally will be entitled to the patent on an invention regardless of whether another inventor had made theinvention earlier. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, andmany 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 ofour business. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecutionof our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effecton 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 costssurrounding the prosecution, enforcement and defense of our patents and applications. Furthermore, the U.S. Supreme Court andthe U.S. Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws ofthe United States are interpreted. Similarly, foreign courts have made, and will likely continue to make, changes in how the patentlaws in their respective jurisdictions are interpreted. We cannot predict future changes in the interpretation of patent laws orchanges to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affectour patents or patent applications and our ability to obtain additional patent protection in the future. 31 Table of Contents 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 theUnited States or in any foreign market. For example, during September 2017, we withdrew our application seeking clearance of oursystem for soft tissue ablation. As such, it is highly speculative as to any timing for our planned products to be approved or clearedor commercialized. Investors need to take a long-term approach to an investment in our securities, as the commercial realization ofour 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. Anyunfavorable regulatory action may materially and adversely affect our future financial condition and business operations andprospects. Our potential devices and products, further development activities and manufacturing and distribution, once developed anddetermined, will be subject to extensive, rigorous and ongoing regulation by numerous government agencies, including the FDAand similar foreign regulatory authorities. To varying degrees, each of these agencies monitors and enforces our compliance withlaws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution, and the safety andeffectiveness of our medical technology. The process of obtaining and maintaining marketing approval or clearance from the FDAand similar foreign regulatory authorities for new devices and products, or for enhancements, expansion of the indications ormodifications 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 standingand result in further losses that adversely affect our financial condition. We will have ongoing responsibilities under FDA andinternational regulations, both before and after a product is approved or cleared and commercially released. Compliance withapplicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections. If aninspection were to conclude that we are not in compliance with applicable laws or regulations, or that any of our devices areineffective or pose an unreasonable health risk, the FDA or similar foreign regulatory authorities could ban such devices orproducts, detain or seize such devices or products, order a recall, repair, replacement, or refund of such devices or products, orrequire us to notify health professionals and others that the therapies, devices or products present unreasonable risks of substantialharm 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 penaltiesagainst our officers, employees, or us. The FDA and similar foreign regulatory authorities have been increasing its scrutiny of theindustry and the government is expected to continue to scrutinize the industry closely with inspections and possibly enforcementactions. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing andselling our devices and products. In addition, negative publicity and product liability claims resulting from any adverse regulatoryaction 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 workingrelationships with physicians. The development, marketing, and sale of our products in development, including the CellFX System, depends upon ourability to maintain strong working relationships with physicians. We rely on these professionals to provide us with considerableknowledge and experience regarding the development, marketing and sale of our products. Physicians assist us 32 Table of Contents in clinical trials and as researchers, marketing and product consultants and public speakers. If we cannot maintain our strongworking relationships with these professionals and continue to receive their advice and input, the development and marketing ofour products could suffer, which could harm our business, financial condition and results of operations. The medical deviceindustry’s relationship with physicians is under increasing scrutiny by the Office of Inspector General, or OIG, the Department ofJustice, 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, stateattorneys 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 weare 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 thatviolate the laws and regulations of the FDA and other similar regulatory bodies, There are many federal and state laws andregulations prohibiting fraud and abuse in the healthcare industry that can result in significant criminal and civil penalties. Theselaws may constrain the business or financial arrangements and relationships through which we conduct our operations, includinghow 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 andwillfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce orreward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good orservice, for which payment may be made under a U.S. healthcare program such as Medicare and Medicaid. A person orentity does not need to have actual knowledge of the U.S. federal Anti-Kickback Statute or specific intent to violate itin order to have committed a violation. In addition, the government may assert that a claim including items or servicesresulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposesof 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 tamactions, 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, afalse 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 civilliability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud anyhealthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or makingany 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 thestatute 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 respectto safeguarding the privacy, security and transmission of individually identifiable health information withoutappropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses andhealthcare providers as well as their business associates that perform certain services for or on their behalf involvingthe use or disclosure of individually identifiable health information;·the U.S. Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics andmedical 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 ofvalue” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) andteaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to thegovernment ownership and investment interests held by the physicians described above and their immediate familymembers; 33 Table of Contents ·federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activitiesthat potentially harm consumers; and·analogous state and non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may applyto our business practices, including, but not limited to, research, distribution, sales and marketing arrangements andclaims involving healthcare items or services reimbursed by non-governmental third-party payors, including privateinsurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines andthe relevant compliance guidance promulgated by the U.S. government, or otherwise restrict payments that may bemade to healthcare providers and other potential referral sources; state laws and regulations that require manufacturersto report information related to payments and other transfers of value to physicians and other healthcare providers ormarketing expenditures and pricing information; and state and non-U.S. laws governing the privacy and security ofhealth information in some circumstances, many of which differ from each other in significant ways and often are notpreempted by HIPAA, thus complicating compliance efforts.We have implemented a comprehensive compliance program to identify and deter healthcare violations by employees andother third-parties that perform services for us. Notwithstanding our compliance program, it is possible that governmentalauthorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance orcase law involving applicable healthcare laws. In addition, we are subject to the risk that a person or government could allege suchfraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful indefending 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, individualimprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment ofour operations. Defending against any such actions can be costly, time-consuming and may require significant financial andpersonnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, ourbusiness may be impaired. If any of the above occur, it could have a material adverse effect on our liquidity and financialcondition.To obtain the necessary device approvals or clearances from regulatory authorities for our product candidates, we willhave to conduct various preclinical and clinical tests, which may be costly and time consuming, and may not provide results thatwill 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 onthe disease or condition to be treated, the method of treatment, the nature of the device, the jurisdiction in which we are seekingapproval or clearance and the applicable regulations. Regulatory agencies, including those in the United States, Canada, Europeand other countries where medical devices and products are regulated, can delay, limit or deny approval of a product for manyreasons. 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 ofdifficulties or delays in obtaining regulatory approval or clearance in the US. As part of the process for regulatory approval orclearance, we may, from time to time, elect to withdraw an application. For example, during September 2017, the FDA requestedthat 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. 34 Table of Contents Even if a potential device or product ultimately is cleared or approved by the different regulatory authorities, it may becleared 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 orapproved for the indications that are necessary or desirable for a successful commercialization. The FDA may grant marketingauthorization 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 thanwe originally requested. Our preference will be to obtain as broad an indication as possible for use in connection with theparticular disease or treatment for which it is designed. However, the final classification may be more limited than we originallyseek. The limitation on use may make the device or product commercially less viable and more difficult, if not impractical, tomarket. Therefore, we may not obtain the revenues that we seek in respect of the proposed product, and we will not be able tobecome 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 andinspections 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 includetesting, control, and documentation requirements. We will be subject to similar regulations in foreign countries. Even if regulatoryapproval or clearance of a product is granted, the approval or clearance may be subject to limitations on the indicated uses forwhich 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 Systemregulations and other applicable regulatory requirements is strictly enforced in the United States through periodic inspections bystate and federal agencies, including the FDA, and in international jurisdictions by comparable agencies. Failure to comply withregulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure ofproducts, 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 regulatoryapprovals 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 trialsmay adversely affect our business. Preclinical studies, clinical trials and post-clinical monitoring and trials required to demonstrate the reasonable safety andefficacy of our potential devices and products are and will be time consuming and expensive. If we must conduct additionalclinical trials or other studies with respect to any of our proposed product candidates to those that are initially contemplated, if weare unable to successfully complete any clinical trials or other studies, or if the results of these trials or studies are not positive orare only modestly positive, we may be delayed in obtaining marketing approval for the planned products, we may not be able toobtain marketing approval, or we may obtain approval for indications that are not as broad as we seek. Our research and productdevelopment costs also will increase if we experience delays in testing or approvals. The completion of clinical trials for ourproposed therapies, devices and products could be delayed because of our inability to manufacture or obtain from third-partiesmaterials sufficient for use in preclinical studies and clinical trials; delays in patient enrollment and variability in the number andtypes of patients available for clinical trials; difficulty in maintaining contact with patients after treatment, resulting in incompletedata; poor effectiveness of proposed devices and products during clinical trials; unforeseen safety issues or side effects; andgovernmental or regulatory delays and changes in regulatory requirements and guidelines. If we incur significant delays in ourclinical trials, our competitors may be able to bring their products to market before we do, which could result in harming ourability 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, thefederal 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 totake a license for itself if the government funded the development of a patent. The march-in right applies to patents that have beenissued. 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 isnot equipped to handle. The march-in right may also be used to remove the exclusive rights belonging to a patent holder if thepatent for which the government provided funding is not suitable for public use. If march-in rights are used by the government, theentities using the patent are required to pay royalties to the patent holder, which amount would be subject to negotiation. Becausefederal funding was used for some aspects of the company’s technology that will be the subject of some of our patents, thecompany could be subject to the march-in right and lose its exclusivity of those patents, and may suffer direct competition if anylicense is granted by the government under the march-in right to a competitor. 35 Table of Contents 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 theregulations of the FDA and similar foreign regulatory authorities report financial information or data accurately or discloseunauthorized activities to us. See also “–We may be subject to healthcare laws and regulations relating to our business and couldface substantial penalties if we are determined not to have fully complied with such laws, which would have an adverse impact onour business.” We adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deteremployee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknownor unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from afailure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful indefending ourselves or asserting our rights, those actions could have a significant impact on our business, including theimposition of significant fines or other sanctions.Healthcare policy changes, including recent federal legislation to reform the U.S. healthcare system, may have a materialadverse effect on us. Our operations may be impacted by the Patient Protection and Affordable Care Act (PPACA). For example, the PPACAimposed, among other things, a 2.3% federal excise tax, with limited exceptions, on any entity that manufactures or imports ClassI, II and III medical devices offered for sale in the United States that began on January 1, 2013. The excise tax was suspended for atwo year period beginning January 1, 2016 and was further suspended through December 31, 2019, and will be reinstated onmedical device sales starting January 1, 2020. The current administration has expressed an intention to repeal the PPACA andreplace it with alternative reforms. The details and timing of any further such actions are unknown at this time, and it is possiblethat 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 otherthings, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations periodfor the government to recover overpayments to providers from three to five years. We expect that additional state and federalhealthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governmentswill 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 aresult of current and future executive orders and legislative actions. The impact of those changes on us and potential effect on themedical device industry as a whole is currently unknown. Any changes to the PPACA are likely to have an impact on our results ofoperations, and may have a material adverse effect on our results of operations. We cannot predict what other healthcare programsand regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation inthe United States may have on our business. 36 Table of Contents 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 sellyour 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 theforeseeable 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 rejectingapproval 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 ortechnologies;·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, capitalcommitments 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 toobtain 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 themarket for companies in our industry in particular, have experienced price and volume fluctuations that have affected andcontinue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated ordisproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well asgeneral 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 andmay lose some or all of their investment. In the past, companies that have experienced volatility in the market price of their stockhave been subject to securities class action litigation. Securities litigation against us could result in substantial costs and divertour 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. 37 Table of Contents 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, registerfor sale, or indicate an intent to sell or purchase, shares of our common stock in the public market, it may have a material adverseeffect on the market price of our common stock. In particular, Robert W. Duggan is not subject to any contractual restrictions withus on his ability to sell or transfer our common stock, and these sales or transfers could create substantial declines in the price ofour securities or, if these sales or transfers were made to a single buyer or group of buyers, could contribute to a transfer of controlof 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 aggregateof $150.0 million of our common stock, preferred stock, depositary shares, warrants, debt securities or units. We may also issueshares of common stock or securities convertible into, exchangeable or exercisable for our common stock from time to time inconnection with financings, acquisitions, investments or otherwise. Any such issuances would result in dilution to our existingstockholders and could cause our stock price to fall. We may also sell shares or other securities at a price per share that is less thanthe price per share paid by existing investors, and investors purchasing shares or other securities in the future could have rightssuperior to existing stockholders.We do not know whether an active, liquid and orderly trading market will be maintained for our common stock and as aresult 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 commonstock is listed on The Nasdaq Capital Market, the market for our shares has demonstrated varying levels of trading activity. As aresult 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 thestock or at all. Further, an inactive market may also harm our ability to raise capital by selling additional common stock and mayharm our ability to enter into strategic collaborations or acquire companies or products by using our common stock asconsideration.Our common stock could be delisted from the Nasdaq Capital Market if we fail to regain compliance with Nasdaq listingrules.On July 30, 2018, we received a notice from Nasdaq indicating that we were not in compliance with the audit committeerequirements as set forth in Listing Rule 5605, which requires us to have at least three members of our audit committee. Nasdaq hasprovided 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 nationalsecurities exchange, our common stock may trade only on the over-the-counter market (the “OTC”). If our common stock were totrade on the OTC, the market price and liquidity of our common stock may decline because smaller quantities of shares wouldlikely 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 themfrom effecting transactions in our common stock, thus further limiting the liquidity of our common stock and potentially resultingin lower prices and larger spreads in the bid and ask prices for our common stock. A delisting from the Nasdaq Capital Marketcould 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 directorelections 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 thisAnnual 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. 38 Table of Contents Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting toobtain control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premiumover our stock price.Management currently beneficially holds a small percentage of our common stock. Other than their positions as directors orofficers, and the restriction on the stockholders being able to call a special meeting limited to holders of 15% or more of theoutstanding shares of common stock, our management will not be able to greatly influence corporate actions requiring stockholderapproval.Robert W. Duggan’s significant ownership position may deter or prevent efforts by other companies to acquire us, whichcould 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 asof 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 acquiredin a transaction that stockholders might otherwise deem favorable, including transactions in which our stockholders might realizea 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 hasbeen 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, accountingand other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance withthe Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the Nasdaq. The SEC andother regulators have continued to adopt new rules and regulations and make additional changes to existing regulations thatrequire our compliance.Stockholder activism, the current political environment, and the current high level of government intervention andregulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliancecosts and impact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and otherpersonnel have and will continue to devote a substantial amount of time to these compliance programs and monitoring of publiccompany 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, andfurther regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs tocomply with such compliance programs and rules. New laws and regulations as well as changes to existing laws and regulationsaffecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, and rules adoptedby the SEC and Nasdaq, will likely result in increased costs to us as we respond to their requirements. We are currently evaluatingand monitoring developments with respect to these rules and regulations, and we cannot predict or estimate the amount ofadditional 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 typesof insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverageor incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make itmore difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as ourexecutive officers. We are an “emerging growth company” under the JOBS Act as well as a “smaller reporting company”; as a result, wecannot 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, andwe may take advantage of certain exemptions from various reporting requirements that are applicable to other public companiesthat are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestationrequirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in ourperiodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executivecompensation and stockholder approval of any golden parachute payments not previously approved. We also qualify as a “smallerreporting company,” as defined in the Exchange Act, and so long as we remain a smaller reporting company, we benefit from andmay take advantage of scaled disclosure requirements. 39 Table of Contents We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If someinvestors find our common stock less attractive as a result, there may be a less active trading market for our common stock and ourstock price may be more volatile and it may be difficult for us to raise additional capital as and when we need it. Investors may beunable to compare our business with other companies in our industry if they believe that our reporting is not as transparent as othercompanies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results ofoperations 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-convertibledebt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as ofJune 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 publishabout us or our business. We do not have any control over these analysts. We currently have no analysts covering us and there canbe no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgradeour stock or change their opinion of our stock, our market price would likely decline. If one or more of these analysts ceasecoverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which couldcause 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 donot plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, atany time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as adividend. 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 bebeneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our currentmanagement 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 theeffect of delaying or preventing a change of control or changes in our management. These provisions could also make it difficultfor stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporateactions, 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 ofpreferred 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 notby written consent;·specify that special meetings of our stockholders can be called only by our board of directors, the chairman of ourboard of directors, any of our officers, or any stockholder holding at least fifteen percent (15%) of the voting power ofthe 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 ourstockholders, 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 outstandingshares of our voting stock, voting together as a single class, to amend provisions of our certificate of incorporation orour 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, eventhough less than a quorum. 40 Table of Contents These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management bymaking it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing themembers of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of ouroutstanding voting stock to engage in certain types of transactions with us. Item 1B. Unresolved Staff Comments None. Item 2. PropertiesWe lease approximately 15,700 square feet of premises located in Hayward, California, which is used for our corporateheadquarters and principal operating facility. The term of this lease is sixty-two (62) months and commenced on July 1, 2017. Wehave the right to extend this lease for five years upon written notice not more than twelve months nor less than nine months priorto 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, productliability, patent infringement, contract disputes, employment matters and other matters relating to the normal course of ourbusiness in addition to governmental and other regulatory investigations and proceedings. In addition, third parties may, fromtime 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”) requestingdocuments and other information in connection with an investigation into trading in our stock in advance of our September 2017financing announcement. According to documents received from the SEC, “This investigation is a non-public, fact-findinginquiry. We are [the SEC is] trying to determine whether there have been any violations of the federal securities laws. Theinvestigation 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 directorshave fully cooperated with the investigation.The results of legal proceedings and claims are inherently unpredictable. We do not believe any currently pending matterswill have a material adverse effect on our business based on our current understanding of such matters. Item 4. Mine Safety DisclosuresNot applicable. 41 Table of Contents Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is listed on The Nasdaq Capital Market and has been traded under the symbol “PLSE” since May 18,2016.Holders of RecordAs of February 28, 2019, there were approximately 11 stockholders of record of our common stock. We believe the actualnumber of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, butwhose shares are held in “street” name by brokers and other nominees. This number of holders of record also does not includestockholders whose shares may be held in trust by other entities. Dividend PolicyWe have never declared or paid any cash dividend on our common stock and have no present plans to do so. We intend toretain earnings for use in the operation and expansion of our business. Sales of Unregistered SecuritiesNone. 42 Table of Contents Performance GraphThe performance graph included in this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of PulseBiosciences, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth byspecific reference in such filing.The following graph shows a comparison from May 18, 2016 (the date our common stock commenced trading on the NasdaqCapital Market through December 31, 2018 of the cumulative total return for our common stock, the Nasdaq Composite Index andthe 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. 43 Table of Contents 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, ouraudited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected consolidatedstatement of operations data for the period from May 19, 2014 (inception) through December 31, 2014 and selected consolidatedbalance sheet data as of December 31, 2016, 2015 and 2014 are derived from our audited consolidated financial statements notincluded in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected forany future period. The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes includedelsewhere 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 $0.4 million, respectively, werereclassified from research and development costs to general and administrative costs. These changes did not impact loss fromoperations or net loss. These reclassifications are reflected in the table below.May 19, 2014(inception)throughYear Ended December 31,December 31,(in thousands, except per share amounts)20182017201620152014Revenue$ —$ —$ —$ —$ —Operating expenses:General and administrative20,045 15,503 3,415 1,621 43 Research and development17,253 9,646 5,506 2,181 26 Amortization of intangible assets665 665 665 666 111 Costs of business acquisitions — — — —120 Total operating expenses37,963 25,814 9,586 4,468 300 Other income (expense):Interest income446 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 percommon share — basic and diluted17,078 14,754 11,009 7,565 2,511 As of December 31,20182017201620152014Cash, cash equivalents and investments$59,583 $38,069 $16,395 $3,606 $7,009 Working capital57,254 36,268 15,647 3,337 6,866 Total assets70,640 49,821 26,314 14,325 17,896 Total liabilities4,306 3,826 1,016 660 1,821 Total stockholders' equity66,334 45,995 25,298 13,665 16,074 44 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis of our financial condition and results of operations together with ourconsolidated financial statements and the related notes thereto included in Item 8 under the heading “Financial Statements andSupplementary Data”. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Kcontains forward-looking statements that involve risks and uncertainties, including statements regarding our expected financialresults 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 notall forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectationsdisclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actualresults or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statementsthat we make. You should read the “Risk Factors” section of this Form 10-K for a discussion of important factors that could causeactual results to differ materially from the results described in or implied by the forward-looking statements contained in thefollowing discussion and analysis. We do not assume any obligation to update any forward-looking statements.OverviewWe are a clinical stage medical therapy company pursuing commercial introduction of our proprietary CellFX™ Systemutilizing our patent-protected Nano-Pulse Stimulation™ (NPS™) platform technology. With our proprietary CellFX System, wecan deliver a unique cell-focused effect on dysfunctional cells while preserving surrounding non-cellular tissue, a combinationthat may potentially lead to both improved efficacy and less collateral tissue damage. It also causes a process of immunogenic celldeath that may stimulate an immune response to the dysfunctional cells. We are currently conducting research and developmentactivities in pursuit of commercial applications for our NPS technology, but we have not yet commercialized or recognizedrevenue from our technology.Plan of OperationWe plan to establish ourselves as a medical therapy company with a local, non-thermal, and drug-free treatment platform thatinitiates cell death in targeted tissue by a process of cell signaling and also induces a systemic adaptive immune response to thetargeted tissue. In order to accomplish this, we plan to:·Improve our technology by continuing our research and product development efforts. We expect to developinterchangeable tissue applicators to target different tissue types that will leverage the novel characteristics of ourtechnology platform.·Further explore and understand the benefits of NPS technology platform with the objectives of broadening thecurrently planned cosmetic and therapeutic applications and identifying new applications. We anticipate that results ofour 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 expectwill increase our ability to deter competitors and position our company for favorable licensing and partneringopportunities.·Partner with medical or biomedical device companies for certain applications which we anticipate may accelerateproduct development and acceptance into target market areas and allow us to gain the sales and marketing advantagesof the distribution infrastructure.Critical Accounting Policies and Use of EstimatesThe following discussion and analysis of financial condition and results of operations is based upon our consolidatedfinancial statements, which have been prepared in conformity with accounting principles generally accepted in the United Statesof America. Certain accounting policies and estimates are particularly important to the understanding of our financial position andresults of operations and require the application of significant judgment by management or can be materially affected by changesfrom period to period in economic factors or conditions that are outside of the company’s control. As a result, these issues aresubject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine theappropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historicaloperations, future business plans and the projected financial results, the terms of existing contracts, trends in the industry andinformation available from other outside sources. 45 Table of Contents Long-Lived AssetsWe review long-lived assets, consisting of property and equipment and intangible assets, for impairment at each fiscal yearend 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 estimatedundiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimatedfuture cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fairvalue of the assets. Assets to be disposed of are separately presented in the consolidated balance sheet, reported at the lower of thecarrying amount or fair value less costs to sell, and are no longer depreciated.GoodwillWe record goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assetsand the identified intangible assets acquired. We review goodwill for impairment at least annually or whenever changes incircumstances indicate that the carrying value of the goodwill may not be recoverable based on the fair value of the reportingunits. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, goodwill is notconsidered impaired and no further testing is required. If further testing is required, we perform a two step-process. The first stepinvolves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of thereporting unit exceeds its fair value, the second step of the test is performed by comparing the carrying value of the goodwill in thereporting until to its implied fair value. An impairment charge is recognized for the excess of the carrying value of goodwill overits implied fair value. For the purpose of impairment testing, we have determined that it has one reporting until. To date, there hasbeen no impairment of goodwill. Stock-Based CompensationWe periodically issue stock options to officers, directors, employees and consultants for services rendered. Such issuancesvest 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 optiongrants, which are generally time vested, are measured at the grant date fair value and charged to operations on a straight-line basisover the vesting period. We estimate the grant date fair value of stock options, using the Black-Scholes option-pricing model on astraight-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 ofstock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates arecomplex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so thatthey are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense couldbe 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 yieldbased 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 publicoffering, we did not believe our historical exercise pattern was indicative of the pattern we would experience as a publicly-tradedcompany. We have consequently used the simplified method to calculate expected term, which is the average of the contractualterm and vesting period. We plan to continue using the simplified method until we have sufficient trading history as a publiclytraded company.Volatility. We determine the price volatility factor based on the historical volatilities of comparable public companies in asimilar industry. We intend to continue to consistently apply this process using the same or similar public companies until asufficient amount of historical information regarding the volatility of our own common stock share price becomes available, orunless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companieswhose 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 dividendpolicy. We currently do not expect to issue any dividends. 46 Table of Contents Income TaxesWe account for income taxes using the asset and liability method, whereby deferred tax assets and liability account balancesare determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured usingthe 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. Ifwe determine that we would be able to realize deferred tax assets in the future in excess of the recorded amount, an adjustment tothe deferred tax assets would be credited to operations in the period such determination was made. Likewise, should we determinethat 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 wouldbe 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 asprescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, “Accountingfor Uncertainty in Income Taxes.” The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustainedby the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, thenno 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 beutilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which we currentlyoperate or have operated in the past. We are not currently under examination by any tax authority.Segment and Geographical InformationWe operate and manage our business as one reportable and operating segment. Our Chief Executive Officer, who is the chiefoperating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluatingfinancial performance. Primarily all of our long-lived assets are based in the United States.Components of Results of OperationsOperating ExpensesWe generally recognize operating expenses as they are incurred in two general categories, general and administrative costsand research and development costs, as well as non-cash amortization of intangible assets. Our operating expenses also includenon-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, humanresources, 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 thefuture as we hire personnel and incur additional costs to support the expansion of our research and developmentactivities 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. Weexpect research and development costs to increase in the future as we initiate additional clinical trials, continuedevelopment and enhancement of our CellFX System and pursue commercial applications of our NPS technology.ReclassificationCertain items in prior period financial statements have been reclassified to conform to the presentation in the current periodfinancial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position. 47 Table of Contents Results of OperationsComparison of the Years ended December 31, 2018 and 2017Our consolidated statements of operations as discussed herein are presented below:Year EndedDecember 31,(in thousands)20182017$ ChangeRevenue$ —$ —$ —Operating expenses:General and administrative20,045 15,503 4,542 Research and development17,253 9,646 7,607 Amortization of intangible assets665 665 —Total operating expenses37,963 25,814 12,149 Other income (expense):Interest income446 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 AdministrativeGeneral 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 $20.0million 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 andexpenses and office supplies costs. Professional, consulting and insurance costs increased primarily as a result of increased costsincurred due to operations and reporting obligations as a public company, and increased legal costs related to our intellectualproperty and reincorporation from the State of Nevada to the State of Delaware. Compensation, travel and expenses, and officesupplies costs increased as a result of increased headcount in 2018. General and administrative expenses are expected to increasesubstantially during 2019 in connection with the buildout of additional operational infrastructure to support the anticipatedcommercialization of our CellFX System in the aesthetic dermatology market. Research and DevelopmentResearch 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-basedcompensation expense, $1.2 million of increased prototype expenses, $0.6 million of increased lab and office supplies, $0.4million of increased clinical trial expense, $0.4 million of increased consulting and outside services costs, $0.2 million ofincreased in travel expenses, and $0.2 million of increased depreciation expense. Stock-based compensation and compensationrelated costs increased a result of headcount increases. Prototype expenses increased as a result of the design and testing of theCellFX System which was introduced in the beginning of the fourth quarter of 2018. Lab, office supplies, and travel expensesincreased as a result of increased headcount. Clinical trial costs increased due to the Company’s clinical study of NPS technologyfor the treatment of sebaceous hyperplasia, basal cell carcinoma, warts, and other general benign lesions studies. Consulting andoutside services and lab supplies increased due to increased product development activities. Depreciation and amortizationexpense 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 clinicalstudy activities by initiating additional studies, continue development and enhancement of our CellFX System in preparation foradditional clinical trials. 48 Table of Contents Other Income (Expense)Other income (expense) increased by $0.2 million to $0.4 million in 2018 from $0.2 million due primarily to the increasedinterest income earned from higher interest rates earned on cash equivalent and investment balances.Comparison of the Years ended December 31, 2017 and 2016Our consolidated statements of operations as discussed herein are presented below:Year EndedDecember 31,(in thousands)20172016$ ChangeRevenue$ —$ —$ —Operating expenses:General and administrative15,503 3,415 12,088 Research and development9,646 5,506 4,140 Amortization of intangible assets665 665 —Total operating expenses25,814 9,586 16,228 Other income:Interest income247 68 179 Total other income247 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 AdministrativeGeneral and administrative expenses increased by $12.1 million to $15.5 million in 2017, from $3.4 million in 2016 dueprimarily to $8.5 million of increased stock-based compensation expense, $1.9 million of increased professional and consultingcosts, $0.9 million of increased compensation costs, $0.2 million of increased insurance costs, $0.2 million of increased officesupplies 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 tooptions and restricted stock units, respectively, granted during 2017 and due to the acceleration of former board of director stockoptions. Headcount increases during 2017 also contributed to increased stock-based compensation as well as compensation costsmore broadly. Professional, consulting and insurance costs increased primarily as a result of increased costs incurred due tooperations and reporting obligations as a public company, and increased legal costs related to our intellectual property. Theincrease in office supplies costs was due to the Company’s move to new office space in the third quarter of 2017. Travel expensesincreased as a result in the increase in clinical trials being conducted in 2017. Depreciation and amortization expense increaseddue to increased leasehold improvements purchased and installed in our Hayward facility around mid-2017.Research and DevelopmentResearch and development expenses increased by $4.1 million to $9.6 million in 2017, from $5.5 million in 2016. Theincrease was due primarily to $1.6 million of increased stock-based compensation expense, $1.2 million of increasedcompensation costs, $0.9 million of increased clinical trial expense, $0.3 million of increased consulting and outside servicescosts, $0.2 million of increased depreciation and amortization expense and $0.1 million of increased lab supplies, partially offsetby $0.1 million of decreased sponsored research expenses. Stock-based compensation increased principally due to the higherBlack-Scholes values and grant date intrinsic value ascribed to options and restricted stock units, respectively, granted during2017. Compensation costs increased as a result of headcount increases. Clinical trial costs increased due to the Company’s clinicalstudy of NPS platform for the treatment of seborrheic keratosis that was initiated and conducted during 2017. Consulting andoutside 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 andinstalled in our Hayward facility around mid-2017. Sponsored research expenses decreased mainly due to the timing of sponsoredresearch activities conducted by Old Dominion University Research Foundation (“ODURF”) during 2017 compared to 2016. 49 Table of Contents Interest IncomeInterest income increased by $0.2 million from $0.1 million in 2017 due primarily to the increased interest income earned onhigher cash equivalent and investment balances as a result of the proceeds received from the issuance of equity securities.Liquidity and Capital ResourcesTo date, we have not generated any revenues from product sales. Since inception, we have funded our business plan throughthe issuance of equity securities and grants from governmental agencies. Over the next few years, we intend to invest in researchand 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 costsassociated 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 ourcommon stock, par value $0.001 per share, at a price per share of $12.57 per share, for net proceeds of approximately $44.8million.Our consolidated statements of cash flows as discussed herein are presented below:Year Ended December 31,(in thousands)201820172016Net cash used in operating activities$(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 monthsfrom the filing date of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018; however, we plan to raiseadditional capital in the future. These expectations are based on our current operating and financing plans which are subject tochange. Until we are able to generate sustainable product revenues at profitable levels, we expect to finance our future cash needsthrough public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such additionalfunds may not be available on terms acceptable to us or at all, particularly in light of recent market conditions. If we raise funds byissuing equity or equity-linked securities, the ownership of our stockholders will be diluted and the holders of new equitysecurities may have priority rights over our existing stockholders. If adequate funds are not available, we may be required to curtailoperations significantly or to obtain funds by entering into agreements on unattractive terms. Our inability to raise capital couldhave a material adverse effect on our business, financial condition and results of operations.Operating ActivitiesDuring 2018, we used cash of $23.9 million in operating activities. The difference between cash used in operating activitiesand net loss consisted primarily of stock-based compensation, depreciation and amortization, increased accounts payable andaccrued 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 activitiesand 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 expensesand 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 activitiesand 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 ActivitiesDuring 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 ofinvestments and $0.3 million cash used in purchase of property and equipment. 50 Table of Contents During 2017, we used cash of $23.0 million for investing activities for the purchase of investments, leasehold improvementsand equipment.During 2016, we used cash of $14.4 million for investing activities for the purchase of investments and office and laboratoryequipment.Financing ActivitiesDuring 2018, cash provided from financing activities was $45.5 million due to net proceeds from our rights offering and theissuance 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 privateplacements 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 initialpublic offering, after deducting underwriting discounts and commissions and other offering costs. Contractual ObligationsFrank Reidy Research Center AgreementAs provided for in the license agreement with Old Dominion University Research Foundation (“ODURF”) and EasternVirginia Medical School, effective on November 6, 2014, we sponsored certain approved research activities at ODURF’s FrankReidy Research Center under a sponsored research agreement. In June 2017, we agreed to sponsor $0.7 million in research fromJuly 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 reasonablesatisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principalinvestigator may transfer funds with the budget as needed with our approval so long as the obligations of ODURF under the taskorder and statement of work remain unchanged and unimpaired. During the years ended December 31, 2018, 2017, and 2016, weincurred costs relating to the sponsored research agreement equal to $0.7 million, $0.8 million and $0.9 million, respectively. Asof 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 andEastern Virginia Medical School matching funds made available to those researchers by the Virginia Biosciences Health ResearchCorporation. Our sponsorship affords access to certain intellectual property, if any, developed during the project. As of December31, 2018, there was approximately $0.1 million remained payable under this agreement. Operating LeaseWe leased approximately 4,300 square feet of corporate offices and research facilities in Burlingame, California, at a monthlycost 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 feetlocated in Hayward, California. 51 Table of Contents The lease commenced on July 1, 2017 and expires in August 2022, with an option to extend the lease term for an additionalfive 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 futureminimum lease payment is reduced by amortization of tenant improvement allowance over the life of the lease. An offsettingamount was recorded as leasehold improvement at the inception of the lease term. Leasehold improvements are depreciated overthe lease term. The following table summarizes our contractual obligations as of December 31, 2018 (in thousands):Payments Due by Period(in thousands)TotalLess Than 1 Year1 to 3 Years3 to 5 YearsMore Than 5YearsRent Obligation$2,056 $536 $1,128 $392 $ —Off-Balance Sheet ArrangementsAt December 31, 2018, we did not have any transactions, obligations or relationships that could be considered off-balancesheet arrangements.In the ordinary course of business, we enter into standard indemnification arrangements. Pursuant to these arrangements, weindemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party inconnection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party withrespect to its technology, or from claims relating to our performance or non-performance under a contract. The maximum potentialamount of future payments we could be required to make under these agreements is not determinable because it involves claimsthat may be made against us in future periods, but have not yet been made. To date, we have not incurred costs to defend lawsuitsor 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 toindemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited byapplicable law. In addition, we may have obligations to hold harmless and indemnify third parties involved with our fundraisingefforts 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 intobetween us and such third parties in connection with such fundraising efforts. No liability associated with such indemnificationagreements has been recorded as of December 31, 2018.JOBS Act Accounting ElectionUnder the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequentto the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected notto avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new orrevised accounting standards as other public companies that are not emerging growth companies.Trends, Events and UncertaintiesResearch and development of new technologies are, by their nature, unpredictable. Although we undertake developmentefforts with commercially reasonable diligence, there can be no assurance that the net proceeds from our financings will besufficient to enable us to develop our technology to the extent needed to generate future sales to sustain our operations. If we donot continue to have enough funds to sustain our operations, we will consider other options to continue our path tocommercialization of NPS technology platform, including, but not limited to, additional financing through follow-on stockofferings, 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 sufficientto support our operations. Even if we are able to generate revenues, there can be no assurances that we will be able to achieveprofitability or positive operating cash flows. There can be no assurances that we will be able to secure additional financing in thefuture on acceptable terms or at all. If cash resources are insufficient to satisfy our ongoing cash needs, we would be required toscale back or discontinue our technology and product development programs, or obtain funds, if available, although there can beno assurances, through the sale, licensing or strategic alliances that could require us to relinquish rights to our technology andintellectual property, or to curtail, suspend or discontinue our operations entirely. 52 Table of Contents 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 possiblethat new trends or events may develop in the future that could have a material effect on our financial condition. 53 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market RiskWe are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impactour financial position due to adverse changes in financial market prices and rates.Interest Rate and Market RiskOur exposure to interest rate and market risk is confined to our cash, cash equivalents and investments, all of which havematurities of less than two years. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs andfiduciary control of our cash and investments. We also seek to maximize income from our investments without assumingsignificant risk. To achieve our goals, we maintain a portfolio of cash equivalents and investments in a variety of securities of highcredit quality. The securities in our investment portfolio are not leveraged, are classified as available-for-sale, and are, due to theirrelatively short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of theshort-term maturities of our investments, we do not believe that a hypothetical 10% change in market interest rates would have amaterial negative impact on the value of our investment portfolio.Foreign Exchange RiskThe majority of our expense and capital purchasing activities are transacted in U.S. dollars. We do not have any internationaloperations. We may incur foreign exchange gains or losses in the future. 54 Table of Contents Item 8. Financial Statements and Supplementary DataPULSE BIOSCIENCES, INC.Index to Consolidated Financial Statements Page NumberCONSOLIDATED 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 Statements62 55 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders ofPulse Biosciences, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of Pulse Biosciences, Inc. (as defined in Note 2 to the consolidatedfinancial statements) (the “Company”) as of December 31, 2017, the related consolidated statements of operations andcomprehensive loss, and cash flows, for each of the two years in the period ended December 31, 2017, and stockholders’ equity forthe year ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). Inour opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company asof December 31, 2017, and the results of their operations and their cash flows for each of the two years in the period endedDecember 31, 2017, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered withthe Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect tothe Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to erroror fraud. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financialreporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not forthe 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 atest basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation 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, CaliforniaMarch 16, 2018 56 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors of Pulse Biosciences, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of Pulse Biosciences, Inc. and subsidiaries (the “Company”) as ofDecember 31, 2018, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cashflows, for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In ouropinion, 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 accountingprinciples generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on theCompany's financial statements based on our audit. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to erroror fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financialreporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not forthe 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 toerror 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 accountingprinciples used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audit provides a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPSan Jose, California March 14, 2019 We have served as the Company's auditor since 2018. 57 Table of Contents PULSE BIOSCIENCES, INC.Consolidated Balance Sheets(in thousands, except par value) December 31, 2018 2017ASSETS 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 – 20,593 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 $49,821 See accompanying notes to the consolidated financial statements. 58 Table of Contents PULSE BIOSCIENCES, INC.Consolidated Statements of Operations and Comprehensive Loss(in thousands, except per share data)Year Ended December 31,201820172016Revenue$ —$ —$ —Operating expenses:General and administrative20,045 15,503 3,415 Research and development17,253 9,646 5,506 Amortization of intangible assets665 665 665 Total operating expenses37,963 25,814 9,586 Other income (expense):Interest income446 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 tax50 (44)(7)Comprehensive loss$(37,495)$ (25,611)$ (9,525)Net loss per shareBasic 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 diluted17,078 14,754 11,009 See accompanying notes to the consolidated financial statements. 59 Table of Contents 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 EquityBalance, December 31, 2016 13,315 $13 $37,898 $(7) $(12,606) $25,298 Shares issued upon closing of privateplacements, 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 stockoptions 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 offeringat $12.57 per share for cash, net of issuancecost of $213 3,581 4 44,782 — — 44,786 Issuance of shares upon exercise of warrants 24 — — — — —Issuance of shares upon exercise of stockoptions 145 — 498 — — 498 Issuance of shares under employee stockpurchase plan 24 — 327 — — 327 Stock-based compensation expense — — 12,338 — — 12,338 Tax payments related to shares withheld forvested 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. 60 Table of Contents PULSE BIOSCIENCES, INC.Consolidated Statements of Cash Flows(in thousands) Year Ended December 31, 2018 2017 2016Cash 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 ofissuance costs of $199 — 34,843 —Proceeds from issuance of common stock from initial public offering, net ofissuance 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 issuancecosts 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 initialpublic offering $ — $ — $627 Equipment purchased in accrued expenses 33 38 18 See accompanying notes to the consolidated financial statements. 61 Table of Contents PULSE BIOSCIENCES, INC.Notes to Consolidated Financial Statements 1. Description of the BusinessPulse Biosciences, Inc., is a clinical stage medical therapy company pursuing commercial introduction of its proprietaryCellFX™ System utilizing the Company’s proprietary Nano-Pulse Stimulation™ (NPS™) platform technology. The Company’sCellFX System provides a novel, precise, non-thermal cellular treatment technology delivering nanosecond duration energy pulsesthat impact cells in treated tissue while sparing surrounding non-cellular tissue. The novel characteristics of the Company’sCellFX 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 Stateof 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. TheCompany has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will needto raise additional capital to finance its operations. However, there can be no assurances that the Company will be able to obtainadditional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements. 2. Summary of Significant Accounting Policies Principles of ConsolidationThe accompanying consolidated financial statements are prepared in accordance with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States SecuritiesExchange Commission (the “SEC”). The consolidated financial statements include the financial statements of the Company andits wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affectthe amounts reported in the financial statements and accompanying notes to the financial statements. Estimates include, but arenot limited to, the valuation of investments, clinical trial accruals, the valuation and recognition of stock-based compensation anduseful lives assigned to long-lived assets. Actual amounts could differ from these estimates.Concentration of Credit RiskFinancial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cashequivalents and investments. The Company places its cash equivalents and investments with high credit quality financialinstitutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks mayexceed the amount of insurance provided on such deposits. The Company has not experienced any losses since inception.Fair Value of Financial InstrumentsThe Company believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses andother current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of suchinstruments.Cash, Cash Equivalents and InvestmentsThe Company considers all highly liquid investments purchased with an original maturity of three months or less to be cashequivalents. The Company has designated all investments as available-for-sale and therefore, such investments are reported at fairvalue, 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. Premiumand discount amortization is included in other income, net. Realized gains and losses, as well 62 Table of Contents as interest income, on available-for-sale securities are also included in other income, net. The Company includes all of itsavailable-for-sale securities in current assets.All of the Company’s investments are subject to a periodic impairment review. The Company recognizes an impairment losswhen a decline in the fair value of its marketable investments below the cost basis is judged to be other-than-temporary. Factorsconsidered in determining whether a loss is temporary include the length of time and extent to which the marketable investmentsfair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the lossrelated to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security and whether ornot the Company will be required to sell the security before the recovery of its amortized cost. No impairment losses were incurredduring the periods presented.Property and EquipmentLeasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated usefullife. Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging fromthree to five years.Intangible AssetsThe Company’s intangible assets consist of acquired patents and licenses, which are being amortized over their estimateduseful lives of twelve years.Long-Lived AssetsThe Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment duringeach fiscal year or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fairvalues. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to theestimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during theperiods presented.GoodwillThe Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the nettangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting untillevel at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill may not berecoverable. To date, there has been no impairment of goodwill.Stock-Based CompensationThe Company recognizes the cost of stock-based compensation in the financial statements based upon fair value. The fairvalue of stock options is determined as of the grant date using the Black-Scholes option pricing model. The fair value of restrictedstock and restricted stock unit (RSU) awards is determined based on the number of units granted and the closing price of theCompany’s common stock on the grant date. The fair value of each purchase under the employee stock purchase plan (ESPP) isestimated at the beginning of the offering period using the Black-Scholes option pricing model. The Company’s determination ofthe fair value of equity-settled awards is impacted by the price of the Company's common stock as well as changes in assumptionsregarding a number of complex and subjective variables. These variables include, but are not limited to, the expected term thatawards will remain outstanding, expected common stock price volatility over the term of the awards, risk-free interest rates andexpected dividends. The fair value of an award is recognized over the period during which service is required to be performed inexchange 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 toperiodic adjustments as the underlying equity instruments vest. The fair value of these equity instruments are expensed over theservice period.Estimates of the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholesoption pricing model, are affected by assumptions regarding a number of complex variables. Changes in the assumptions canmaterially affect the fair value of the award and ultimately how much stock-based compensation expense is recognized. Theseinputs are subjective and generally require significant analysis and judgment to develop. The Company determines the volatilityfactor based on the historical volatilities of comparable public companies in similar industries. The risk-free interest rate is basedon the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected 63 Table of Contents term of the equity-settled award. For all stock options granted to date, the Company used the simplified method to calculate theexpected term, which is the average of the contractual term and vesting period. Prior to the Company’s initial public offering, thefair value of common stock was determined by reference to either recent or anticipated cash transactions involving the sale of theCompany’s common stock. The Company recognizes the fair value of stock-based compensation costs in general and administrative costs and inresearch and development costs, as appropriate, in the Company’s consolidated statements of operations.Research and Development CostsResearch and development costs consist primarily of compensation costs, fees paid to consultants and outside serviceproviders and organizations (including university research institutes), costs associated with clinical trials, development prototypesand other expenses relating to the acquisition, design, development and testing of the Company’s product candidates. Researchand development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completionof contracted work, or other information indicates that a different expensing schedule is more appropriate.Patent CostsThe Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with thesuccessful development of one or more commercially viable products based on the Company’s research efforts and any relatedpatent 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, patentcosts totaled $0.6 million, $0.8 million and $0.5 million, respectively. Patent costs are included in general and administrativecosts in the consolidated statements of operations and comprehensive loss.Income TaxesThe Company accounts for income taxes under an asset and liability approach for financial accounting and reporting forincome taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differencesbetween 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 berealized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of itsrecorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination wasmade. 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 losseshave yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which theCompany 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 statementrecognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income taxreturns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustainedby the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, thenno benefits of the position are recognized. At December 31, 2018 and 2017, the Company had not recorded any liability foruncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of incometax expense.Comprehensive LossComprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Companydisplays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.Net Loss per ShareThe Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of commonstock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive 64 Table of Contents common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock andcommon 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 andrestricted stock units outstanding are anti-dilutive.The following outstanding stock options, warrants and restricted stock units to purchase common stock were excluded fromthe computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutiveeffect:Year Ended December 31,201820172016Common stock warrants213,485 249,709 874,610 Common stock options2,956,687 2,598,659 1,229,355 Restricted stock units222,606 229,774 —Total3,392,778 3,078,142 2,103,965 Segment and Geographical InformationThe Company operates and manages its business as one reportable and operating segment. The Company’s Chief ExecutiveOfficer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocatingresources and evaluating financial performance. All of the Company’s assets are based in the United States.ReclassificationCertain items in prior period financial statements have been reclassified to conform to the presentation in the current periodfinancial statements. Such reclassifications did not impact the Company's previously reported net loss or financial position.Recent Accounting PronouncementsDuring May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts withCustomers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promisedgoods or services to customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP whenit becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, theFASB issued an update to defer the effective date of this update to periods beginning after December 15, 2017. This updatedstandard became effective for the Company in the first quarter of fiscal year 2018. Since the Company has not recognized orgenerated 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 forleases. 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 theincome statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019. The Company generallydoes not finance purchases of equipment or other capital, but does lease its facilities. The adoption of the new standard will requirethe recognition of a right-of-use asset and a lease obligation for the Company’s leases (See Note 12 – Commitments andContingencies). 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 generallyconsistent with the current lease accounting guidance. The Company will elect the package of practical expedients permittedunder the transition guidance and as such, the adoption of this ASU will not change the classification of any of the Company’sleases. 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. 65 Table of Contents 3. Investments and Fair Value of Financial InstrumentsInvestmentsThe Company’s investments have been classified and accounted for as available-for-sale. The Company’s investmentsconsisted of the following (in thousands):December 31, 2018CostGross UnrealizedGainsGross UnrealizedLossesFair ValueU.S. Treasury securities$8,481 —(1)$8,480 Total assets measured at fair value$8,481 $—$(1)$8,480 December 31, 2017CostGross UnrealizedGainsGross UnrealizedLossesFair ValueCommercial paper$7,216 $—$(6)$7,210 Corporate bonds19,524 —(33)19,491 Asset-backed securities7,994 —(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,Investments20182017Due in one year$8,480 $30,096 Due in one to two years —4,587 Total$8,480 $34,683 Fair Value of Financial InstrumentsThe Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes the inputsto 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 hasthe ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include money marketfunds.Level 2 - Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability orindirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputsinclude 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 reportingentity to develop its own assumptions. The Company did not classify any of its investments within Level 3 of the fair valuehierarchy.The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis (in thousands):December 31, 2018AssetsClassificationLevel 1Level 2Level 3TotalMoney market fundsCash and cash equivalents$50,703 ——$50,703 U.S. Treasury SecuritiesInvestments—8,480 —8,480 Total assets measured at fair value$50,703 $8,480 $—$59,183 66 Table of Contents December 31, 2017AssetsClassificationLevel 1Level 2Level 3TotalMoney market fundsCash and cash equivalents$2,758 $—$—$2,758 Commercial paperInvestments—7,210 —7,210 Corporate bondsInvestments—19,491 —19,491 Asset-backed securitiesInvestments—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 marketableinvestments. During the year ended December 31, 2018 and 2017, the Company did not have any transfers between Level 1, Level2 or Level 3 of the fair value hierarchy. Additionally, the Company did not have any financial assets and liabilities measured atfair value on a non-recurring basis as of December 31, 2018 or December 31, 2017.4. Property and Equipment, NetProperty and equipment, net consisted of the following (in thousands): December 31,20182017Leasehold improvements$2,248 $2,257 Laboratory equipment518 484 Furniture, fixtures and equipment248 231 Software118 79 Construction in progress33 —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 andits 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 $0.1million, respectively. 5. Intangible Assets, NetIntangible assets primarily consist of a license to utilize certain patents, know-how and technology relating to theCompany’s NPS for biomedical applications acquired from Old Dominion University Research Foundation (“ODURF”), EasternVirginia Medical School, and the University of Southern California. In addition, the Company entered into a Sponsored ResearchAgreement with Old Dominion University’s Frank Reidy Research Center for Bioelectrics, a leading research organization in thefield, which includes certain intellectual property rights arising from the research.Intangible assets, net consisted of the following (in thousands):December 31,20182017Acquired patents and licenses$7,985 $7,985 Less: Accumulated amortization(2,772)(2,107)$5,213 $5,878 67 Table of Contents A schedule of the amortization of intangible assets for the five years ending December 31, 2019 through 2023 and thereafteris as follows (in thousands):Year Ending December 31:2019$665 2020665 2021665 2022665 2023665 Thereafter1,888 $5,213 6. GoodwillIn 2014, the Company acquired three companies (the “acquisitions”) for aggregate consideration of $5.5 million. Inaccordance with ASC Topic 805, Business Combinations, the Company recorded goodwill of $2.8 million in connection with theacquisitions 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 thecarrying 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 ofimpairment at such date.7. Accrued ExpensesAccrued expenses consisted of the following (in thousands):December 31,20182017Compensation expense$938 $685 Accrued clinical156 21 Professional fees274 211 Supplies53 65 Other —52 $1,421 $1,034 8. Stockholders’ Equity and Stock-Based CompensationPreferred StockThe Company has authorized a total of 50,000,000 shares of preferred stock, par value $0.001 per share, none of which wereoutstanding at December 31, 2018 and 2017. The Company’s Board of Directors has the authority to issue preferred stock and todetermine the rights, preferences, privileges, and restrictions, including voting rights, without any further vote or action by theCompany’s stockholders.Common StockThe Company has authorized a total of 500,000,000 shares of common stock, par value $0.001 per share.Initial Public OfferingDuring May 2016 through June 2016, the Company closed its initial public offering (“IPO”), whereby the Company sold5,749,846 shares of common stock at $4.00 per share. The Company received net proceeds of approximately $20.3 million fromthe IPO, including proceeds from the exercise of the overallotment option granted to the underwriters, net of underwritingdiscounts and commissions and other offering costs. 68 Table of Contents Private PlacementsDuring February 2017, the Company entered into a securities purchase agreement, pursuant to which the Company, in aprivate placement, issued and sold an aggregate of 819,673 shares of the Company’s common stock, par value $0.001 per share, ata 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 towhich 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 OfferingOn October 25, 2018, the Company commenced a rights offering pursuant to which stockholders of record as of November19, 2018, were issued, at no charge, one subscription right for each share of common stock then outstanding. Each right entitledthe 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 ofcommon stock that remained unsubscribed at the expiration of the Rights Offering, subject to the availability of shares and a prorata 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 3,581,148shares of the Company’s common stock were issued and sold in the Rights Offering for net proceeds of approximately $44.8million. Robert W. Duggan, the Company’s Chairman of the Board of Directors and the beneficial owner of approximately 35% ofthe Company’s outstanding common stock prior to the Rights Offering, participated in the Rights Offering and purchased anaggregate of 3,146,226 shares for an additional investment of approximately $39.5 million.Common Stock WarrantsIn connection with a private placement offering of the Company’s shares of common stock, par value $0.001 per share in2014, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its commonstock at a price of $2.67 per share (the “Private Placement Warrants”). The Private Placement Warrants are exercisable for a periodof 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 ascompensation to its underwriters, as representatives of the underwriters of its initial public offering to purchase a total of 574,985shares of its common stock at a price of $5.00 per share (“the IPO Warrants”). The IPO Warrants are exercisable for a period of fiveyears. 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: WeightedAverageWeightedRemainingNumber ofAverageContractualSharesExercise PriceLife (in Years)Warrants outstanding at December 31, 2017249,709 $4.14 3.56 Issued —Exercised(36,224)5.00 Expired/terminated —Warrants outstanding and exercisable at December 31, 2018213,485 $4.00 2.37 During the year ended December 31, 2018, warrants to purchase 36,224 shares of common stock were net exercised, resultingin 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. 69 Table of Contents Equity Plans 2017 Equity Incentive Plan and 2017 Inducement Equity Incentive PlanThe Board of Directors (the “Board”) of the Company previously adopted, and the Company’s stockholders approved, theCompany’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 anyparent or subsidiary of the Company, as the Compensation Committee of the Board may determine. Subject to an annual evergreenincrease and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of theCompany’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under theCompany’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), and shares reserved but not issued pursuant to outstandingequity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be addedto the shares of common stock available for issuance under the 2017 Plan. The 2017 Plan is administered by the Board’sCompensation Committee. ​Effective January 1, 2019, the number of shares of common stock available under the 2017 Planincreased by 823,716 shares pursuant to the evergreen provision of the 2017 Plan. Pursuant to the 2017 Plan, the 2019 shareincrease is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December31 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 grantedunder 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 stockoptions, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its termsare 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 tenyears and have variable vesting provisions. New hire grants generally vest 25% upon the first anniversary of the grant and 1/48thmonthly thereafter, over the subsequent 36 months. Equity-based awards issued under the Inducement Plan are only issuable toindividuals not previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’sadoption 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 theopportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Companycommon 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, theBoard determined not to increase the number of shares of common stock available under the 2017 ESPP pursuant to the evergreenprovision of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision isdetermined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of theimmediately 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 commonstock remained available for issuance under the 2017 ESPP. 70 Table of Contents A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the year endedDecember 31, 2018 is presented below: WeightedWeightedAverageAverageRemainingNumber ofExerciseContractualSharesPriceLife (in Years)Balances - December 31, 20172,598,659 $16.88 8.2 Options granted657,375 15.18 Options exercised(144,508)3.44 Options canceled(147,839)19.04 Options expired(7,000)19.99 Balances - December 31, 20182,956,687 $17.04 7.6 Stock options exercisable at December 31, 20181,513,617 $15.70 6.6 The exercise prices of stock options outstanding and exercisable are as follows at December 31, 2018: Options OutstandingOptions ExercisableWeighted averageNumberremaining contractualWeighted averageNumberWeighted averageExercise Priceoutstandinglife (in years)exercise pricevestedexercise price$2.67 - $4.28732,842 6.0$ 3.84579,735 $ 3.79$4.67 - $7.55218,359 7.75.27 105,633 5.42 $11.00 - $16.52471,375 9.613.49 53,634 14.71 $19.35 - $30.991,534,111 7.726.12 774,615 26.08 2,956,687 7.6$ 17.041,513,617 $ 15.70The tables above exclude 42,500 performance stock options granted during the year ended December 31, 2018 for whichthe 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 $1.8million, $3.8 million, and $0, respectively.The fair value of employee stock options was estimated using the Black-Scholes option-pricing model utilizing thefollowing assumptions:Year Ended December 31,201820172016Expected term in years5.3 - 6.10.4 - 6.16.1Expected volatility70%70% - 90%80%Risk-free interest rate2.6 - 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 and2016, calculated pursuant to the Black-Scholes option-pricing model, was $6.4 million, $26.8 million, and $1.2 million,respectively. 71 Table of Contents The fair value of ESPP was estimated using the Black-Scholes option-pricing model utilizing the following assumptions: Year Ended December 31,201820172016Expected term in years0.5 - 1.00.5 - 1.3—Expected volatility70%95%—Risk-free interest rate1.9% - 2.5%1.1% - 1.2%—Dividend yield———Total stock-based compensation expense consisted of the following (in thousands):Year Ended December 31,201820172016General and administrative$9,004 $9,136 $674 Research and development3,334 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 closingprice of the Company’s common stock as of the grant date. The estimated fair value of RSUs is recognized on a straight-line basisover the requisite service period. During 2017, the Company granted 160,974 RSUs all of which vested pursuant to which noshares were issued, during June 2018. Additional paid in capital was reduced by $0.1 million for tax payments related to shareswithheld in connection with the vesting of the RSUs. The stock-based compensation expense related to these RSUs wasapproximately $2.1 million and $2.9 million during the years ended December 31, 2018 and 2017, respectively. As of December31, 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% onJune 1, 2019 with the remaining 50% vesting on June 1, 2021. In the event of a change in control, these RSUs vest 100%. Thestock-based compensation expense recorded in 2018 and 2017 related to these RSUs was approximately $0.4 million and $0.1million, respectively. As of December 31, 2018, there was $0.9 million of unrecognized compensation expense related to theseRSUs.During November 2017, the Board of Directors of the Company accepted resignations of certain members of its board ofdirectors 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-basedcompensation arrangements, which is expected to be recognized over a weighted average period of 2.3 years. 9. Research Grants and AgreementsSponsored Research AgreementThe 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 forthin the applicable task order. During the years ended December 31, 2018, 2017 and 2016, the Company agreed to sponsor $0.8million, $0.7 million and $1.0 million, respectively, in research during the subsequent 12-month period to be funded throughmonthly payments made upon ODURF certifying, to the Company’s reasonable satisfaction, that ODURF has met its obligationspursuant to the specified task order and statement of work. The principal investigator may transfer funds with the budget as neededwithout the Company’s approval so long as the obligations of ODURF under the task order and statement of work remainunchanged 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 toresearchers affiliated with ODURF and Eastern Virginia Medical School matching funds made available to those 72 Table of Contents researchers by the Virginia Biosciences Health Research Corporation. The Company’s sponsorship affords access to certainintellectual property, if any, developed during the project. As of December 31, 2018, there was approximately $0.1million 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 $0.7million, $0.8 million and $0.9 million, respectively. 10. Income TaxesThe 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 andliabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of theCompany’s deferred tax assets at December 31, 2018 and 2017 are summarized below (in thousands):December 31,20182017Temporary differences$111 $36 Credits5,330 1,536 Stock compensation2,630 3,067 Net operating loss carryforwards15,365 7,715 Total deferred tax assets before valuation allowance23,436 12,354 Valuation allowance(22,696)(11,491)Total deferred tax assets after valuation allowance740 863 Technology deferred tax liability(740)(863)Net deferred tax assets$ —$ —In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not thatsome portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon theCompany attaining future taxable income during the periods in which those temporary differences become deductible. AtDecember 31, 2018 and 2017, management was unable to determine that it was more likely than not that the Company’s deferredtax 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 thatreceive 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 statutorytax rate and the effective tax rate for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31,201820172016U.S. federal statutory tax rate(21.0)%(35.0)%(35.0)%Valuation allowance28.0 23.0 42.0 Tax reform(2.0)18.0 —Permanent differences2.0 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 after2034. At December 31, 2018, the Company had approximately $1.4 million and $1.2 million of federal and California R&Dcredits, respectively. The federal R&D credits begin to expire after 2035 and the California R&D credits have an indefinitecarryforward period. 73 Table of Contents These net operating loss carryforward and research and development credits amounts have full valuation allowances againstthem due to the remoteness of their expected utilization.The Company’s activity related to unrecognized tax benefits are summarized below (in thousands):December 31,20182017Balance 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 period365 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 twelvemonths due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognitionand measurement considerations related to the results of published tax cases or other similar activities, the Company does notanticipate 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 theCompany 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 containsseveral key tax provisions that affected the Company, including a reduction of the corporate income tax rate to 21% effectiveJanuary 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 theCompany’s deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, IncomeTax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amountsduring a measurement period not to extend beyond one year of the enactment date. As a result, the Company previously provideda 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 onthe Compnay’s deferred tax balances, ASC 740 “Income Taxes” (“ASC 740”) required the re-measurement of the Company’sdeferred tax balances as of the enactment date of the Tax Act, based on the rates at which the balances are expected to reverse inthe future. The re-measurement of the Company’s deferred tax balances resulted in a net reduction in deferred tax assets of $4.7million offset with a corresponding adjustment to the valuation allowance. In the fourth quarter of 2018, the Company completedits 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, 2017under Internal Revenue Code Sections 382 and 383, and management expects that the Company’s ability to use its net operatingloss carryforwards may be limited in future periods.11. Related Party TransactionsKenneth A. Clark, a director of the Company since November 2017, is a member of the law firm of Wilson Sonsini Goodrichand 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 ofoperations for legal services rendered by WSGR totaling approximately $1.2 million and $0.7 million, respectively. During theyear ended December 31, 2018, the Company capitalized approximately $0.1 million for legal expenses incurred in connectionwith 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 sharesof 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. Atthe time of transaction, Robert W. Duggan, the Company’s Chairman of the Board of Directors and the 74 Table of Contents beneficial owner of approximately 35% of the Company’s then outstanding common stock prior to the rights offering. After givingeffect to the rights offering, Mr. Duggan was the beneficial owner or approximately 44% of the Company’s outstanding stock as ofDecember 31, 2018.MDB Capital Group, LLC (“MDB”) provided investment banking, executive recruiting and intellectual propertymanagement services to the Company. The Company’s former Chairman of the Board, Robert Levande, was a Senior ManagingDirector of MDB throughout his tenure on the Company’s Board. During the year ended December 31, 2016, the Companyincurred $0.1 million for services rendered by MDB with respect to intellectual property management. The Company did not incurany 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 inunderwriting discounts, $0.2 million in unaccountable expense reimbursements and warrants valued in the aggregate of $1.4million. 12. Commitments and ContingenciesOperating LeasesThe 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 rentablesquare feet located in Hayward, California. The lease commenced on July 1, 2017 and expires in August 2022, with an option toextend the lease term for an additional five years. Under the terms of the lease agreement, the landlord provided an allowance fortenant improvements in the amount of $2.1 million, which was recorded as deferred rent at the inception of the lease term. Rentexpense associated with the future minimum lease payment is reduced by amortization of tenant improvement allowance over thelife of the lease. An offsetting amount was recorded as leasehold improvement at the inception of the lease term. Leaseholdimprovements 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 (inthousands):Year Ending December 31:2019$536 2020554 2021574 2022392 Thereafter —$2,056 IndemnificationThe Company and certain directors have received subpoenas from the Securities and Exchange Commission requestingdocuments and other information in connection with an investigation into trading in the Company’s stock in advance of theCompany’s September 2017 private placement equity financing. The Company and its directors have cooperated with theinvestigation.The Company maintains indemnification agreements with its directors and officers that may require the Company toindemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited byapplicable law.At this time, the Company is unable to estimate a possible loss, if any, associated with the matter described above. 75 Table of Contents From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings relating tosecurities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in thenormal course of our business in addition to governmental and other regulatory investigations and proceedings. In addition, thirdparties may, from time to time, assert claims against the Company in the form of letters and other communications. The Companycurrently believes that these ordinary course matters will not have a material adverse effect on our business; however, the results oflitigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on theCompany because of defense and settlement costs, diversion of management resources and other factors. 13. Employee Benefit PlansThe Company sponsors a defined contribution plan under which it may make discretionary contributions. The Company didnot make any employer matching contributions to this plan during the years ended December 31, 2018, 2017 and 2016. 76 Table of Contents 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. Thesechanges did not impact loss from operations or net loss. The selected financial data below has been adjusted for suchreclassifications.The following table provides the selected quarterly financial data for the years ended December 31, 2018 and 2017 (inthousands, except per share data): Quarter Ended 2018 2017 December31, September30, June 30, March 31, December31, September30, 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 incometaxes (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) onavailable-for-sale securities, netof 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 tocompute net loss per common share— basic and diluted 17,656 16,927 16,881 16,842 16,574 14,381 14,233 13,803 77 Table of Contents 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 ourindependent registered public accounting firm for the fiscal year ending December 31, 2018. There have been no disagreementswith our former accountants on accounting and financial disclosure. For further information, please refer to form 8-K filed with theSEC on April 11, 2018. Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief FinancialOfficer, our principal executive and principal financial officers, respectively, conducted an evaluation of the effectiveness of thedesign and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the ExchangeAct of 1934, as amended, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, ourChief 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, withoutlimitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submittedunder the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding required disclosure.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as suchterm 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 overfinancial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission in 2013. Based on the evaluation under that framework and applicable SEC rules, ourmanagement 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 materiallyaffected, or is reasonably likely to materially affect, our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management does not expect that our disclosure controls and procedures or our internal control over financial reportingwill 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 thefact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of theinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues andinstances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented bythe individual acts of some persons, by collusion of two or more people or by management override of the controls. The design ofany system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls maybecome 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 bedetected. 78 Table of Contents Item 9B. Other InformationNone. 79 Table of Contents Part III Item 10. Directors, Executive Officers and Corporate GovernanceInformation responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by thisAnnual Report on Form 10-K. Item 11. Executive CompensationInformation responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our2019 Annual Meeting of Stockholder to be filed with the SEC within 120 days after the end of the fiscal year covered by thisAnnual Report on Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by thisAnnual Report on Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by thisAnnual Report on Form 10-K. Item 14. Principal Accounting Fees and ServicesInformation responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by thisAnnual Report on Form 10-K. 80 Table of Contents 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 theinformation 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: 81 Table of Contents Exhibit Incorporation by ReferenceNumber 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 CapitalGroup, 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 ResearchFoundation, 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 DominionUniversity Research Foundation, Eastern Virginia Medical Schooland the Registrant S-1 333-208694 10.13 March 7, 2016​10.4# License Agreement among University of Southern California, TheAlfred 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 ofSouthern 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 andbetween 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 andbetween 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 agreementsthereunder 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 agreementsthereunder 8-K 001-37744 10.2 May 19, 2017​10.12+ Form of Director Option Agreement, not issued under the 2015 StockIncentive Plan S-1 333-208694 10.3 December 22,2015​10.13+ Executive Employment Agreement between Darrin R. Uecker andthe Registrant S-1 333-208694 10.9 December 22,2015​10.14+ Amendment to Employment Agreement between Darrin R. Ueckerand 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 theRegistrant S-1 333-208694 10.14 December 22,2015​10.16+ Form of At-Will Employment, Confidential Information, InventionAssignment, 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 theRegistrant ​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 ExchangeCommission 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 ofthe Sarbanes-Oxley Act of 2002. 82 Table of Contents 31.2* Certification of Chief Financial Officer pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002. 32.1* Certification of the Chief Executive and Chief Financial Officerspursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18U.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 orarrangement. # Portions of this exhibit (indicated by asterisks) have been omittedpursuant to a grant of confidential treatment. 83 Table of Contents Item 16. Form 10-K SummaryNone. 84 Table of Contents SignaturesPursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused 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 Financeand Administration, Secretary and Treasurer(Principal Financial and Principal Accounting Officer) POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes andappoints Darrin R. Uecker and Brian B. Dow, jointly and severally, as his true and lawful attorney-in-fact and agent, with fullpower of substitution, each with power to act alone, to sign and execute on behalf of the undersigned any and all amendments tothis Annual Report on Form 10-K, and to perform any acts necessary in order to file the same, with all exhibits thereto and otherdocuments in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agentfull power and authority to do and perform each and every act and thing requested and necessary to be done in connectiontherewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that saidattorney-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 onbehalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/ Darrin R. Uecker Darrin R. UeckerPresident, Chief Executive Officer and Director(Principal Executive Officer)March 14, 2019 /s/ Brian B. Dow Brian B. DowChief Financial Officer, Senior Vice President ofFinance and Administration, Secretary and Treasurer(Principal Financial and Principal AccountingOfficer)March 14, 2019 /s/ Robert W. Duggan Robert W. DugganChairman of the Board of DirectorsMarch 14, 2019 /s/ Kenneth A. Clark Kenneth A. ClarkDirectorMarch 14, 2019 /s/ Thomas J. Fogarty, M.D. Thomas J. Fogarty, M.D.DirectorMarch 14, 2019 /s/ Manmeet S. Soni Manmeet S. SoniDirectorMarch 14, 2019 /s/ Mahkam Zanganeh Mahkam Zanganeh DirectorMarch 14, 2019 85Exhibit 10.17 PULSE BIOSCIENCES, INC.EMPLOYMENT AGREEMENTThis Employment Agreement (the “Agreement”) is made and entered into by and between Edward A. Ebbers (“Executive”) andPulse 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 VicePresident 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 withExecutive’s position within the Company. Executive also will serve the Company in such other or alternative positions as mayreasonably be assigned to him by the company’s Chief Executive Officer (“CEO”) and Board of Directors (the “Board”), whichpositions may include director and additional or otherofficer positions of the Company and subsidiaries of the Company. Theperiod 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 hisability and will devote his full business efforts and time to the Company. For the duration of the Employment Term, Executiveagrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remunerationwithout the prior approval of the Board.(c) Automatic Resignation. At the end of the Employment Term, including upon any termination of employmentfor any reason, such ending or termination will be deemed to be an automatic resignation from all director and officer positions ofthe Company and any of its subsidiaries, unless the continuation of such appointments is specifically approved by a resolution ofthe 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 withthe Company. Executive’s employment with the Company will also be terminated due to Executive’s death or disability. Neitherthe vesting of any option described in this agreement or any separate agreement (nor any other provision of this agreement or anyother agreement between Executive and the Company), nor Executive’s participation in any stock option, incentive bonus, orother benefit program in the future, is to be regarded as assuring Executive of continuing employment for any particular period oftime. The employment at-will status can only be modified in a written agreement signed by Executive and by an officer of theCompany.3.Compensation.(a) Base Salary. During the Employment Term, the Company will pay Executive an annual salary of $220,000 ascompensation for Executive’s services (the “Base Salary”). The Base Salary will be paid periodically (but not less frequently thanmonthly) in accordance with the Company’s normal payroll practices and be subject to the usual requiredwithholdings. 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 theattainment of goals and milestones specific to the Executive as agreed to by the Executive and CEO and approved by theBoard. Executive’s eligibility, and the terms and conditions, for this bonus will be documented and issued to Executive if andwhen approved by the board. If awarded, this bonus will be paid not later than March 30 of the year following the fiscal year forwhich the bonus is awarded, provided that the Employment Term extends through the date of payment. (c) Annual Bonus. Executive will be eligible for an annual bonus in respect of fiscal year 2017 and each subsequentfiscal year of up to a maximum of 40% of the Base Salary for the fiscal year which will be contingent upon the attainment ofannual designated corporate goals and milestones, in each case set and measured in the good faith discretion of theBoard. 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 fiscal yearfor which the bonus is awarded, provided that the Employment Term extends through the date of payment.(d) Start Date Options. Promptly after the Start Date, Executive will be granted an option (the “Start Date Option”)under the 2015 Stock Incentive Plan (“Plan”) to acquire 117,200 shares of common stock of the Company equal to approximately0.75% of the fully diluted capital of the Company. The Start Date Option will have an exercise price per share equal to the closingprice at the date of grant. The Start Date Option will vest 25% on the first anniversary of the Start Date and thereafter 75% will vestin equal amounts on a monthly basis over the three-year period starting with the first anniversary of the Start Date with provisionfor accelerated vesting in the event of a change of control, and exercisable through the tenth anniversary on the Start Date. Thisoption will be subject to the grant agreement and the Company’s standard terms and conditions under its option plan.4. Employee Benefits. During the Employment Term, Executive will be entitled to participate in the employeebenefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of theCompany. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at anytime.5. Vacation. During the Employment Term, Executive will be entitled to paid vacation of not less than three weeksper year, in accordance with the Company’s vacation policy for senior executive officers, with the timing and duration of specificvacations mutually and reasonably agreed to by the parties hereto.6. Expenses. The Company will reimburse Executive for reasonable travel, Entertainment or other expensesincurred by Executive in the furtherance of or in connection with the Performance of Executive’s duties hereunder, in accordancewith the Company’s expense reimbursement policy as in effect from time to time.7. Severance. (a) Termination without Cause or Resignation for Good Reason. During the Employment Term, if (i) the Company(or any parent or subsidiary or successor of the Company) terminates Executive’s employment for reasons other than Cause, deathor Disability, or (ii) upon Executive’s resignation from the Company (or any parent or subsidiary or successor of the Company) forGood Reason, then, subject to the continued observance by Executive of Sections 8 (severance conditions), 11 (assignment), 12(notices), 13 (arbitration), 14 (confidential information agreement), 15 (non-competition), 17 (litigation cooperation), and 19(miscellaneous) below after the termination of the rendering of employment services, Executive will receive thefollowing severance from the Company:i.Severance Payment(1) If Executive has been employed for a Term hereunder of less than one year from the Start Date, thenExecutive will receive the continuing payment of the Executive’s Base Salary (as in effect immediately prior to the Executive’stermination) equal to three (3) months. If Executive has been employed for a Term hereunder of one year or more from the StartDate, then Executive will receive six (6) months of continuing payment of Executive’s Base Salary (as in effect immediately priorto Executive’s termination). The Executive will also receive his Annual Bonus for the year of termination, prorated for the portionof the year served, payable with the first severance payment. The payment of the continuing Base Salary and Bonus will be lessapplicable withholding taxes and other legally required withholdings.ii.Accelerated Vesting.(1) Termination without Cause or Resignation for Good Reason not in connection with a Change inControl. The unvested portion of Executive’s then Board approved and issued and outstanding equity grants that would normallyvest over the following twelve (12) months from the date of Executive’s termination will immediately vest prior to Executive’stermination and become exercisable. The options will remain exercisable, to the extent applicable, following the date oftermination for the period prescribed in the Plan under which they are awarded. If the price of any option has not been set as of thedate of acceleration, the price will be set equal to the fair value at the grant date as determined in the documented good faithdiscretion of the Board.(2) Termination without Cause or Resignation for Good Reason in connection with a Change inControl or within twelve (12) months of a Change in Control. If Executive has been employed for a Term hereunder of less thanone year from the Start Date, then 50% of the unvested portion of Executive’s the Board approved and issued and outstandingequity grants will immediately vest prior to Executive’s termination and become exercisable. If Executive has been employed for a Term hereunder of one year or more from the Start Date, then the unvested portion of Executive’s then Boardapproved and issued and outstanding grants will immediately vest to Executive’s termination and become exercisable. Theoptions will remain exercisable, to the extent applicable, following the date of termination for the period prescribed in the Planunder 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 equalto 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 of 1985, as amended (“COBRA”)for Executive and Executive’s eligible dependents, the Company will reimburse Executive for the monthly premiums underCOBRA for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A)the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans or (B) the date uponwhich 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), orthe Company terminates your employment for Cause, or your employment terminates upon your death or Disability, the (i) youwill no longer vest in the Option or any other stock option otherwise held by you, (ii) all payments of compensation by theCompany to you hereunder will terminate immediately (except as to amounts already earned), and (iii) you will not be entitled toany severance benefits. Unless Executive waives this condition in writing, before refusing to pay severance benefits under thisAgreement, Company shall obtain a determination from an arbitrator that Executive was terminated for Cause or that Executivehas not resigned for Good Reason.(b) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (orany parent or subsidiary or successor of the Company), the provisions of this Section 7 are intended to be and are exclusive and inlieu of any other rights or remedies to which executive or the Company may otherwise be entitled, whether at law, tort or contract,in equity, or under this agreement. Executive will be entitled to no severance or other benefits upon termination of employmentwith respect to acceleration of award vesting or severance pay other than those benefits 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 severance Pursuant to Section 7(a) or(b) will be subject to Executive signing and not revoking a separation agreement and release of claims in a form reasonablysatisfactory to the Company and Executive (the “Release”).(b) Confidential Information Agreement. Executive’s receipt of any payments or benefits under Section 7will be subject to Executive continuing to comply with the terms of the Confidential information, Invention Assignment,and Arbitration 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, no severance pay or benefits to be paid orprovided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments orseparation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid orotherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severancepayable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to TreasuryRegulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section409A.ii. Any severance payments or benefits under this Agreement that would be considered Deferred Paymentswill be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive's separationfrom service, or, if later, such time as required by Section 8(c)(iii). Except as required by Section 8(c)(iii), any installment paymentsthat would have been made to Executive during the sixty (60) day period immediately following Executive's separation fromservice but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executive's separation fromservice and the remaining payments shall be made as provided in this Agreement.iii. Notwithstanding anything to the contrary in this agreement, if Executive 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, ifany, that are payable within the first six (6) months following Executive’s separation from service, will become payable on the firstpayroll date that occurs on or after the date six (6) months and one (l) day following the date of Executive's separation fromservice. 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 diesfollowing Executive's separation from service, but prior to the six (6) month anniversary of the separation from service, then anypayments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable afterthe date of Executive's death and all other Deferred Payments will be payable in accordance with the payment schedule applicableto each payment or benefit. Each payment, installment and benefit payable under this Agreement is intended to constitute aseparate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.iv. Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” ruleset 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 ofthe “short-term deferral” rule.v. Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntaryseparation from service pursuant to Section I .409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section409A Limit (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 comply with the requirements of Section409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposedunder Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. The Companyand Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actionswhich are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actualpayment to Executive under Section 409A.(d) No Duty to Mitigate. Executive will not be required to mitigate the amount of any paymentcontemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any suchpayment.9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement orotherwise payable to Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code and (ii) butfor this Section 9, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance benefitswill 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 tothe 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 excise taximposed 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 reductionin the severance and other benefits constituting “parachute payments” is necessary so that no portion of such severance benefits issubject to the excise tax under Section 4999 of the Code, the reduction shall occur in the following order: (l) reduction of theseverance payments under Sections 7(a)(i) or 7(a)(ii); (2) reduction of other cash payments, if any; (3) cancellation of acceleratedvesting of equity awards; and (4) reduction of continued employee benefits. In the event that acceleration of vesting of equityaward compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant ofExecutive's equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-ratabasis. In no event shall the Executive have any discretion with respect to the ordering of payment reductions. Notwithstanding theforegoing, to the extent the Company submits any payment oi benefit payable to Executive under this Agreement or otherwise tothe Company's stockholders for approval in accordance with Treasury Regulation Section 1.280G-l Q&A 7, the foregoingprovisions shall not apply following such submission and such payments and benefits will be treated in accordance with theresults of such vote, except that any reduction in, or waiver of, such payments or benefits required by such vote will be appliedwithout 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 bemade in writing by an independent firm immediately prior to a Change of Control (the “Firm”), whose determination will beconclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required bythis Section 9, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely onreasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company andExecutive 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 connectionwith 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 nolocontendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, (ii) Executive's grossmisconduct, (iii) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or anyother party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (iv)Executive’s willful breach of any obligations under any written agreement or covenant with the Company that is injurious to theCompany; or (v) Executive's continued failure to perform his employment duties after Executive has received a written demand ofperformance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has notsubstantially performed his duties and has failed to cure such non-performance to the Company’s satisfaction within 30 businessdays after receiving such notice.(b)Change of Control. For purposes of this Agreement, “Change of Control” means the occurrence of anyof the following events:i. any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities 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 ofthe Company representing more than 50% of the total voting power represented by the Company's then outstanding votingsecurities, other than the acquisition of 50% of the total voting power represented by the outstanding voting securities when soldby the Company in a capital raising transaction; orii. the date of the consummation of a merger or consolidation of the Company with any other corporationthat has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the votingsecurities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting powerrepresented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after suchmerger or consolidation; oriii. the date of the consummation of the sale or disposition by the Company of all or substantially all theCompany’s assets in a transaction that has been approved by the stockholders of the Company.Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change of Control unlessthe 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 Revenue Code of 1986, as amended.(d)Disability. For the purposes of this Agreement, “Disability” will mean that Executive has been unableto engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can beexpected 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. Terminationresulting from Disability may only be effected after at least thirty (30) days' written notice by the Company of its intention toterminate Executive's employment, In the event that Executive resumes the performance of substantially all of Executive's dutieshereunder before the termination of Executive's employment becomes effective, the notice of intent to terminate based onDisability will automatically be deemed to have been revoked.(e)Good Reason. For the purposes of this Agreement, “Good Reason” means Executive's resignationwithin thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one ormore of the following, without Executive’s express written consent: (i) the assignment to Executive of any duties beyond thegenerally recognized scope of employment of a company Vice President and General Manager, Dermatology and Aesthetics orthe reduction of Executive’s duties or the removal of Executive from his position and responsibilities as Vice President andGeneral 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 isprovided with an alternative executive type position within the Company or its subsidiaries at the same or better compensation asproved herein or that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and madepart of a larger entity will not constitute “Good Reason”; (ii) a reduction in Executive’s Base Salary (except where there is areduction 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 amaterial change in geographic location. Executive will not resign for Good Reason without first providing the Company withwritten notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existenceof the grounds for “Good Reason” and providing a cure period of not less than thirty (30) days following the date of such noticeand such grounds for “Good Reason” have not been cured during such cure period.(f)Section 409A. For purposes of this Agreement, “Section 409A” means Code Section 409A, and thefinal regulations and any guidance promulgated thereunder or any state law Equivalent.(g)Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” will mean two (2) timesthe lesser of: (i) Executive's annualized compensation based upon the annual rate of pay paid to Executive during the Executive'staxable year preceding the Executive's taxable year of his or her separation from service, as determined under Treasury RegulationSection 1.409A-l(b)(9)(iii)(A)(l) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximumamount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for theyear in which Executive's separation from service occurred.11. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legalrepresentatives of Executive upon Executive's death and (b) any successor of the Company. Any such successor of the Companywill be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, "successor' meansany person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly orindirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive anyform o of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descentand distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive's right to compensationor other benefits will be null and void.12. Notice. All notices, requests, demands and other communications called for hereunder will be in writing andwill be deemed given (i) on the date of delivery if delivered personally, (ii) one (l) day after being sent by a well-establishedcommercial 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 laterdesignate in writing.If to the Company:Pulse Biosciences, Inc.849 Mitten Rd.Burlingame, CA 94010Attn: Darrin R. Uecker, Chief Executive OfficerIf 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 allemployment-related disputes, and Executive's receipt of the compensation, pay raises and other benefits paid to Executive by theCompany, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (includingthe Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such orotherwise) 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 CaliforniaCode of Civil Procedure Section 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law. TheFederal Arbitration Act shall also apply with full force and effect, notwithstanding the application of procedural rules set forthunder the Act.(b) Dispute Resolution. Dispute that Executive agrees to arbitrate, and thereby agrees to waive anyright to a trial by jury, include any statutory claims under local, State, or federal law, including, but not limited to, claimsunder Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination inEmployment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the CaliforniaFamily Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutoryor common law claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that theCompany may have with Executive.(c) Procedure. Executive agrees that any arbitration will be administered by the Judicial Arbitration &Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”). Thearbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summaryjudgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitrationhearing. The arbitrator shall have the power to award any remedies available under applicable law, and the arbitrator shall awardattorneys' fees and costs to the prevailing party to the extent authorized by applicable law. The Company will pay for anyadministrative or hearing fees charged by the administrator or JAMS, and all arbitrator's fees, except that Executive shall pay anyfiling fees associated with any arbitration that Executive initiates, but only so much of the filing fee as Executive would haveinstead paid had Executive filed a complaint in a court of law. Executive agrees that the arbitrator shall administer and conductany arbitration in accordance with California law, including the California Code of Civil Procedure and the California EvidenceCode, and that the arbitrator shall apply substantive and procedural California law to any dispute or claim, without reference to therules of conflict of law. To the event that the JAMS Rules conflict with California law, California law shall take precedence. Thedecision 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 forany dispute between Executive and the Company. Accordingly, except as provided by the Act and this Agreement,neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject toarbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Companypolicy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which theCompany has not adopted.(e) Administrative Relief. Executive is not prohibited from pursuing an administrative claim with a local,state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment,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 actionregarding any such claim, except as permitted by law.14. Confidential Information. Executive agrees to enter into the Company's standard Confidential Information,Invention Assignment and Arbitration Agreement (the “Confidential Information Agreement”) and IPO lock up agreement uponcommencing employment hereunder.15. Non-Compete. The Executive hereby agrees that during the period commencing on the date hereof and endingon 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 theUnited States, Mexico or Canada, engage in any activity which is, or participate or invest in, or provide or facilitate the provisionof financing to, or assist (whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent orconsultant, or in any other capacity), any business, organization or person other than the Company (or any subsidiary or affiliate ofthe 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 thedate that the Executive's employment with the Company terminates and which are in the Company's Field of lnterest (definedbelow); provided that the Executive shall be permitted to be employed by an entity which operates an ancillary business in theCompany'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 ofmethods of using nanopulse electricity for bio-medical applications, including for diagnosis, detection. prevention treatment orcure of tumors or cancers of internal organs, or benign diseases that can be treated by the ablation of internal tissue as well as otherdermatologic applications and any other business activity engaged in, conducted by or in active planning by the Company or itssubsidiaries or affiliates on the date the Executive's employment with the Company terminates. Notwithstanding anything hereinto the contrary, the Executive may make passive investments in any enterprise the shares of which are publicly traded if suchinvestment constitutes less than three percent (3%) of the equity of such enterprise.16. Business Opportunities. The Executive agrees, during the Employment Term, to offer or otherwise make knownor 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 otherwisehave available to him in the Company's Field of lnterest, and further agrees that any such prospects, contacts or other businessopportunities shall be the property of the Company.17. Litigation and Regulatory Cooperation. During and after the Executive’s employment with the Company, theExecutive shall cooperate fully with the Company and its affiliates in the defense or prosecution of any claims or actions now inexistence or which may be brought in the future against or on behalf of the Company and its affiliates which relate to events oroccurrences that transpired while the Executive was employed by the Company. The Executive's full cooperation in connectionwith such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery ortrial and to act as a witness on behalf of the Company and its affiliates at mutually convenient times. During and after theExecutive's employment, the Executive also shall cooperate fully with the Company and its affiliates in connection with any suchinvestigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events oroccurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive forany reasonable out-of-pocket expenses incurred in connection with the Executive's performance of obligations pursuant to thisSection. If assistance is required after Executive is no longer employed by the Company, the Company agrees to compensateExecutive by paying him a mutually agreed upon hourly rate for all time spent beyond five (5) hours. The performance by theExecutive under this Section after the termination of the Executive's employment with the Company shall be subject to his otheremployment obligations.18. Insurance. The Executive agrees that the Company or its affiliates may from time to time and for the Company’sor the affiliates’ own benefit apply for and take out life insurance covering the Executive, either independently or together withothers, in any amount and form which the Company or an affiliate may deem to be in its best interests. The Company or therespective affiliate shall own all rights in such insurance and in the cash values and proceeds thereof, and the Executive shall nothave any right, title or interest therein. The Executive agrees to assist the Company and its affiliates, at the Company's expense, inobtaining any such insurance by, among things, submitting to customary examinations and correctly preparing, signing anddelivering such applications and other documents as reasonably may be required. Nothing contained in this Section shall beconstrued 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 or discharged unlessthe modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company(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 provisionof this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition orprovision at another time.(c) Headings. All captions and section headings used in this Agreement are for Convenient reference onlyand do not form a part of this Agreement.(d) Entire Agreement. This Agreement, together with the Equity Plan, Option Agreement, the ConfidentialInformation Agreement (and its exhibits), lock up agreement, and any employment policy statements and employment manualsthat the Company or its Board adopts from time to time represents the entire agreement and understanding between the parties withrespect to Executive's employment by the Company and supersedes all prior or contemporaneous agreements whether written ororal. With respect to stock options granted on or after the date of this Agreement the acceleration of vesting provisions providedherein will apply to such stock options. This Agreement may be modified only by agreement of the parties by a written instrumentexecuted 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 of California (withthe exception of its conflict of law’s provisions).(f)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement willnot 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 subject to all applicablewithholdings, 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 to discuss this matter withand obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all theprovisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.(i) Counterparts. This Agreement may be executed in counterparts, and each counterpart will have thesame 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 dulyauthorized officer, as of the day and year set forth below. COMPANYPulse Biosciences, Inc. /s/ Darrin R. Uecker By:Darrin R. Uecker Title:Chief Executive Officer /s/ Edward A. Ebbers6/29/16EXECUTIVEBy:Edward A. Ebbers Exhibit 21.1 List of SubsidiariesSubsidiaryJurisdiction of IncorporationOwnership PositionNanoblate Corp., a Delaware CorporationDelaware100%BioElectroMed Corp., a California CorporationCalifornia100%Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of DirectorsPulse Biosciences, Inc.We hereby consent to the use in the Form 10-K for the year ended December 31, 2018 of our reportdated March 16, 2018, relating to the consolidated balance sheet of Pulse Biosciences, Inc. as of December31, 2017, and the related consolidated statements of operations and comprehensive loss, and cash flows foreach of the two years in the period ended December 31, 2017, and stockholders’ equity for the year endedDecember 31, 2017, and the related notes, which is included in the Form 10-K for the year ended December31, 2018. /s/ Gumbiner Savett Inc.March 14, 2019Santa Monica, CaliforniaExhibit 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe 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 ofPulse Biosciences, Inc. and its subsidiaries appearing in this Annual Report on Form 10-K of PulseBiosciences, Inc. for the year ended December 31, 2018./s/ DELOITTE & TOUCHE LLPSan Jose, CaliforniaMarch 14, 2019Exhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TOSECURITIES EXCHANGE ACT RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, 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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; anda)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. Date: March 14, 2019By:/s/ Darrin R. Uecker Darrin R. Uecker President and Chief Executive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TOSECURITIES EXCHANGE ACT RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, 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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date: March 14, 2019By:/s/ Brian B. Dow Brian B. Dow Chief Financial Officer and Senior Vice President ofFinance and Administration, Secretary and Treasurer (Principal Financial and Principal Accounting Officer) Exhibit 32.1CERTIFICATIONS PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Pulse Biosciences, Inc. (the “Company”) on Form 10-K for the fiscal yearended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of theundersigned 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 ofoperations of the Company.4Date: March 14, 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 Financeand 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 beincorporated by reference into any filing of Pulse Biosciences, Inc. under the Securities Act of 1933, as amended, or the SecuritiesExchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporationlanguage contained in such filing.

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