What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-22 · 268 added, 211 removed, 698 unchanged (41% of the section changed)

39 unchanged sentences

The number of PSAs with a market condition that vest and are issued to the recipient is based upon the Company's TSR relative to the TSR of the selected market index at the end of the three-year performance period.

A Monte Carlo simulation was performed to estimate the fair value on the date of grant, with associated share-based compensation expense recognized over the requisite service period as the employee renders service.

The determination of the fair value on the date of grant is affected by the stock price of the Company and the market index, as defined by the award agreement, at the beginning of the service period and grant date, the expected stock price volatility of the Company and the market index over the performance period and the correlation coefficient of the daily returns for the Company and the market index over the performance period.

A Monte Carlo simulation was performed to estimate the fair value on the grant date, with associated share-based compensation expense recognized over the requisite service period as the employee renders service.

The determination of the fair value on the date of grant is affected by the stock price of the Company and the market index, as defined by the award agreement, at the beginning of the service period and grant date, the expected stock price volatility of the Company and the market index over the performance period, the risk-free interest rate, and the correlation coefficient of the daily returns for the Company and the market index over the performance period.

Given the level of judgment involved by management, including the use of a specialist, to determine the grant date fair value of the PSAs with a market condition, audit procedures required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

1 unchanged sentence

Our audit procedures related to the Company's determination of the grant date fair value of the PSAs with a market condition included the following, among others:

• We inquired of management of the key valuation assumptions and the Monte Carlo simulation methodology used in the determination of the grant date fair value of the PSAs.

• We inquired with management regarding the key valuation assumptions and the Monte Carlo simulation methodology used in the determination of the grant date fair value of the PSAs.

• We tested the design and operating effectiveness of the Company's internal controls over the determination of the grant date fair value of the PSAs.

31 unchanged sentences

Accrued liabilities 44,682 33,022

Other current liabilities and current maturities of debt and leases 5,472 1,756

Current maturities of debt and leases 2,533 5,472

Total current liabilities 74,569 58,392

44 unchanged sentences

Comprehensive (loss) income:

Unrealized loss on investments $ ( 2,811 ) $ ( 941 ) $ ( 46 )

Unrealized gain (loss) on investments $ 2,898 $ ( 2,811 ) $ ( 941 )

Foreign currency translation adjustment 205 ( 337 ) ( 319 )

Other comprehensive (loss) income ( 3,148 ) ( 1,260 ) 470

Other comprehensive income (loss) 3,103 ( 3,148 ) ( 1,260 )

Net (loss) income ( 30,438 ) ( 46,466 ) 50,199

11 unchanged sentences

45,346 $ 45 $ 742,389 $ ( 330,352 ) $ 312 $ 412,394

Issuance of common stock through public offering 4,574 5 188,953 — — 188,958

Issuance of common stock under equity incentive plans 589 1 ( 9,837 ) — — ( 9,836 )

1 unchanged sentence

Share-based employee compensation expense — — 28,078 — — 28,078

Other comprehensive income — — — — 470 470

Net loss — — — ( 48,155 ) — ( 48,155 )

Other comprehensive loss — — — — ( 1,260 ) ( 1,260 )

Net income — — — 50,199 — 50,199

Balance—December 31, 2021

4 unchanged sentences

Other comprehensive loss — — — — ( 3,148 ) ( 3,148 )

Net income — — — 50,199 — 50,199

Net loss — — — ( 46,466 ) — ( 46,466 )

Balance—December 31, 2022

3 unchanged sentences

Share-based employee compensation expense — — 35,728 — — 35,728

Other comprehensive loss — — — — ( 3,148 ) ( 3,148 )

Other comprehensive income — — — — 3,103 3,103

Net loss — — — ( 30,438 ) — ( 30,438 )

26 unchanged sentences

Other noncurrent assets and liabilities ( 1,193 ) ( 1,782 ) ( 2,766 )

Net cash used in operating activities ( 22,141 ) ( 13,780 ) ( 19,869 )

Net cash provided by (used in) operating activities

4,484 ( 22,141 ) ( 13,780 )

Cash flows from investing activities:

2 unchanged sentences

Purchases of property and equipment ( 11,998 ) ( 16,881 ) ( 9,753 )

Proceeds from capital grant — — 800

Net cash provided by (used in) investing activities 44,006 23,504 ( 156,198 )

Acquisition of intellectual property

( 30,000 ) — —

Net cash provided by investing activities

21,817 44,006 23,504

Cash flows from financing activities:

Proceeds from sale of stock, net of offering costs of $ 218

Proceeds from debt borrowings — — 5,000

4 unchanged sentences

Proceeds from issuance of common stock under employee stock purchase plan 5,261 4,225 4,181

Net cash (used in) provided by financing activities ( 7,059 ) ( 7,642 ) 189,392

Net cash used in financing activities

( 32 ) ( 7,059 ) ( 7,642 )

Effect of exchange rate changes on cash and cash equivalents ( 58 ) ( 361 ) ( 372 )

7 unchanged sentences

Accrued purchases of property and equipment 1,427 272 1,552

Assets obtained in exchange for finance lease obligations — — 22

See accompanying notes to consolidated financial statements.

11 unchanged sentences

Cash and Cash Equivalents— The Company considers highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents.

Cash equivalents include demand deposits, money market funds and repurchase agreements on deposit with financial institutions.

Cash equivalents include demand deposits and money market funds with financial institutions.

Investments— The Company invests primarily in government and agency obligations, corporate bonds, commercial paper and asset-backed securities and classifies all investments as available-for-sale.

13 unchanged sentences

no installation, calibration or testing of products is performed subsequent to shipment in order to render products operational.

The Company expects to be entitled to the total consideration for the products ordered as product pricing is fixed and payment terms fall within one year to forgo adjustment for the effects of a significant financing component.

The Company expects to be entitled to the total consideration for the products ordered as product pricing is fixed, and there are no adjustments for a significant financing component as payment terms fall within one year .

The Company excludes taxes assessed by governmental authorities on revenue-producing transactions from the measurement of the transaction price.

3 unchanged sentences

Significant judgments and estimates involved in the Company’s recognition of revenue include the estimation of a provision for returns.

In the normal course of business, the Company generally does not accept product returns unless a product is defective as manufactured.

In the normal course of business, the Company is not obligated to accept product returns unless a product is defective as manufactured.

The Company does not provide customers with the right to a refund.

16 unchanged sentences

Beginning balance - January 1 $ 230 $ 1,096 $ 1,096

Adoption of ASU 2016-13 — — ( 28 )

Provision for expected credit losses 270 190 65

1 unchanged sentence

Ending balance - December 31 $ 500 $ 230 $ 1,096

Concentration of Credit Risk and Significant Customers — During 2023, 2022 and 2021, 8.8 %, 9.7 % and 10.5 % of the Company’s total revenue was derived from its top ten customers.

During 2023, 2022 and 2021 no individual customer accounted for more than 10% of the Company’s revenue.

As of December 31, 2023 and 2022, 11.3 % and 11.7 % of the Company’s total accounts receivable were derived from its top ten customers.

No individual customer accounted for more than 10% of the Company’s accounts receivable as of December 31, 2023 and 2022.

Inventories— Inventories are stated at the lower of cost or net realizable value based on the first-in, first-out cost method (FIFO) and consist of raw materials, work in process and finished goods.

The Company’s industry is characterized by rapid product development and frequent new product introductions.

Uncertain timing of regulatory approvals, variability in product launch strategies and variation in product use all impact inventory reserves for excess, obsolete and expired products.

Uncertain timing of regulatory approvals, variability in product launch strategies and variation in product sales all impact inventory reserves for excess, obsolete and expired products.

An increase to inventory reserves results in a corresponding increase in cost of revenue.

4 unchanged sentences

The estimated useful lives of buildings is 15 to 20 years, while furniture, fixtures, computers and office equipment are depreciated from three to seven years .

The Company’s radiofrequency and cryothermic generators are generally placed with customers that use the Company’s disposable products.

The Company’s radiofrequency and cryothermic generators are generally placed with customers that purchase the Company’s disposable products.

The estimated useful lives of generators are based on anticipated usage by customers and may change in future periods with changes in usage or introduction of new technology.

2 unchanged sentences

The Company assesses the useful lives of property and equipment at least annually and retires assets no longer in use.

Intangible Assets— Intangible assets with determinable useful lives are amortized on a straight-line basis over the estimated fifteen year period benefited.

The Company reviews intangible assets at least annually for impairment using its best estimates based on reasonable and supportable assumptions and projections.

Intangible Assets— Technology intangible assets with determinable useful lives are amortized on a straight-line basis over the estimated fifteen year period benefited.

Patent intangible assets with determinable useful lives are amortized over the estimated useful life of five years in a pattern reflecting the estimated economic benefit of the asset to the Company.

Amortization of technology intangible assets is recorded in research and development expense, while amortization of patent intangible assets is recorded in cost of revenue.

The Company reviews intangible assets for impairment at least annually or more often if impairment indicators are present using its best estimates based on reasonable and supportable assumptions and projections.

Goodwill— Goodwill represents the excess of purchase price over the fair value of the net assets acquired in business combinations.

3 unchanged sentences

When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset's carrying value.

Leases —The Company leases office, manufacturing and warehouse facilities and computer equipment under leases that qualify as either financing or operating leases, as determined at the inception of the lease arrangement.

Leases —The Company leases office, manufacturing and warehouse facilities and automobiles under leases that qualify as either financing or operating leases, as determined at the inception of the lease arrangement.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments under the lease.

Lease assets and liabilities are measured and recorded at the commencement date based on the present value of payments over the lease term.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Lease assets and liabilities include lease incentives and options to extend or terminate when it is reasonably certain the Company will exercise that option.

4 unchanged sentences

Additionally, the portfolio approach is applied for operating leases based on the terms of the underlying leases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities, while finance leases are included in property and equipment and finance lease liabilities.

The short-term portions of both lease liabilities are included in other current liabilities and current maturities of debt and leases.

The short-term portions of lease liabilities are included in other current liabilities and current maturities of debt and leases.

Operating lease expense is recognized on a straight-line basis over the lease term.

See Note 9 for further discussion.

Other Noncurrent Liabilities— This balance consists of contractual obligations, including asset retirement obligations.

Other Income (Expense)— Other income (expense) consists primarily of foreign currency transaction gains and losses generated by settlements of intercompany balances denominated in Euros and customer invoices transacted in British Pounds and Australian Dollars .

See Note 9 – Leases for further discussion.

Income Taxes —Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

12 unchanged sentences

Diluted earnings per share reflects net income available to common stockholders divided by the weighted average number of common shares outstanding during the period and any dilutive common share equivalents, including shares issuable upon the vesting of restricted stock awards and restricted stock units, exercise of stock options as well as shares issuable under the Company's employee stock purchase plan (ESPP).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Year Ended December 31,

6 unchanged sentences

Diluted net (loss) income per common share $ ( 0.66 ) $ ( 1.02 ) $ 1.09

For the years ended December 31, 2022 and 2020, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation, and net loss per share excludes the effect of 1,292 and 2,301 shares

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

because the effect would be anti-dilutive.

For the years ended December 31, 2023 and 2022, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation, and net loss per share excludes the effect of 1,668 and 1,292 shares because the effect would be anti-dilutive.

The computation of diluted earnings per share in the year ended December 31, 2021 excludes 404 shares because the effect would be anti-dilutive.

Research and Development Costs — Research and development costs include compensation and other internal and external costs associated with the development and research of new and existing products or concepts, preclinical studies, clinical trials and related regulatory activities, as well as amortization of technology assets.

Research and Development Costs — Research and development costs include compensation and other internal and external costs associated with the development and research of new and existing products or concepts, preclinical studies, clinical trials and studies, and related regulatory activities, as well as amortization of technology assets.

Research and development costs are expensed as incurred.

Clinical trial costs and other development costs incurred by third parties are expensed as contracted work is performed.

Clinical trial costs and other development costs incurred by third parties are expensed as contracted work is performed or over the expected service period.

Advertising Costs — The Company expenses advertising costs as incurred.

2 unchanged sentences

The value of the portion of an award that is ultimately expected to vest is recognized as expense over the service period.

The Company estimates forfeitures at the time of grant and revises them, as necessary, in subsequent periods as actual forfeitures differ from those estimates.

Prior to January 1, 2023, the Company estimated forfeitures at the time of grant and revised them, as necessary, in subsequent periods as actual forfeitures differ from those estimates.

Effective January 1, 2023, the Company's policy was amended to account for forfeitures as they occur rather than estimating at the time of grant, and the effect on income from continuing operations and retained earnings is not significant.

The Company estimates the fair value of time-based options on the date of grant using the Black-Scholes option-pricing model (Black-Scholes model).

6 unchanged sentences

the expected volatility of the Company and market index stock performance over the performance period and the correlation coefficient of the daily returns for the Company and market index over the performance period.

The Company also has an employee stock purchase plan (ESPP) which is available to all eligible employees as defined by the plan document.

The Company also has an employee stock purchase plan (ESPP) covering substantially all U.S.

employees of the Company.

Under the ESPP, shares of the Company’s common stock may be purchased at a discount.

The Company estimates the number of shares to be purchased under the ESPP at the beginning of each purchase period based upon the fair value of the stock at the beginning of the purchase period using the Black-Scholes model and records estimated compensation expense during the purchase period.

The Company estimates the number of shares to be purchased under the ESPP at the beginning of each purchase period based upon the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

fair value of the stock at the beginning of the purchase period using the Black-Scholes model and records estimated compensation expense during the purchase period.

Expense is adjusted at the time of stock purchase.

9 unchanged sentences

Accordingly, the Company has determined that it has a single operating segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The Company’s long-lived assets are located in the United States, except for $ 3,432 as of December 31, 2023 and $ 1,616 as of December 31, 2022 located primarily in Europe.

2 unchanged sentences

The carrying amounts of these assets and liabilities approximate their fair value due to their relatively short-term nature.

Cash equivalents and investments in corporate bonds, repurchase agreements, commercial paper and asset-backed securities are classified as Level 2 within the fair value hierarchy.

Cash equivalents and investments in corporate bonds, commercial paper and asset-backed securities are classified as Level 2 within the fair value hierarchy.

The fair value of fixed term debt is estimated by calculating the net present value of future debt payments at current market interest rates and is classified as Level 2.

2 unchanged sentences

See Note 2 – Fair Value for further information on fair value measurements.

Recent Accounting Pronouncements —The Company has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements which are expected to have a material effect on the Company's financial statements.

The Company continues to monitor and evaluate recently issued accounting guidance upon issuance for any potential impact.

Recent Accounting Pronouncements —In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

This guidance provides new segment disclosure requirements for entities with a single reportable segment and modifies certain reportable segment disclosure requirements.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of assessing the impact of the adoption of this guidance;

however, adoption is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

This guidance requires disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a specified quantitative threshold.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of assessing the impact of the adoption of this guidance;

however, adoption is not expected to have a material impact on the Company’s consolidated financial statements.

FASB ASC 820, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

2 unchanged sentences

• Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

An active market for the asset or liability is a market in which transactions for the asset or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

The valuation under this approach does not entail a significant degree of judgment.

5 unchanged sentences

Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023:

4 unchanged sentences

Money market funds $ — $ 77,864 $ — $ 77,864

Commercial paper — 11,935 — 11,935

Government and agency obligations 12,711 — — 12,711

2 unchanged sentences

Total assets $ 12,711 $ 118,128 $ — $ 130,839

There were no changes in the levels or methodology of measurement of financial assets and liabilities during the years ended December 31, 2022 and 2021.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2022:

9 unchanged sentences

Total assets $ 32,637 $ 136,300 $ — $ 168,937

There were no changes in the levels or methodology of measurement of financial assets and liabilities during the years ended December 31, 2023 and 2022.

Contingent Consideration.

1 unchanged sentence

The achievement periods for the PMA approval and reimbursement milestones expire on December 31, 2023 and December 31, 2026, respectively.

The contingent consideration liabilities are measured by applying the probability weighted scenario method using unobservable inputs, thus representing a Level 3 measurement within the fair value hierarchy.

During 2021, the Company was informed that data from the aMAZE clinical trial did not achieve statistical superiority, and the Company assessed the projected probability of payment to be remote.

The Company recorded a credit to operating expenses of $ 184,800 reflecting the change in fair value of the contingent consideration.

The Company has assessed the projected probability of payment during the contractual achievement periods to be remote, resulting in no fair value as of December 31, 2022 and 2021.

The contingent consideration liabilities are measured by

ATRICURE, INC.

2 unchanged sentences

(In Thousands, Except Per Share Amounts)

applying the probability weighted scenario method using unobservable inputs, thus representing a Level 3 measurement within the fair value hierarchy.

During 2021, the Company was informed that data from the aMAZE clinical trial did not achieve statistical superiority, and the Company assessed the projected probability of payment to be remote.

The Company recorded a credit to operating expenses of $ 184,800 reflecting the change in fair value of the contingent consideration.

The Company continues to assess the projected probability of payment during the contractual achievement periods to be remote, resulting in no fair value as of December 31, 2023 and 2022.

The following table represents the Company’s Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration for each of the years ended December 31:

4 unchanged sentences

Ending Balance – December 31

$ — $ — $ 184,800

Investments as of December 31, 2023 consisted of the following:

3 unchanged sentences

Government and agency obligations 12,998 ( 287 ) 12,711

Commercial paper 11,935 — 11,935

Asset-backed securities 2,263 ( 32 ) 2,231

14 unchanged sentences

$ 51,512 $ 50,744

Due after 1 year through 5 years

52,142 49,330

Due after 5 years through 10 years

Instruments not due at a single maturity date 2,263 2,231

10 unchanged sentences

Technology $ 46,470 $ 10,084 $ 46,470 $ 7,131

During 2021, the Company recorded an impairment charge of $ 82,300 to reduce the carrying value of the aMAZE IPR&D asset to $ 0 as of December 31, 2022 as a result of data from the aMAZE clinical trial not achieving statistical superiority.

This impairment charge was reflected as a component of operating expenses.

The $ 9,242 reduction in technology cost and accumulated amortization during 2022 is a result of a write-off fully-amortized asset no longer in use.

Patents 30,000 2,400 $ — $ —

Total $ 76,470 $ 12,484 $ 46,470 $ 7,131

In May 2023, the Company acquired patents that are amortizable over an estimated useful life of five years , in a pattern reflecting the estimated economic benefit of the patents to the Company.

See Note 10 – Commitments and Contingencies for further information on the patent acquisition.

During 2021, the Company recorded an impairment charge of $ 82,300 to reduce the carrying value of the aMAZE IPR&D asset to $ 0 as of December 31, 2021 resulting from the aMAZE clinical trial not achieving statistical superiority.

Amortization expense of intangible assets was $ 5,353 , $ 3,653 and $ 2,907 for the years ended December 31, 2023, 2022 and 2021.

The following table summarizes the allocation of amortization expense of intangible assets:

2023 2022 2021

Cost of revenues $ 2,400 $ — $ —

Selling, general and administrative expenses 2,953 3,653 2,907

Total $ 5,353 $ 3,653 $ 2,907

Future amortization expense is projected as follows:

3 unchanged sentences

Net carrying amount as of December 31, 2021

Additions (Impairment)

Net carrying amount as of December 31, 2022

Additions (Impairment)

Net carrying amount as of December 31, 2023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Inventories consisted of the following at December 31:

3 unchanged sentences

Inventories $ 67,897 $ 45,931

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

PROPERTY AND EQUIPMENT

10 unchanged sentences

Property and equipment depreciation expense was $ 9,460 , $ 8,057 and $ 7,534 for the years ended December 31, 2023, 2022 and 2021.

As of December 31, 2022 and 2021, the net carrying value of generators and other capital equipment was $ 4,447 and $ 3,637 .

As of December 31, 2023 and 2022, the net carrying value of generators was $ 4,912 and $ 4,447 .

ACCRUED LIABILITIES

4 unchanged sentences

Total $ 44,682 $ 33,022

Credit Facility.

The Company has a Loan and Security Agreement, as amended and modified effective February 8, 2021 and as further amended November 1, 2021 (Loan Agreement) with Silicon Valley Bank (SVB).

The Loan Agreement includes a $ 60,000 term loan, with an option to make available an additional $ 30,000 in term loan borrowings, and a $ 30,000 revolving line of credit.

The Loan Agreement has a five year term, expiring November 2026.

Principal payments under the Loan Agreement are to be made ratably commencing 24 months after inception through the loan's maturity date.

At the option of the Company, the commencement of term loan principal payments may be extended an additional twelve months .

SVB Loan Agreement.

As of December 31, 2023, the Company has a Loan and Security Agreement, as amended and modified effective February 8, 2021 and as further amended November 1, 2021 with Silicon Valley Bank (SVB) (SVB Loan Agreement).

The SVB Loan Agreement includes a $ 60,000 term loan, with an option to make available an additional $ 30,000 in term loan borrowings, and a $ 30,000 revolving line of credit.

The SVB Loan Agreement has a five-year term, expiring November 2026.

Principal payments under the SVB Loan Agreement are to be made ratably commencing 24 months after inception through the loan's maturity date.

In November 2023, the Company exercised its option to extend the commencement of term loan principal payments for an additional twelve months .

The term loan accrues interest at the Prime Rate plus 1.25 % and is subject to an additional 3.00 % fee on the term loan principal amount at maturity.

The Company is accruing the 3.00 % fee over the term of the Loan Agreement, with $ 420 included in the outstanding loan balance as of December 31, 2022.

Additionally, the unamortized financing costs related to the term loan of $ 253 are netted against the outstanding loan balance in the Consolidated Balance Sheets and are amortized ratably over the term of the Loan Agreement.

The Company is accruing the 3.00 % fee over the term of the SVB Loan Agreement, with $ 780 included in the outstanding loan balance as of December 31, 2023.

Additionally, the unamortized financing costs related to the term loan of $ 187 are netted against the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

outstanding loan balance in the Consolidated Balance Sheets and are amortized ratably over the term of the SVB Loan Agreement.

The revolving line of credit is subject to an annual facility fee of 0.20 % of the revolving line of credit, and any borrowings thereunder bear interest at the Prime Rate.

Borrowing availability under the revolving credit facility is based on the lesser of $ 30,000 or a borrowing base calculation as defined by the Loan Agreement.

As of December 31, 2022, the Company had no borrowings under the revolving credit facility and had borrowing availability of approximately $ 28,750 .

Borrowing availability under the revolving credit facility is based on the lesser of $ 30,000 or a borrowing base calculation as defined by the SVB Loan Agreement.

Financing costs related to the revolving line of credit are included in other assets in the Consolidated Balance Sheets and amortized ratably over the twelve-month period of the annual fee.

As of December 31, 2023, the Company had no borrowings under the revolving credit facility and had borrowing availability of approximately $ 28,750 .

The SVB Loan Agreement also provides for certain prepayment and early termination fees, as well as establishes a minimum liquidity covenant and dividend restrictions, along with other customary terms and conditions.

Specified assets have been pledged as collateral.

New Credit Agreement.

On January 5, 2024, the Company entered into an asset-based credit agreement (Credit Agreement) among the Borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as bookrunner and lead arranger (JPMCB), and Silicon Valley Bank, a Division of First-Citizen Bank & Trust Company, as Joint Lead Arrangers and Joint Bookrunners, and the lenders party thereto (Lenders).

The Credit Agreement provides for an asset based revolving credit facility (ABL Facility) in an amount of up to $ 125,000 .

The Company may request an increase in the revolving commitment by up to $ 40,000 (not to exceed a total of $ 165,000 ).

Borrowing availability under the ABL Facility is based on the lesser of $ 125,000 or a borrowing base calculation as defined by the Credit Agreement.

A portion of the ABL Facility, limited to $ 5,000 , is available for the issuance of letters of credit by JPMCB or other financial institutions.

JPMCB in its sole discretion, may create swingline loans by advancing floating rate revolving loans requested.

Any such swingline loans will reduce availability under the ABL Facility on a dollar-for-dollar basis.

The Credit Agreement has a three-year term, expiring January 5, 2027.

The ABL facility is subject to a facility fee of 0.37 % per annum of the daily available revolving commitment and paid on a quarterly basis.

Outstanding amounts under the Credit Agreement bear interest at a rate per annum equal to, at the Company's election:

(i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin.

All swingline loans bear interest at a rate per annum equal to the ABR plus the applicable margin under the Credit Agreement.

Alternate base rate is equal to the greatest of Prime, the NYFRB Rate plus 0.50 % and Adjusted Term SOFR Rate plus 1.00 %.

The applicable margin on borrowings will adjust ranging 1.50 % to 1.75 % per annum for ABR borrowings and from 2.50 % to 2.75 % per annum for SOFR term borrowings determined by the average historical excess availability.

Participation and fronting fees are accrued and paid on a quarterly basis.

At time of closing, the Company borrowed $ 61,865 and had $ 61,885 of available borrowing capacity under the ABL facility.

The proceeds of the ABL Facility were used to terminate the Company’s indebtedness under the SVB Loan Agreement.

The SVB Loan Agreement terminated on January 5, 2024 and was treated as a debt extinguishment.

Certain prepayment and early termination fees under the SVB Loan Agreement were waived at termination.

The resulting loss on debt extinguishment in 2024 is not significant.

As a result of the new Credit Agreement, borrowings outstanding under the existing SVB Loan Agreement have been classified as long-term in the Consolidated Balance Sheet as of December 31, 2023.

Outstanding borrowings are due upon maturity of the Credit Agreement in January 5, 2027.

Through January 2025, the Company's required minimum utilization of the ABL facility is 40 % of the aggregate revolving commitment or $ 50,000 .

Subject to customary exceptions and restrictions, the Company may voluntarily prepay outstanding amounts under the ABL Facility at any time thereafter without premium or penalty.

Any voluntary prepayments made will not reduce commitments under the ABL Facility.

The Credit Agreement contains mandatory prepayment provisions which require prepayment of amounts outstanding under the ABL Facility upon specified events or shortfall.

The ABL Facility is secured by the assets of the Company, whether consisting of personal, tangible or intangible property, including specified all of the outstanding equity interests of the Company’s direct subsidiaries, subject to limitations specified in the Credit Agreement.

The Credit Agreement contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to financial covenants relating to a fixed charge coverage ratio, a minimum liquidity requirement and a minimum excess availability requirement, and restrictions on indebtedness, liens, investments and acquisitions, asset dispositions, specified agreements, restricted payments and prepayment of certain indebtedness.

ATRICURE, INC.

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(In Thousands, Except Per Share Amounts)

The Loan Agreement also provides for certain prepayment and early termination fees, as well as establishes a minimum liquidity covenant and dividend restrictions, along with other customary terms and conditions.

Specified assets have been pledged as collateral.

Future maturities of long-term debt, excluding the term loan final fee, are projected as follows:

Future maturities of debt, after consideration of the new Credit Agreement on January 5, 2024, are projected as follows:

Total long-term debt, of which $ 0 is current and $ 61,865 is noncurrent

The Company has operating and finance leases for offices, manufacturing and warehouse facilities and computer equipment.

The Company’s leases have remaining lease terms of one to eight years .

Options to renew or extend leases beyond their initial term have been excluded from measurement of the ROU assets and lease liabilities for the majority of leases as exercise is not reasonably certain.

The Company has operating and finance leases for office, manufacturing and warehouse facilities and automobiles.

The Company’s leases have remaining lease terms of one to nine years .

Options to renew or extend leases beyond their initial term have been excluded from measurement of the ROU assets and lease liabilities as exercise is not reasonably certain.

The weighted average remaining lease term and the discount rate for the reporting periods are as follows:

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Weighted average discount rate 6.93 % 6.92 % 6.91 %

A letter of credit for $ 1,250 was issued to the lessor of the Company's corporate headquarters building in October 2015, and is renewed annually and remains outstanding as of December 31, 2022.

A letter of credit for $ 1,250 was issued to the lessor of the Company's corporate headquarters building at inception of the lease and is renewed annually and remains outstanding as of December 31, 2023.

The components of lease expense are as follows:

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Finance Leases — 62 —

Early termination of operating lease — — 2,743

Supplemental balance sheet information related to leases was as follows:

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License Agreements.

The Company has a license agreement that requires payments of 5 % of specified product sales.

The agreement terminates the later of 2023 or expiration of the underlying patents or patent applications, which is expected to occur after 2023.

Parties to the license agreement have the right at any time to terminate the agreement immediately for cause.

The Company had been party to a license agreement that required payments of 5 % of specified product sales.

In May 2023, the Company entered into an agreement that terminated the license agreement and the Company's obligations to make royalty payments.

See Legal section below for additional information.

Royalty expense was $ 1,333 , $ 3,264 and $ 3,124 for the years ended December 31, 2023, 2022 and 2021.

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A liability is established once management determines a loss is probable and an amount can be reasonably estimated.

The Company recognizes income from a favorable resolution of legal proceedings when the associated cash or assets are received.

The Company received a Civil Investigative Demand (CID) from the U.S.

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Although the USDOJ and all of the state and local governments declined to intervene, the relator continues to pursue the case.

During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which dropped allegations of off-label promotion and now alleges that the Company paid illegal kickbacks to healthcare providers in exchange for using or referring the Company’s products, in violation of the federal Anti-Kickback Statute and various comparable state and local laws.

During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which dropped allegations of off-label promotion and alleges that the Company paid illegal kickbacks to healthcare providers in exchange for using or referring the Company’s products, in violation of the federal Anti-Kickback Statute and various comparable state and local laws.

While the Company is contesting the case, it is not possible to predict when this matter may be resolved or what impact, if any, the outcome of this matter might have on our consolidated financial position, results of operations or cash flows.

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(IDx) filed a Demand for Arbitration against the Company with the American Arbitration Association (AAA), alleging that the Company breached certain provisions of the License Agreement dated December 9, 2003, among the Company, Clinic and IDx (License Agreement).

Clinic and IDX allege the Company did not include the revenues from sales of certain products in its calculation of royalty payments due under the License Agreement.

Clinic and IDX also allege that the Company did not provide related notices required under the License Agreement.

The Demand for Arbitration requests a declaration that the termination of the License Agreement shall not occur until the expiration of certain patents and that the Company violated the License Agreement’s non-competition provisions.

Clinic and IDX claim they are entitled to no less than $ 6 million plus interest and costs, fees and expenses associated with their claims and future royalties.

The Company denies the allegations of Clinic and IDX.

Clinic and IDx allege the Company did not include the revenues from sales of certain products in its calculation of royalty payments due under the License Agreement, and that the Company did not provide related notices required under the License Agreement.

The Company filed its Answering Statement and Counterclaims to the allegations in September 2022, denying each claim and counterclaiming for breach of contract, correction of inventorship, declaratory judgment, patent prosecution and legal fees.

This arbitration has been scheduled for May 2023.

The Company develops, manufactures and sells devices designed primarily for surgical ablation of cardiac tissue, exclusion of the left atrial appendage, and blocking pain by temporarily ablating peripheral nerves.

These devices are marketed to a broad base of medical centers globally.

In 2022, the Company changed the presentation of its disaggregated revenue within the notes to the Consolidated Financial Statements to align with current product line offerings.

Specifically, pain management revenue, representing

In May 2023, the Company entered into an Assignment and Agreement Regarding IDx and CCF Intellectual Property (Assignment Agreement) with Clinic and IDx.

Pursuant to the Assignment Agreement, during the second quarter of 2023, the Company made a one-time payment of $ 33,400 to Clinic and IDx for the acquisition of patents and other intellectual property.

The Assignment Agreement also required dismissal of the arbitration and release of payment for royalty obligations due to Clinic and IDx under the License Agreement after March 31, 2023.

The amount paid, together with transaction costs, was allocated between the acquired intangible asset, the release of payment for royalty obligations and the settlement of the dispute.

The intangible asset was assigned a value of $ 30,000 and is being amortized over an estimated useful life of 5 years.

The release of the royalty obligations was valued at $ 432 .

The remaining $ 3,088 was allocated to the settlement and is included in selling, general and administrative expenses for the twelve months ended December 31, 2023.

During the first quarter of 2023, the Company entered into a legal settlement of $ 7,500 in connection with the settlement of claims filed against a competitor.

The Company recorded a $ 7,500 gain for the twelve months ended December 31, 2023 for the proceeds received as a reduction to selling, general and administrative expenses.

ATRICURE, INC.

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(In Thousands, Except Per Share Amounts)

sales of the cryoSPHERE ® product, was historically presented within open ablation revenue and is now a separately stated revenue product type.

Valve revenue, historically presented as a separate product type revenue, is now included in open ablation revenue.

Revenue amounts for comparative prior fiscal periods have been reclassified to conform to the current period presentation.

The Company develops, manufactures and sells devices designed primarily for surgical ablation of cardiac tissue, exclusion of the left atrial appendage, and temporarily blocking pain by ablating peripheral nerves.

These devices are marketed to a broad base of medical centers globally.

The Company recognizes revenue when control of promised goods is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.

United States revenue by product type is as follows:

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Europe 38,469 30,428 27,931

Asia 20,734 16,077 13,118

24,526 20,734 16,077

Other International 2,706 2,016 1,190

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Accruals and reserves 1,131 1,332

Other 506 587

Property and equipment 219 ( 2,568 )

Total deferred tax assets 182,962 176,325

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Right-of-use assets ( 2,160 ) ( 2,626 )

Property and equipment ( 2,568 ) ( 1,264 )

Total deferred tax liabilities ( 11,172 ) ( 11,398 )

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Provisions enacted in the Tax Cut and Jobs Act of 2017 related to the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022.

These provisions require us to capitalize and amortize research and experimental expenditures for tax purposes over five or fifteen years , depending on where research is conducted.

These provisions require the Company to capitalize and amortize research and experimental expenditures for tax purposes over five or fifteen years , depending on where research is conducted.

The Company has federal net operating loss carryforwards of $ 276,866 which expire between 2024 and 2037 and $ 175,758 which have no expiration.

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The Company does not expect that its unrecognized tax benefits for research credits will significantly change within twelve months of December 31, 2023.

CONCENTRATIONS

During 2022, 2021 and 2020, approximately 9.7 %, 10.5 % and 10.8 % of the Company’s total net revenue was derived from its top ten customers.

During 2022, 2021 and 2020 no individual customer accounted for more than 10% of the Company’s revenue.

As of December 31, 2022 and 2021, 11.7 % and 16.0 % of the Company’s total accounts receivable balance was derived from its top ten customers.

No individual customer accounted for more than 10% of the Company’s accounts receivable as of December 31, 2022 and 2021.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The Company maintains cash and cash equivalents balances at financial institutions which at times exceed FDIC limits.

As of December 31, 2022, $ 57,849 of the cash and cash equivalents balance was in excess of the FDIC limits.

EMPLOYEE BENEFIT PLANS

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Eligible employees may contribute pre-tax annual compensation up to specified maximums under the Internal Revenue Code.

During the year ended December 31, 2022, the Company made matching contributions of 50 % on the first 8 % of employee contributions to the 401(k) Plan.

During the year ended December 31, 2021 and 2020, the Company made matching contributions of 50 % on the first 6 % of employee contributions to the 401(k) Plan.

During the years ended December 31, 2023 and 2022, the Company matched contributions of 50 % on the first 8 % of employee contributions to the 401(k) Plan.

During the year ended December 31, 2021, the Company matched contributions of 50 % on the first 6 % of employee contributions to the 401(k) Plan.

The Company’s matching contributions in 2023, 2022 and 2021 were $ 4,949 , $ 4,447 and $ 2,651 .

Additional amounts may be contributed to the 401(k) Plan at the discretion of the Company’s Board of Directors, however, no such discretionary contributions were made in 2022, 2021 or 2020.

The Company also provides retirement benefits for employees of its foreign subsidiaries.

Additional amounts may be contributed to the 401(k) Plan at the discretion of the Company’s Board of Directors;

however, no such discretionary contributions were made in 2023, 2022 or 2021.

The Company also provides retirement benefits for

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

employees of its foreign subsidiaries.

Total contributions to foreign retirement plans were $ 503 , $ 446 and $ 349 in 2023, 2022 and 2021.

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the 2023 Stock Incentive Plan (2023 Plan) and the 2018 Employee Stock Purchase Plan (ESPP).

Stockholders approved the 2023 Plan at the 2023 Annual Meeting of Stockholders.

Pursuant to its terms, the 2023 Plan supersedes and replaces the 2014 Stock Incentive Plan (Prior Plan).

Stock Incentive Plan

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As of December 31, 2023, 2,287 shares of common stock had been reserved for issuance under the 2023 Plan and 2,238 shares were available for future grants.

Stock options, restricted stock awards and restricted stock units granted generally vest at a rate of 33.3 % on the first, second and third anniversaries of the grant date.

Stock options generally expire ten years from the date of grant.

The Company issues registered shares of common stock for stock option exercises, restricted stock grants and performance award grants.

The following table summarizes total share-based compensation expense related to employees, directors and consultants for 2023, 2022 and 2021.

The expense was allocated as follows:

2023 2022 2021

Cost of revenue $ 1,817 $ 1,868 $ 2,243

Research and development expenses 5,802 4,544 4,206

Selling, general and administrative expenses 28,109 22,359 21,629

Total $ 35,728 $ 28,771 $ 28,078

Performance Share Awards.

The award agreements for the PSAs provide that each PSA that vests represents the right to receive one share of the Company’s common stock at the end of the performance period.

With respect to the PSAs, the number of shares that vest and are issued to the recipient is based upon the Company’s performance with respect to specified targets at the end of the three year performance period.

PSAs granted in 2020 have performance targets based on the Company’s compound annual revenue growth rate (CAGR) over the three year performance period, and payout opportunities range from 0 % to 100 % of the target amount.

PSAs awarded subsequent to 2020 have two weighted performance targets:

(i) the Company’s CAGR and (ii) relative total shareholder return (TSR).

The number of shares that vest and are issued to the recipient is based upon the Company’s performance with respect to specified targets at the end of the three-year performance period.

PSAs granted since 2021 have two weighted performance targets:

(i) the Company’s compound annual growth rate (CAGR), a performance condition and (ii) relative total shareholder return (TSR), a market condition, both measured over the three-year performance period.

TSR is measured against the Nasdaq Health Care Index constituents and the 20 -trading-day average stock price prior to the start and end of the performance period.

PSAs granted in 2021 have payout opportunities ranging from 0 % to 200 % of the target amount, based on equally weighting of the performance targets.

Awards granted in 2022 have payout opportunities ranging from 0 % to 300 % of the target amount and are weighted 60 % on the CAGR performance target and 40 % on the TSR performance target.

PSAs granted in 2021 have payout opportunities ranging from 0 % to 200 % of the target amount, based on equally weighted performance targets.

PSAs granted beginning in 2022 have payout opportunities ranging from 0 % to 300 % of the target amount.

PSAs granted in 2022 are weighted 60 % on the CAGR performance target and 40 % on the TSR performance target.

PSAs granted in 2023 are weighted 75 % on the CAGR performance target and 25 % on the TSR performance target.

These ranges are used to determine the number of shares that will be issuable when the award vests.

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(In Thousands, Except Per Share Amounts)

PSA activity at target attainment under the plans during 2023 was as follows:

Performance Share Awards Number of Shares Outstanding

Outstanding at January 1, 2023 213 $ 90.70

Awarded 236 46.16

Vested ( 96 ) 89.36

Forfeited — —

Outstanding at December 31, 2023 353 $ 61.09

During the year ended December 31, 2023, the 2021 PSAs with a TSR performance target vested at the target threshold, while 2021 PSAs with a CAGR performance target vested over the target threshold.

An additional 43 shares were earned that are excluded from plan activity above.

The total fair value of performance share awards vested during 2023, 2022 and 2021 was $ 4,955 , $ 5,185 and $ 8,165 .

In determining compensation expense, the fair value of performance share awards with a performance condition is based on the market value of the Company’s stock on the grant date of the awards.

The fair value of performance share awards with a market condition is estimated on the grant date using a Monte Carlo simulation and includes the following assumptions:

2023 2022 2021

Stock price $ 38.81 $ 39.94 - $ 69.59

Expected term (years) 2.8 2.6 to 2.8

Company volatility 44.80 % 43.50 - 46.90 %

Market index average volatility 91.00 % 90.30 - 92.00 %

Market index average correlation 32.20 % 33.50 - 35.40 %

Risk-free interest rate 4.60 % 1.40 - 2.70 %

Dividend yield 0.00 % 0.00 %

The expected term is estimated as the remaining performance period at the grant date.

Expected volatility is estimated based on the Company and daily trading prices of the market index, adjusted for dividends and stock splits over the remaining performance period.

The risk-free interest rate is based upon the US Constant Maturity yield curve at the time of grant for the expected term of the performance share awards.

Based on the assumptions above, the weighted average estimated grant date fair value per share and expense was as follows:

2023 2022 2021

Weighted average estimated grant date fair value $ 46.16 $ 91.05 $ 89.36

Expense 11,417 8,731 8,095

As of December 31, 2023, $ 11,610 of unrecognized compensation costs related to non-vested performance share awards are expected to be recognized over a weighted-average period of 1.7 years.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Restricted Stock Awards and Units.

Restricted stock awards and restricted stock units granted generally vest at a rate of 33.3 % on the first, second and third anniversaries of the grant date.

Activity under the plans during 2023 was as follows:

Number of Average

Remaining Aggregate

Shares Exercise

Contractual Intrinsic

Time-Based Stock Options Outstanding Price

Restricted Stock Awards RSA

Outstanding at January 1, 2023 598 $ 60.00

Awarded 751 39.21

Released ( 338 ) 54.08

Forfeited ( 29 ) 50.25

Outstanding at December 31, 2023 982 $ 46.43

The total fair value of restricted stock vested during 2023, 2022 and 2021 was $ 13,824 , $ 23,242 and $ 40,510 .

In determining compensation expense, the fair value of restricted stock awards and restricted stock units is based on the market value of the Company’s stock on the grant date of the awards.

The weighted average estimated grant date fair value per share and expense was as follows:

2023 2022 2021

Weighted average estimated grant date fair value $ 39.21 $ 63.14 $ 67.51

Expense 21,797 17,621 17,746

As of December 31, 2023, $ 28,202 of unrecognized compensation costs related to non-vested performance share are expected to be recognized over a weighted-average period of 1.9 years.

Stock Options.

Stock options granted generally vest at a rate of 33.3 % on the first, second and third anniversaries of the grant date and expire ten years from the date of grant.

Activity under the plans during 2023 was as follows:

Time-Based Stock Options Number of

Outstanding at January 1, 2023 481 $ 29.34

Exercised ( 137 ) 16.93

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For 2023, 2022 and 2021, $ 2,316 , $ 1,816 and $ 8,175 in cash proceeds from the exercise of stock options were included in the Consolidated Statements of Cash Flows.

Shares Grant Date

Restricted Stock Awards and Performance Share Awards Outstanding Fair Value

Outstanding Fair Value

Outstanding at January 1, 2022 628 $ 50.96 227 $ 64.27

Awarded 356 63.14 117 91.05

Released ( 362 ) 47.58 ( 116 ) 44.21

Forfeited ( 24 ) 57.45 ( 15 ) 55.17

Outstanding at December 31, 2022 598 $ 60.00 213 $ 90.70

The total fair value of restricted stock vested during 2022, 2021 and 2020 was $ 23,242 , $ 40,510 and $ 34,200 .

The total fair value of performance share awards vested during 2022, 2021 and 2020 was $ 5,185 , $ 8,165 and $ 4,003 .

The Company issues registered shares of common stock to satisfy stock option exercises and restricted stock and performance award grants.

Employee Stock Purchase Plan

Under the ESPP, shares of the Company’s common stock may be purchased at a discount ( 15 %) to the lesser of the closing price of the Company’s common stock on the first or last trading day of the offering period.

The offering period (currently six months ) and the offering price are subject to change.

Participants may not purchase a value of more than $ 25 of the Company’s common stock in a calendar year and may not purchase a value of more than 3 shares during an offering period.

As of December 31, 2022, there were 184 shares available for future issuance under the ESPP.

The fair value of options is estimated on the grant date using the Black-Scholes model.

No options were granted during 2023 or 2022.

ATRICURE, INC.

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(In Thousands, Except Per Share Amounts)

Valuation and Expense Information Under FASB ASC 718

The following table summarizes total share-based compensation expense related to employees, directors and consultants for 2022, 2021 and 2020.

The expense was allocated as follows:

2022 2021 2020

Cost of revenue $ 1,868 $ 2,243 $ 1,425

Research and development expenses 4,544 4,206 3,530

Selling, general and administrative expenses 22,359 21,629 17,687

Total $ 28,771 $ 28,078 $ 22,642

The expense by award type was allocated as follows:

2022 2021 2020

Restricted Stock Awards & Time-Based Stock Options $ 18,633 $ 18,727 $ 18,612

Performance Share Awards 8,731 8,095 2,921

ESPP 1,407 1,256 1,109

Total $ 28,771 $ 28,078 $ 22,642

In 2020, the Compensation Committee modified the methodology for measuring performance of the 2018, 2019 and 2020 performance awards.

The modification to vesting conditions and performance measures resulted in incremental compensation cost of $ 994 , $ 2,856 and $ 569 during 2022, 2021 and 2020.

As of December 31, 2022 there was $ 23,252 of unrecognized compensation costs related to non-vested stock options and restricted stock arrangements ($ 1,160 relating to stock options and $ 22,092 relating to restricted stock).

This cost is expected to be recognized over a weighted-average period of 1.4 years for stock options and 1.8 years for restricted stock.

As of December 31, 2022 there was $ 11,648 of unrecognized compensation costs related to non-vested performance share awards, and this cost is expected to be recognized over a weighted-average period of 1.7 years.

In determining compensation expense, the fair value of restricted stock awards, restricted stock units and performance share awards with a performance condition is based on the market value of the Company’s stock on the grant date of the awards or subsequent modification (as applicable).

The fair value of options is estimated on the grant date using the Black-Scholes model.

No options were granted during 2022.

Options granted in prior years included the following assumptions:

Options granted in 2021 included the following assumptions:

Range of risk-free interest rate 0.43 - 1.22 %

0.30 - 1.73 %

Range of expected life of stock options (years) 5.3 to 5.7

Range of expected volatility of stock 40.00 - 43.00 %

40.00 - 43.00 %

Weighted-average volatility 41.84 %

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The Company estimates the expected terms of options using historical employee exercise behavior.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The fair value of performance share awards with a market condition is estimated on the grant date using a Monte Carlo simulation and includes the following assumptions:

Stock price $ 39.94 - $ 69.59

Expected term (years) 2.6 to 2.8

Company volatility 43.50 - 46.90 %

Market index average volatility 90.30 - 92.00 %

Market index average correlation 33.50 - 35.40 %

Risk-free interest rate 1.40 - 2.70 %

Dividend yield 0.00 %

The expected term is estimated as the remaining performance period at the grant date.

Expected volatility is estimated based on the Company and daily trading prices of the market index, adjusted for dividends and stock splits over the remaining performance period.

The risk-free interest rate is based upon the US Constant Maturity yield curve at the time of grant for the expected term of the performance share awards.

Based on the assumptions noted above, the weighted average estimated grant date fair value per share of the stock options, restricted stock awards and performance share awards granted for 2022, 2021 and 2020 was as follows:

Based on the assumptions noted above, the weighted average estimated grant date fair value per share and expense was as follows:

2023 2022 2021

Stock options $ — $ 27.31 $ 15.25

Restricted stock awards 63.14 67.51 40.77

Performance share awards 91.05 89.36 38.42

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Weighted average estimated grant date fair value $ — $ — $ 27.31

Expense 765 1,012 981

As of December 31, 2023, $ 287 of unrecognized compensation costs related to non-vested stock options are expected to be recognized over a weighted-average period of 0.5 years.

Employee Stock Purchase Plan

The offering period (currently six months ) and the offering price are subject to change.

Participants may not purchase more than $ 25 of the Company’s common stock in a calendar year and may not purchase a value of more than 3 shares during an offering period.

As of December 31, 2023, 782 shares are available for future issuance under the ESPP.

ESPP expense was $ 1,749 , $ 1,407 and $ 1,256 for the years ended December 31, 2023, 2022 and 2021.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

In addition to net (loss) income, comprehensive (loss) income includes foreign currency translation adjustments and unrealized losses on investments.

Accumulated other comprehensive (loss) income consisted of the following, net of tax:

Accumulated other comprehensive income (loss) consisted of the following, net of tax:

2023 2022 2021

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Balance at beginning of period $ ( 3,698 ) $ ( 887 ) $ 54

Other comprehensive (loss) income before reclassifications ( 2,739 ) ( 941 ) ( 70 )

Amounts reclassified from accumulated other comprehensive (loss) income to interest income ( 72 ) — 24

Other comprehensive income (loss) before reclassifications 2,898 ( 2,739 ) ( 941 )

Amounts reclassified from accumulated other comprehensive income (loss) to interest income — ( 72 ) —

Balance at end of period $ ( 800 ) $ ( 3,698 ) $ ( 887 )

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Balance at beginning of period $ ( 398 ) $ ( 61 ) $ 258

Other comprehensive (loss) income before reclassifications ( 774 ) ( 768 ) 555

Other comprehensive income (loss) before reclassifications 154 ( 774 ) ( 768 )

Amounts reclassified from accumulated other comprehensive (loss) income to other (expense) income 51 437 449

Balance at end of period $ ( 193 ) $ ( 398 ) $ ( 61 )

Total accumulated other comprehensive (loss) income at end of period $ ( 4,096 ) $ ( 948 ) $ 312

Total accumulated other comprehensive loss at end of period $ ( 993 ) $ ( 4,096 ) $ ( 948 )

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data