What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-16 · 98 added, 87 removed, 151 unchanged (55% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 16, 2024.

We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management.

Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive procedures.

We are a leading innovator in treatments for atrial fibrillation, left atrial appendage management and post-operative pain management.

Our ablation and left atrial appendage management products are used by physicians during both open-heart and minimally invasive procedures.

In open-heart procedures, the physician is performing heart surgery for other conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure.

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direct international sales transactions are transacted in Euros, British Pounds, Australian Dollars or Canadian Dollars.

In 2023, we realized significant global revenue growth and continued our strategic initiatives of product innovation, clinical science and expanding physician awareness and adoption through superior training and education.

Our worldwide revenues for the year ended December 31, 2023 of $399,245 was an increase of 20.8% over the prior year driven by growing adoption across key product lines.

Historically there have been limited competitors in our key markets, but we have begun to see more entrants that may cause variability in 2024 results.

In 2024, we realized significant global revenue growth and continued our strategic initiatives of product innovation, clinical science and physician education and training to expand awareness and adoption.

Our worldwide revenues for the year ended December 31, 2024 of $465,307 was an increase of 16.5% over the prior year driven by growing adoption across key product lines as well as new product launches.

Historically there have been limited competitors in our key markets, but new entrants are marketing and developing competing products, procedures, and/or clinical solutions that may cause variability in our results.

Highlights of the strategic and operational advancements in 2024 include:

PRODUCT INNOVATION.

We received final labeling approval for the next generation EPi-Sense ST device and began a limited launch evaluation in the fourth quarter of 2022, followed by full product launch in the second quarter of 2023.

In October 2023, we received clearance for our next generation cryoSPHERE probe for pain management and expect to launch in the first quarter of 2024.

Additionally, we completed several 510k submissions to FDA for new products in development.

We also continue to make significant progress on European Medical Device Regulation (EU MDR) clearance submissions for our products.

As of the second quarter of 2023, all of our products have been submitted to our notified body under EU MDR.

These activities are in addition to several research and development programs currently underway.

We continue to invest in research and development of new products and pursue regulatory approvals to market and sell globally across all franchises.

Upon receiving regulatory approval during the third quarter of 2024, we began selling the EnCompass clamp in CE-marked countries in the European Union, representing a significant expansion of our open ablation franchise products in Europe.

• Minimally invasive .

In the first half of 2024, FDA granted 510(k) clearance for EPi-Ease, our Hybrid access device to facilitate guide-wire delivery, vacuum application and endoscope insertion.

During the third quarter, FDA granted 510(k) clearance for our EnCapture clamp, the newest in our line of Isolator Synergy Ablation System clamps, with enhanced geometry and features to facilitate engagement with intended cardiac tissue.

• Pain management .

During the second quarter of 2024, we launched the cryoSPHERE+ cryoablation probe for pain management in the United States.

The cryoSPHERE+ device leverages new technology that minimizes thermal loss by focusing energy at the ball tip, allowing for a reduction in freeze time by 25%.

Further, the cryoSPHERE MAX probe was launched during the fourth quarter of 2024 and features a larger ball tip designed

to optimize Cryo Nerve Block therapy.

This new probe reduces freeze times by 50% when compared to the first generation cryoSPHERE cryoablation probe, and over 30% when compared to the cryoSPHERE+ probe.

• Appendage management .

We launched the AtriClip FLEX-Mini device in the United States during the third quarter of 2024.

The AtriClip FLEX-Mini sets a new standard as the smallest profile for surgical LAA device on the market and builds upon the proven technology of our AtriClip platform, with ease of use and design simplicity that offers enhanced access and increased visibility for physicians.

We also obtained additional international regulatory approvals for our AtriClip platform during the third quarter.

In China, we received approval to market and sell several models of our AtriClip Left Atrial Appendage Exclusion System from the National Medical Products Administration (NMPA) of China.

In CE-marked countries in Europe, we received expanded indication for the AtriClip for use in patients at high risk of thromboembolism for whom left atrial appendage exclusion is warranted.

Throughout 2024, we received several additional CE Mark certifications under the European Union Medical Device Regulation (EU MDR).

As of December 31, 2024, substantially all of our products were cleared under EU MDR.

During the fourth quarter of 2024, we entered into an exclusive licensing agreement with a third-party to co-develop and commercialize equipment incorporating pulsed field ablation.

See Note 3 - Asset Acquisition for additional information.

CLINICAL SCIENCE.

We continue to invest in studies to expand labeling claims, support various indications for our products and gather clinical data regarding our products.

We invest in studies to expand labeling claims, support various indications for our products and publish clinical data for therapies and procedures involving our products.

During 2024, we supported the publication of 19 articles and 17 congress abstracts featuring clinical studies with our product.

The Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.

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The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide.

In January 2023, the first patient was enrolled in the trial, and we ended 2023 with nearly 1,400 patients enrolled.

In January 2023, the first patient was enrolled in the trial, and we ended 2024 with over 4,200 patients enrolled.

Site initiation and enrollment is ongoing.

Trial enrollment was completed in the second quarter of 2023 for the ICE-AFIB clinical trial, which is designed to study the safety and efficacy of our cryoICE ® system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery.

The trial provided for enrollment of up to 150 patients at up to 20 sites in the United States.

Patient follow-up for twelve months post ablation required by the study protocol remains ongoing.

During the second quarter of 2023, results from our CEASE-AF trial were presented at the European Heart Rhythm Association meeting.

CEASE-AF is a prospective, multi-center randomized control trial for persistent and long-standing persistent Afib treatment that demonstrated superior freedom from atrial arrhythmias for staged hybrid ablation compared to endocardial catheter ablation.

During the fourth quarter of 2023, 12-month follow-up results of enrolled patients from our DEEP AF IDE trial were presented at the American Heart Association meeting.

The DEEP AF IDE pivotal trial evaluated the safety and efficacy of the AtriCure Bipolar System when used in a staged approach where a minimally invasive surgical ablation procedure is first performed.

The patient undergoes the endocardial catheter procedure approximately 91-120 days later.

The results from this single arm study for persistent and long-standing persistent Afib treatment demonstrated superior freedom from atrial arrhythmias for staged hybrid ablation compared to a pre-specified performance goal.

Our professional education and marketing teams conduct virtual and in-person training programs for physicians and healthcare professionals.

These training methods ensure invaluable access to continuing education and awareness of our products and related procedures.

The EnCompass clamp and the AtriClip in Box Lesion and Left Atrial Appendage E X clusion Procedure for the Prevention of N ew O nset of A trial F ibrillation (BoxX-NoAF) IDE trial will evaluate the impact of concomitant ablation and LAA exclusion in non-AF patients for the reduction of post-operative AF (POAF) and Clinical AF.

This prospective, multi-center, multi-national randomized trial evaluates safety at 30 days post-procedure for POAF and secondary effectiveness for Clinical AF through three years.

The trial provides for enrollment of up to 960 subjects.

During the fourth quarter of 2024, FDA approved the trial protocol.

We expect site initiation to begin by the end of 2025.

Our professional education and marketing teams conduct a variety of virtual and in-person training programs for physicians and other healthcare professionals.

These training methods ensure access to continuing education and awareness of our products and related procedures.

During 2023, we launched new training courses for Advanced Practice Providers, pain management in pectus procedures, as well as a best practice course for developing arrhythmia programs, with a primary focus on Hybrid therapies.

These trainings allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals.

Additionally, our professional education courses continue to benefit from use of inanimate models or synthetic cadavers, known as CADets.

These reusable CADets provide a sustainable alternative to the use of animals or cadavers, in addition to reducing spend on training programs.

Additionally, our professional education courses continue to be enhanced by the use of simulation models or synthetic cadavers, known as CADets.

These reusable CADets provide a sustainable alternative to the use of cadaver specimens, in addition to increasing the efficiencies of education and more cost effective training alternatives.

In 2024, we continue to innovate physician training to improve accessibility and efficiency for our physician partners.

We are currently piloting the use of live streaming to enable remote proctoring and case observation.

SOCIETY GUIDELINES.

In 2023, the American College of Cardiology (ACC), American Heart Association (AHA), American College of Clinical Pharmacy (ACCP), and HRS released Guidelines for Diagnosis and Management of Atrial Fibrillation, and they upgraded Left Atrial Appendage Management to the highest recommendation of Class 1 and now include Hybrid AF™ Therapy as a Class 2 recommendation.

In 2024, the European Society of Cardiology (ESC) released Guidelines for Management of Atrial Fibrillation developed in collaboration with European Association of Cardio-Thoracic Surgery (EACTS), in which they upgraded LAAM to the highest Class 1 recommendation.

During 2023, the American College of Cardiology (ACC), American Heart Association (AHA), American College of Clinical Pharmacy (ACCP) and HRS released Guidelines for Diagnosis and Management of Atrial Fibrillation, and upgraded LAAM to the highest recommendation of Class 1 and included Hybrid AF Therapy as a Class 2 recommendation.

All major cardiac societal guidelines now include a Class 1 recommendation for surgical management of the left atrial appendage.

These societal guidelines are reflective of the scientific evidence suggesting that surgical and hybrid ablation is safe and effective for patients who have Afib.

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Gross profit 347,524 74.7 300,370 75.2

Operating expense (benefit):

Operating expense:

Research and development expenses 96,178 20.7 73,915 18.5

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Total Revenue $ 465,307 $ 399,245 $ 66,062 16.5 %

Worldwide revenue increased 20.8% (20.6% on a constant currency basis).

In the United States, we experienced growth in all key product lines as a result of deepening market penetration and expanding physician adoption.

Key products contributing to the increase in revenue in the United States were:

• the ENCOMPASS ® clamp in open ablation,

• Hybrid AF™ Therapy procedures using the EPi-Sense System in minimally invasive ablation,

• the cryoSPHERE ® probe for post-operative pain management and

• the AtriClip ® Flex⋅V ® for appendage management.

International revenue increased 23.5% (22.1% on a constant currency basis), across all franchises and major geographic regions.

Worldwide revenue increased 16.5% as reported and on a constant currency basis.

We experienced growth in all key product lines as a result of deepening market penetration, continuing physician adoption and new product launches.

International revenue increased 25.6% as reported and on a constant currency basis, across all franchises and major geographic regions, while key products contributing to the increase in revenue in the United States were:

• EnCompass clamp in open ablation,

• cryoSPHERE probes for post-operative pain management and

• AtriClip ® Flex⋅V ® for appendage management.

Revenue reported on a constant currency basis is a non-GAAP measure calculated by applying previous period foreign currency exchange rates, which are determined by the average daily exchange rate, to each of the comparable periods.

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Cost of revenue increased $18,908 primarily reflecting higher sales volumes.

The gross margin increase of 80 basis points was driven by favorable production efficiencies, partially offset by less favorable geographic and product mix.

Gross margin decreased by 55 basis points driven by less favorable geographic and product mix, as well as an increase in product costs.

Research and development expenses.

Research and development expenses increased $22,263, or 30.1%.

Expansion of product development, regulatory and clinical teams resulted in $7,413 of additional personnel costs, including variable compensation and share-based compensation.

Clinical trial expenses increased $6,667 due to strong enrollment activity in the LeAAPS clinical trial throughout the year.

Additionally, our expanding product pipeline and domestic and international regulatory submissions drove a $2,389 increase in spending.

During 2024, we entered into an exclusive licensing agreement requiring upfront cash payment of $12,000 for the acquired in-process research and development (IPR&D), which was included in research and development expenses in 2024.

See Note 3 – Asset Acquisition for further information.

Expansion of product development, regulatory and clinical teams resulted in additional headcount-related costs (including travel and share-based compensation) of $6,773.

Clinical trial expenses increased $4,801 due to increased trial activity driven by our LeAAPS clinical trial.

These increases were partially offset by a $1,606 decrease in product development project spend and regulatory approval costs as several new products were brought to market in 2024, including cryoSPHERE+ and AtriClip FLEX-Mini.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $38,221, or 15.1%.

Personnel costs increased $26,971 as a result of growth in headcount, variable compensation and share-based compensation.

Trade shows and marketing activities increased $1,538 and other administrative and operating expenses increased $2,274 as compared to the prior year.

This increase was offset by a $4,019 decrease in training costs as a result of growing efficiencies and enhancements to our global training programs and a net gain of $4,412 from non-recurring legal settlements during the first half of 2023.

Legal settlement activity included a $7,500 gain from proceeds on a legal matter settled during the first quarter of 2023, partially offset by a $3,088 charge for settlement of an intellectual property matter during the second quarter of 2023.

See Note 10 – Commitments and Contingencies for further information.

Personnel costs, including travel and share-based compensation, increased $27,384 as a result of growth in headcount and variable compensation.

Operational growth drove $2,156 additional professional services, IT and corporate costs along with $2,079 additional marketing and meeting activities.

Finally, the increase reflects a $4,412 non-recurring net gain in 2023 related to legal settlements.

See Note 11 – Commitments and Contingencies for related discussion.

Other income and expense.

Other income and expense consists primarily of net interest expense and net foreign currency transaction losses.

Net interest expense was $3,133 for 2023 and $2,992 for 2022.

During 2024, the Company recognized a loss on debt extinguishment of $1,362.

See Note 9 - Indebtedness for related discussion.

The remaining activity consists primarily of net interest expense and net foreign currency transaction losses.

Liquidity and Capital Resources

As of December 31, 2023, we had cash, cash equivalents and investments of $137,285 and borrowing capacity of approximately $28,750 under the SVB Credit Facility.

As a result of the new asset-based credit agreement with JPMorgan Chase Bank, N.A.

entered into on January 5, 2024, unused borrowing availability increased to approximately $61,885 (see Note 8 – Indebtedness for related discussion).

All cash equivalents and investments and most of our operating cash are held in United States financial institutions.

As of December 31, 2024, we had cash and cash equivalents of $122,721 and unused borrowing capacity of approximately $61,885 under our existing credit agreement.

All cash equivalents and most of our operating cash are held in United States financial institutions.

A minor portion of our cash is held in foreign banks to support our international operations.

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investments in working capital;

costs to develop and support our products, including professional training;

costs to develop and support our products, including professional training, clinical trials and contractual development costs;

costs to expand and support our sales and marketing efforts;

operating and filing costs relating to changes in regulatory policies or laws;

operating and filing costs required by regulatory policies or laws;

costs for clinical trials and to secure regulatory approval for new products;

costs to prosecute, defend and enforce our intellectual property rights;

costs to defend against and/or resolve litigation or claims against us;

maintenance and enhancements to our information systems and security;

and possible acquisitions and joint ventures, including potential business integration costs.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, rising interest rates, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, changing interest rates, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

Credit facility.

As of December 31, 2023, we had a Loan and Security Agreement with Silicon Valley Bank (SVB), (SVB Loan Agreement).

The SVB Loan Agreement provides for 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 and expires November 2026.

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.

We had unused borrowing capacity of approximately $28,750 under our revolving credit facility.

As of January 5, 2024, we entered into an asset-based credit agreement with JPMorgan Chase Bank, N.A.

On January 5, 2024, we entered into an asset-based credit agreement with JPMorgan Chase Bank, N.A.

as Administrative Agent, JPMorgan Chase Bank, N.A.

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

At the time of closing, the Company borrowed $61,865 and had unused borrowing availability of approximately $61,885.

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

As a result of the new Credit Agreement, the $60,000 borrowings outstanding under the SVB Loan Agreement as of December 31, 2023 are classified as noncurrent in the Consolidated Balance Sheet.

Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2023.

The proceeds of the ABL Facility were used to terminate the Company’s indebtedness under the prior loan agreement with Silicon Valley Bank.

As of December 31, 2024, our outstanding debt was $61,865 and we had unused borrowing availability of approximately $61,885.

Our corporate headquarters lease requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2024.

For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 9 – Indebtedness.

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We incur capital expenditures on an ongoing basis to continue investment in our growth and our ability to better serve our customers.

Throughout 2021 through 2023, we continued expansion and renovation of our manufacturing and engineering facilities in our Mason, Ohio campus.

In recent years, we have expanded the manufacturing and engineering facilities in our Mason, Ohio campus and expect to continue to invest in facilities to support our growth.

Other Contractual Obligations.

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In 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial.

The terms of the agreement require we make milestone payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason.

The terms of the agreement require payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason.

Furthermore, we incur additional variable costs, including pass through costs from clinical trial sites.

We expect to disburse between $14,000 and $17,000 of fixed and

variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.

We have operating and finance leases primarily for our corporate offices, manufacturing and warehouse facilities and automobiles.

We expect to disburse between $14,000 and $17,000 of fixed and variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.

In 2024, we entered into an exclusive licensing agreement to co-develop and commercialize equipment incorporating PFA technology.

The agreement requires that we pay additional contingent consideration in cash upon achievement of specified developmental and regulatory approval milestones within defined periods over the ten-year term.

We expect to disburse between $6,000 and $10,000 based on estimated achievement of milestone payments within the next twelve months.

For additional information, see Note 3 – Asset Acquisition.

We have operating and finance leases primarily for our offices, manufacturing and warehouse facilities and automobiles.

Our finance leases consist primarily of principal and interest payments related to our Mason, Ohio headquarters building.

As of December 31, 2023, we have current finance lease obligations of $1,086 and long-term obligations of $8,061.

Our operating leases for office and warehouse space includes current obligations of $1,447 and long-term obligations of $3,307.

As of December 31, 2024, current finance lease obligations are $1,186 and long-term obligations are $7,281.

Our operating leases for office and warehouse space includes current obligations of $1,619 and long-term obligations of $4,579 as of December 31, 2024.

For additional information, see Note 10 – Leases.

We have contractual obligations for contingent consideration payments related to the SentreHEART acquisition.

Subject to the terms and conditions of the SentreHEART merger agreement, such contingent consideration would be paid in AtriCure common stock and cash, up to a specified maximum number of shares.

We have a contractual obligation for a contingent consideration payment under the SentreHEART merger agreement that would be paid in AtriCure common stock and cash, up to a specified maximum number of shares.

As of December 31, 2024, we believe the likelihood of payment is remote, and the estimated fair value of the contingent consideration is $0.

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Sources of liquidity.

We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our Credit Agreement, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.

However, we have on file with the SEC a shelf registration statement which allows us to sell any combination of debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future.

We believe that our current cash and cash equivalents, along with the cash we expect to generate or use for operations or access via our Credit Agreement, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.

However, we have a shelf registration statement on file with the SEC which allows us to sell any combination of debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future.

We expect to maintain the effectiveness of the shelf registration statement for the foreseeable future.

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2024 2023 Change

Net cash provided by (used in) operating activities

Net cash provided by operating activities

$ 12,204 $ 4,484 $ 7,720

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Net cash used in financing activities (3,603) (32) (3,571)

(32) (7,059) 7,027

Cash flows provided by (used in) operating activities.

Net cash provided by operating activities increased $26,625 in 2023 as compared to 2022, largely reflecting the improvement in operating results of $16,028 driven by higher sales, improvements to gross and operating margin and a net gain from legal settlements.

Cash used for working capital remained relatively flat year over year, with increased investment in inventories largely offset by increased accruals for annual variable compensation payments due to improved operating performance.

Cash flows provided by operating activities.

Net cash provided by operating activities increased $7,720 in 2024 as compared to 2023.

While operating results declined $14,260, this decline was driven primarily by an increase in adjustments to income and changes in non-cash expenses as well as the acquisition of in-process research and development for $12,000.

Changes in non-cash expenses include $4,677 increase in share-based compensation, $3,920 increase in depreciation & amortization and $1,362 loss on extinguishment of debt.

Cash used in working capital remained flat year over year due to moderating investments in inventory in 2024, offset by higher annual variable compensation due to improved operating performance.

Cash flows provided by investing activities.

Net cash provided by investing activities decreased by $22,189 in 2023 compared to 2022, reflecting the $30,000 acquisition of intellectual property, partially offset by a $4,883 decrease in purchases of property and equipment following our 2022 manufacturing facilities expansion and $2,928 increase in net maturities of available-for-sale securities.

Net cash provided by investing activities increased by $8,417 in 2024 compared to 2023.

This increase is attributable to a $18,000 decrease in cash paid for acquisitions year over year, offset by a $10,147 decrease in maturities of available-for-sale securities.

Cash flows used in financing activities.

Net cash from financing activities increased by $7,027 in 2023 compared to 2022, reflecting savings of $5,644 due to fewer shares repurchased at a lower value for payment of taxes on stock awards and an increase of $1,536 of proceeds from the employee stock purchase plan and stock option exercise activity.

Net cash used in financing activities increased by $3,571 in 2024 compared to 2023, driven by $1,686 payment for extinguishment of debt and financing fees, net of borrowings, and a $1,491 decrease in proceeds from stock option exercises and the employee stock purchase plan.

Inflationary pressures may have an adverse impact on our results of operations or financial condition in the foreseeable future.

Inflation has impacted our operating costs throughout 2024 and 2023.

Continued increases in our cost of revenue may affect our ability to maintain our gross margin if the selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely affect our operating results and the

ability to make discretionary investments.

Continued increases in our cost of revenue may affect our ability to maintain our gross margin if selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely affect our operating results and the ability to make discretionary investments.

We will continue to monitor the impact of inflation on our cost of revenue and operating expenses.

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If such goals are not met or service is not rendered for the requisite service period, no compensation cost is recognized, and any recognized compensation cost from prior periods will be reversed.

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 existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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The sources of taxable income that may be available to realize the benefit of deferred tax assets are future taxable income, future reversals of existing taxable temporary differences, taxable income in prior carryforward years and tax planning strategies that are both prudent and feasible.

In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is

significant objectively verifiable negative evidence that must be overcome by objectively-verifiable positive evidence to avoid the need for a valuation allowance.

In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is significant objectively verifiable negative evidence that must be overcome by objectively-verifiable positive evidence to avoid the need for a valuation allowance.

Our valuation allowance offsets substantially all net deferred income tax assets as it is more-likely-than-not that the benefit of such deferred income tax assets will not be recognized in future periods.

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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 7. Management’s Discussion and Analysis