What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-14 compared with 2024-02-16 · 253 added, 280 removed, 686 unchanged (44% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Performance Share Awards with a Market Condition - Refer to Note 14 to the financial statements

Valuation of Performance Shares - Refer to Note 15 to the financial statements

Critical Audit Matter Description

Performance share awards (PSAs) granted in 2023 have two performance targets measured at the end of the three-year performance period:

(i) the Company's revenue compound annual growth rate, a performance condition;

and (ii) relative total shareholder return (TSR), a market condition.

The performance and market condition payouts are determined independently.

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 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.

Performance share awards and performance share units (collectively, Performance Shares) were granted in 2024 with a grant date fair value of $15,007.

The Performance Shares vest based on the achievement of performance conditions and/or market conditions.

The number of Performance Shares with a market condition that vest and are issued to the recipient is based upon either:

(i) the Company’s total shareholder return (TSR) relative to the TSR of the selected market index or (ii) the Company’s simple moving average of the closing price of the Company’s Common Stock during the sixty calendar days immediately prior to and including the Measurement Period Dates at the end of the defined performance period.

A Monte Carlo simulation was performed to estimate the fair value of the awards with a market condition on the date of grant.

The number of Performance Shares with a performance condition that vest and are issued to the recipient is measured based on the Company’s revenue compound annual growth rate at the end of the defined performance period as compared to a target threshold.

The Company’s share-based compensation expense is recognized over the requisite service period as the employee renders service.

The determination of fair value on the grant date 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/or 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 to determine the grant date fair value of the Performance Awards, including the use of a specialist for awards 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.

How the Critical Audit Matter Was Addressed in the Audit

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 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.

• We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as grant date, share price, and vesting conditions, among others, back to source documents, such as compensation committee minutes or PSA agreements.

• With the assistance of our fair value specialists, we evaluated management's valuation of PSAs with a market condition by:

Our audit procedures related to the Company's determination of the grant date fair value of the Performance Shares included the following, among others:

• We inquired with management regarding the key valuation assumptions and the methodology used in the determination of the grant date fair value of the Performance Shares.

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

• We evaluated management’s valuation of Performance Shares with a performance condition through testing of revenue growth assumptions over the defined performance period by comparing to the Company’s annual plan and external guidance.

• With the assistance of our fair value specialists, we evaluated management's valuation of Performance Shares with a market condition by:

▪ Evaluating the Monte Carlo simulation methodology and the reasonableness of the valuation assumptions, including the risk-free interest rate, expected volatility, and the correlation coefficients.

▪ Independently calculating a fair value estimate for the market condition PSAs using the underlying PSA agreement and independently calculated valuation inputs.

▪ Independently calculating a fair value estimate for the market condition Performance Shares using the underlying agreement and independently calculated valuation inputs.

/s/ Deloitte & Touche LLP

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Total current assets 267,826 266,246

Long-term investments — 51,509

Property and equipment, net 41,659 42,435

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Accrued liabilities 45,587 44,682

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

Current lease liabilities

Total current liabilities 73,424 74,569

Long-term debt 61,865 60,593

Finance lease liabilities 8,061 9,147

Operating lease liabilities 3,307 3,095

Finance and operating lease liabilities

11,860 11,368

Other noncurrent liabilities 1,210 1,234

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

YEARS ENDED DECEMBER 31, 2024, 2023 and 2022

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Gross profit 347,524 300,370 245,940

Operating expenses (benefit):

Operating expenses:

Research and development expenses 96,178 73,915 57,337

Selling, general and administrative expenses 291,359 253,138 231,272

Change in fair value of contingent consideration (Note 2) — — ( 184,800 )

Intangible asset impairment (Note 4) — — 82,300

Total operating expenses 387,537 327,053 288,609

(Loss) income from operations ( 26,683 ) ( 42,669 ) 55,205

Loss from operations

( 40,013 ) ( 26,683 ) ( 42,669 )

Other income (expense):

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Interest income 4,434 3,792 1,994

Loss on debt extinguishment

( 1,362 ) — —

Other ( 326 ) ( 31 ) ( 537 )

(Loss) income before income tax expense ( 29,847 ) ( 46,198 ) 50,387

Loss before income tax expense

( 43,674 ) ( 29,847 ) ( 46,198 )

Income tax expense 1,024 591 268

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

Net (loss) income per share:

Basic net (loss) income per share $ ( 0.66 ) $ ( 1.02 ) $ 1.11

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

Weighted average shares outstanding:

Basic 46,309 45,740 45,066

Diluted 46,309 45,740 46,039

$ ( 44,698 ) $ ( 30,438 ) $ ( 46,466 )

Net loss per share:

Basic and diluted net loss per share

$ ( 0.95 ) $ ( 0.66 ) $ ( 1.02 )

Weighted average shares outstanding - basic and diluted

46,965 46,309 45,740

Comprehensive (loss) income:

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Foreign currency translation adjustment ( 842 ) 205 ( 337 )

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

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

Comprehensive (loss) income, net of tax $ ( 27,335 ) $ ( 49,614 ) $ 48,939

Other comprehensive (loss) income

( 42 ) 3,103 ( 3,148 )

( 44,698 ) ( 30,438 ) ( 46,466 )

Comprehensive loss, net of tax

$ ( 44,740 ) $ ( 27,335 ) $ ( 49,614 )

See accompanying notes to consolidated financial statements.

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

Net income — — — 50,199 — 50,199

— — — ( 46,466 ) — ( 46,466 )

Balance—December 31, 2022

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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 )

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Share-based employee compensation expense — — 40,405 — — 40,405

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

Other comprehensive loss

— — — — ( 42 ) ( 42 )

Net loss — — — ( 44,698 ) — ( 44,698 )

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Cash flows from operating activities:

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

Adjustments to reconcile net (loss) income to net cash used in operating activities:

$ ( 44,698 ) $ ( 30,438 ) $ ( 46,466 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Share-based compensation expense 40,405 35,728 28,771

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Amortization of investments 107 632 1,478

Change in fair value of contingent consideration — — ( 184,800 )

Intangible asset impairment — — 82,300

Acquired in-process research and development expense

Loss on debt extinguishment

Other non-cash adjustments 2,175 1,503 739

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Purchases of property and equipment ( 11,459 ) ( 11,998 ) ( 16,881 )

Acquisition of intellectual property

Proceeds from sale of property and equipment 25 — —

Acquisitions, including in-process research and development

( 12,000 ) ( 30,000 ) —

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Cash flows from financing activities:

Proceeds from debt borrowings — — 5,000

Payments on debt and finance leases ( 992 ) ( 899 ) ( 5,816 )

Payment of debt fees ( 60 ) — ( 1,171 )

Proceeds from revolving credit facility, net of financing costs

Payments on debt and leases

( 62,879 ) ( 992 ) ( 899 )

Payment of financing costs and bank fees

( 1,069 ) ( 60 ) —

Proceeds from stock option exercises 1,022 2,316 1,816

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business —The “Company” or “AtriCure” consists of AtriCure, Inc.

and its wholly-owned subsidiaries.

The Company is a leading innovator in surgical treatments and therapies for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management, and sells its products to medical centers globally through its direct sales force and distributors.

Nature of the Business — AtriCure, Inc.

(the “Company” or “AtriCure”) is a leading innovator in surgical treatments and therapies for atrial fibrillation, left atrial appendage management and post-operative pain management, and sells its products to medical centers globally through its direct sales force and distributors.

Principles of Consolidation— The Consolidated Financial Statements include the accounts of AtriCure, Inc.

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Ending balance - December 31 $ 550 $ 500 $ 230

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.

Concentration Risk — During 2024, 2023 and 2022, 8.9 %, 8.8 % and 9.7 % of the Company’s total revenue was derived from its top ten customers.

As of December 31, 2024 and 2023, 10.4 % and 11.3 % 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, 2024 and 2023.

The Company is dependent on third-party suppliers, in some cases single-source suppliers.

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.

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Inventories are written off against the reserve when they are physically disposed.

Property and Equipment— Property and equipment is stated at cost less accumulated depreciation.

Property and Equipment— Property and equipment are stated at cost less accumulated depreciation.

Depreciation is determined using the straight-line method over the estimated useful life.

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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 purchase the Company’s disposable products.

The Company’s RF and cryo 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.

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

Contingent Consideration— Contingent consideration arrangements obligate the Company to pay certain amounts if specified future events occur or conditions are met, such as the achievement of certain developmental, commercial or regulatory milestones.

Contingent consideration obligations incurred in connection with a business combination are recorded at fair value on acquisition date and periodically measured, with changes in the estimated fair value reflected in operating expense.

Contingent consideration arrangements arising from asset acquisitions are recorded within operating expenses at the time milestone results are achieved.

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.

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

The Company reviews intangible assets for impairment 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.

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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 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.

ATRICURE, INC.

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(In Thousands, Except Per Share Amounts)

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.

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

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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, Australian Dollars and Canadian Dollars.

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.

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 Company has not reclassified income tax effects of the Tax Cuts and Jobs Act within accumulated other comprehensive (loss) income to retained earnings due to its full valuation allowance.

Earnings Per Share— Basic earnings per share is computed by dividing net (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

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).

Net Loss Per Share —Basic and diluted net loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Since the Company has experienced net losses for all periods presented, net loss per share exclude the effect of 2,583 , 1,668 and 1,292 stock options, restricted stock awards, restricted stock units, performance share awards, and performance share units as of December 31, 2024, 2023 and 2022 because they are anti-dilutive.

Therefore, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation.

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, related regulatory activities, acquired in-process research and development (IPR&D), as well as amortization of technology assets.

Research and development costs are expensed as incurred.

Clinical trial costs and other

ATRICURE, INC.

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(In Thousands, Except Per Share Amounts)

Year Ended December 31,

2023 2022 2021

Net (loss) income available to common stockholders $ ( 30,438 ) $ ( 46,466 ) $ 50,199

Basic weighted average common shares outstanding 46,309 45,740 45,066

Effect of dilutive securities — — 973

Diluted weighted average common shares outstanding 46,309 45,740 46,039

Basic net (loss) income per common share $ ( 0.66 ) $ ( 1.02 ) $ 1.11

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

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 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 or over the expected service period.

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

Acquired IPR&D expenses reflect the costs of externally developed IPR&D projects acquired in an asset acquisition that do not have an alternative future use.

Acquired IPR&D is expensed on the acquisition date and future expenses to develop the IPR&D projects are recorded in research and development expense as incurred.

Milestone payments made to third parties in connection with asset acquisitions are expensed as incurred up to the point of regulatory approval.

Advertising Costs — The Company expenses advertising costs as incurred.

Advertising expense was $ 2,817 , $ 1,695 and $ 1,233 during the years ended December 31, 2024, 2023 and 2022.

Share-Based Compensation— The Company recognizes share-based compensation expense for all share-based payment awards, including stock options, restricted stock awards, restricted stock units, performance share awards (PSAs) and stock purchases related to an employee stock purchase plan, based on estimated fair values.

Share-Based Compensation— The Company recognizes share-based compensation expense for all share-based payment awards, including stock options, restricted stock awards, restricted stock units, performance share awards (PSAs), performance share units (PSUs) and stock purchases related to an employee stock purchase plan, based on estimated fair values.

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

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

For PSAs with a market condition, a Monte Carlo simulation is performed to estimate the fair value on the date of grant, and compensation cost is recognized over the requisite service period as the employee renders service, even if the market condition is not satisfied.

For PSAs and PSUs with a market condition, a Monte Carlo simulation is performed to estimate the fair value on the date of grant, and compensation cost is recognized over the requisite service period as the employee renders service, even if the market condition is not satisfied.

The Company’s determination of the fair value is affected by the Company and market index stock performance, as defined by the award agreement, at the beginning of the service period and grant date;

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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

ATRICURE, INC.

AND SUBSIDIARIES

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.

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.

Expense is adjusted at the time of stock purchase.

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Segments —The Company evaluates reporting segments in accordance with FASB ASC 280, “Segment Reporting”.

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

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

Management considers all such sales to be part of a single operating segment.

The chief operating decision maker for the Company is the Chief Executive Officer.

The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied only by information about revenue by product type and geographic area, for purposes of allocating resources and evaluating financial performance.

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

The Company has one business activity and operates as one operating segment:

the development, manufacture, and sale of devices used by cardiothoracic and thoracic surgeons in surgical procedures, designed primarily for the surgical ablation of cardiac tissue, the exclusion of the left atrial appendage, and to block pain by temporarily ablating peripheral nerves.

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

Management considers all such sales to be part of the single operating segment.

The Chief Executive Officer is regularly provided with consolidated expenses consistent with the presented consolidated statements of operations, accompanied by information about revenue by product type and

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

geographic area, for purposes of allocating resources and evaluating financial performance.

Revenue by product type and geographic area is included at Note 12 - Revenue.

The Company’s long-lived assets are located in the United States, except for $ 4,021 as of December 31, 2024 and $ 3,432 as of December 31, 2023 located primarily in Europe.

Fair Value Disclosures —The Company classifies cash investments in U.S.

Fair Value Disclosures —The Company classifies cash equivalents, investments in U.S.

government and agency obligations, accounts receivable, other current assets, and accounts payable as Level 1.

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, commercial paper and asset-backed securities are classified as Level 2 within the fair value hierarchy.

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.

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

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.

Recent Accounting Pronouncements —In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses”.

This guidance requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, 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.

The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

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.

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• 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

ATRICURE, INC.

AND SUBSIDIARIES

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.

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.

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

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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.

ATRICURE, INC.

AND SUBSIDIARIES

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, 2024:

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Money market funds $ 101,147 $ — $ — $ 101,147

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

Corporate bonds — 38,033 — 38,033

Asset-backed securities — 2,231 — 2,231

Total assets $ 101,147 $ — $ — $ 101,147

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

Commercial paper — 11,935 — 11,935

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

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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, 2023 and 2022.

Contingent Consideration.

The estimated fair value of money market funds transferred from a Level 2 fair value measurement to a Level 1 fair value measurement during the year ended December 31, 2024.

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

Contingent Consideration-Business Combination.

The Company's contingent consideration arrangements arising from the SentreHEART acquisition obligate the Company to pay certain defined amounts to former shareholders of SentreHEART if specified milestones are met related to the aMAZE IDE clinical trial, including PMA approval and reimbursement for the therapy involving SentreHEART's devices.

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

The PMA approval milestone expired on December 31, 2023, while the achievement period for the reimbursement milestone expires on December 31, 2026.

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

The Company continues to assess the projected probability of payment during the contractual achievement periods to be remote, resulting in no reported fair value as of December 31, 2024 and 2023.

The Company had no Level 3 fair value measurements using significant other unobservable inputs for contingent consideration in the years ended December 31, 2024, 2023 and 2022.

ASSET ACQUISITION

On October 15, 2024, the Company entered into an exclusive licensing agreement (Cooperation Agreement) to co-develop and commercialize equipment incorporating pulsed field ablation (PFA) technology.

The Company paid cash of $ 12,000 for the exclusive license of related intellectual property.

The transaction was accounted for as an asset acquisition,

ATRICURE, INC.

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(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:

2023 2022 2021

Beginning Balance – January 1 $ — $ — $ 184,800

Amounts acquired — — —

Changes in fair value of contingent consideration — — ( 184,800 )

Ending Balance – December 31

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

Cost Basis Unrealized

Losses Fair Value

Corporate bonds $ 38,514 $ ( 481 ) $ 38,033

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

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

Total $ 53,775 $ ( 800 ) $ 52,975

resulting in acquired in-process research and development (IPR&D).

The acquired IPR&D was expensed to research and development expense as we determined there was no alternative future use of the technologies acquired.

The Cooperation Agreement also requires the Company to pay additional contingent consideration, settled in cash, with a maximum payout of $ 28,000 if all milestones are achieved successfully within the ten-year term as follows:

• Development Milestones - $ 3,000 to $ 15,000 for successful delivery of equipment for defined purposes at multiple dates within the next two years and is reduced for calendar days lapsed from delivery dates at specified rates.

• Regulatory Approval Milestone - up to $ 13,000 for First Market Authorization in the United States, as defined in the Cooperation Agreement.

The contingent consideration will be expensed when each milestone is paid or becomes payable as a result of achievement.

As of December 31, 2024, the milestones were not yet achieved and, therefore, there is no financial impact during the period.

The agreement also contains provisions requiring future royalty payments on devices incorporating co-developed technology upon commercialization.

The Company had no i nvestments as of December 31, 2024.

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

Total $ 53,775 $ ( 800 ) $ 52,975

The gross realized gains or losses from sales of available-for-sale investments were not material in the years ended December 31, 2023, 2022 and 2021.

The cost and fair value of investments in debt securities, by contractual maturity, as of December 31, 2023 were as follows:

Available-for-sale

Amortized Cost Fair Value

Due in 1 year or less

$ 51,512 $ 50,744

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

Total $ 53,775 $ 52,975

Instruments not due at a single maturity date consist of asset-backed securities.

Actual maturities may differ from the contractual maturities due to call or prepayment rights.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The gross realized gains or losses from sales of available-for-sale investments were not significant in the years ended December 31, 2024, 2023 and 2022.

INTANGIBLE ASSETS AND GOODWILL

4 unchanged sentences

Total $ 76,470 $ 20,003 $ 76,470 $ 12,484

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 $ 7,519 , $ 5,353 and $ 3,653 for the years ended December 31, 2024, 2023 and 2022.

1 unchanged sentence

2024 2023 2022

Cost of revenues $ 2,400 $ — $ —

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

Cost of revenue

$ 4,500 $ 2,400 $ —

Research and development expenses

3,019 2,953 3,653

Total $ 7,519 $ 5,353 $ 3,653

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Future amortization expense is projected as follows:

7 unchanged sentences

Net carrying amount as of December 31, 2024

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

Inventories consisted of the following at December 31:

14 unchanged sentences

Property and equipment, net $ 41,659 $ 42,435

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

Depreciation expense was $ 11,214 , $ 9,460 and $ 8,057 for the years ended December 31, 2024, 2023 and 2022.

As of December 31, 2024 and 2023, the net carrying value of generators was $ 4,620 and $ 4,912 .

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

ACCRUED LIABILITIES

1 unchanged sentence

Accrued compensation and employee-related expenses $ 39,505 $ 39,425

Other accrued liabilities 2,503 3,301

Sales returns and allowances

Other accrued liabilities

Total $ 45,587 $ 44,682

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 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

ATRICURE, INC.

AND SUBSIDIARIES

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 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).

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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.

At closing, the Company borrowed $ 61,865 .

The proceeds of the ABL Facility were used to terminate the Company’s outstanding indebtedness and final fee under its then-existing Loan and Security Agreement with Silicon Valley Bank (SVB Loan Agreement).

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

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

The resulting loss on debt extinguishment is $ 1,362 .

The Credit Agreement has a three-year term, and all outstanding borrowings are due upon maturity of the Credit Agreement on 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 Availability shortfall.

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.

5 unchanged sentences

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.

As of December 31, 2024, the effective interest rate on the ABL Facility was 7.33 %.

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.

4 unchanged sentences

(In Thousands, Except Per Share Amounts)

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

Future maturities of debt are projected as follows:

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

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 .

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 as exercise is not reasonably certain.

37 unchanged sentences

Operating lease right-of-use assets $ 5,727 $ 4,324

Other current liabilities and current maturities of debt and leases 1,447 1,147

Current lease liabilities

Operating lease liabilities 4,579 3,307

4 unchanged sentences

Property and equipment, net $ 5,890 $ 6,515

Other current liabilities and current maturities of debt and leases $ 1,086 $ 992

Current lease liabilities

$ 1,186 $ 1,086

Finance lease liabilities 7,281 8,061

17 unchanged sentences

License Agreements.

In 2024, we entered into an exclusive licensing agreement (Cooperation Agreement) to co-develop and commercialize equipment incorporating pulsed field ablation (PFA) technology.

The Company paid cash of $ 12,000 for the exclusive license of related intellectual property.

The agreement also contains provisions requiring future royalty payments on devices incorporating co-developed technology upon commercialization.

See Note 3 - Asset Acquisition for further information.

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

1 unchanged sentence

See Legal section below for additional information.

There was no royalty expense for the year ended December 31, 2024.

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

Purchase Agreements.

The Company enters into standard purchase agreements with suppliers in the ordinary course of business, generally with terms that allow cancellation.

The Company may, from time to time, become a party to legal proceedings.

Such matters are subject to many uncertainties and to outcomes of which the financial impacts are not predictable with assurance and that may not be known for extended periods of time.

Purchase Commitments.

The Company enters into various purchase arrangements related to its manufacturing and research and development activities.

In the ordinary course of business, these agreements generally include terms that allow cancellation.

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

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.

Payments made under this agreement were $ 12,471 , $ 5,636 , and $ 1,539 for the years ended December 31, 2024, 2023, and 2022.

The Company may, from time to time, become a party to legal proceedings which are subject to many uncertainties.

Litigation and administrative proceedings over patent and other intellectual property rights are common in our industry, as are requests for information related to interactions with medical professionals.

Accordingly, the financial impact of ultimate resolutions from legal proceedings may not be known for extended periods of time and are not predictable with assurance.

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.

On February 7, 2025, representatives for former securityholders of SentreHEART, Inc.

filed a complaint in the Delaware Court of Chancery naming the Company as a defendant.

The Company acquired SentreHEART, Inc.

pursuant to a merger agreement dated August 11, 2019.

The merger agreement provides for contingent consideration to be paid upon achievement of specified PMA and CPT reimbursement milestones by specified dates.

The complaint alleges breach of contract and a related claim for breach of the implied covenant of good faith and fair dealing resulting from the Company's alleged failure to use commercially reasonable efforts to obtain premarket approval from FDA for the LARIAT System.

The complaint seeks damages in the amount of the original PMA and CPT reimbursement milestones of up to $ 260,000 plus interest.

The Company intends to vigorously defend this claim.

A liability has not been recognized related to this matter because any potential loss is not currently probable or reasonably estimable.

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

Department of Justice (USDOJ) in December 2017 stating that it is investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of atrial fibrillation.

The CID covers the period from January 2010 to December 2017 and required the production of documents and answers to written interrogatories.

The Company had no knowledge of the investigation prior to receipt of the CID.

The Company maintains rigorous policies and procedures to promote compliance with the False Claims Act and other applicable regulatory requirements.

The Company provided the USDOJ with documents and answers to the written interrogatories.

In March 2021, USDOJ informed the Company that its investigation was based on a lawsuit brought on behalf of the United States and various state and local governments under the qui tam provisions of federal and certain state and local False Claims Acts.

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 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.

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

During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which alleged that the Company paid illegal kickbacks.

In September 2024, the District Court granted the Company's motion to dismiss the Fourth Amended Complaint and denied the relator's request for leave to further amend the complaint.

On August 23, 2022, the Cleveland Clinic Foundation (Clinic) and IDx Medical, Ltd.

(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, 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.

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

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

Clinic and IDx alleged that the Company did not include the revenues from sales of certain products in its royalty payments due under the License Agreement, and 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.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

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.

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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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

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.

These devices are marketed to a broad base of medical centers globally and primarily used by cardiothoracic and thoracic surgeons.

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.

4 unchanged sentences

Pain management 61,844 49,199 39,974

Total ablation $ 199,063 $ 164,646 $ 134,563

Appendage management 151,588 134,481 112,555

5 unchanged sentences

Pain management 5,624 2,013 558

Total ablation $ 40,166 $ 33,353 $ 29,664

Appendage management 34,070 25,535 19,825

8 unchanged sentences

Total Revenue $ 465,307 $ 399,245 $ 330,379

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The Company files federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations.

3 unchanged sentences

The Company's valuation allowance offsets substantially all its net deferred tax assets as it is more likely than not that the benefit of the deferred tax assets will not be recognized in future periods.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The Company’s provision for income taxes for each of the years ended December 31 is as follows:

19 unchanged sentences

Finance and operating lease liabilities 2,494 3,083

Deferred interest — 2,411

Inventories 3,325 2,822

5 unchanged sentences

Right-of-use assets ( 1,749 ) ( 2,160 )

( 254 ) ( 444 )

Total deferred tax liabilities ( 7,008 ) ( 11,172 )

2 unchanged sentences

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 the Company 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

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

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 $ 216,156 which expire between 2025 and 2037 and $ 175,758 which have no expiration.

3 unchanged sentences

Additionally, the Company has foreign net operating loss carryforwards of approximately $ 79,662 which have no expiration.

ATRICURE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

The Company’s 2024, 2023 and 2022 effective income tax rates differ from the federal statutory rate as follows:

8 unchanged sentences

Effective tax rate ( 2.3 ) % $ 1,024 ( 2.0 ) % $ 591 ( 0.6 ) % $ 268

The Company’s pre-tax book (loss) income for domestic and international operations was $( 17,822 ) and $( 12,025 ) for 2023, $( 38,008 ) and $( 8,190 ) for 2022, and $ 55,666 and $( 5,279 ) for 2021.

The Company’s pre-tax book loss for domestic and international operations was $ 36,983 and $ 6,691 for 2024, $ 17,822 and $ 12,025 for 2023, and $ 38,008 and $ 8,190 for 2022.

The Company had undistributed earnings of foreign subsidiaries of approximately $ 609 at December 31, 2024.

The Company does not consider these earnings as permanently reinvested and has determined that no current and deferred taxes are required on such amounts.

Federal, state and local tax returns of the Company are routinely subject to examination by various taxing authorities.

The Company's federal, state, local and foreign tax returns are routinely subject to review by various taxing authorities.

Federal income tax returns for periods beginning in 2021 are open for examination.

2 unchanged sentences

The Company has not recognized certain tax benefits because of the uncertainty of realizing the entire value of the tax position taken on income tax returns upon review by the taxing authorities.

The Company has not accrued any interest and penalties related to unrecognized income tax benefits as a result of offsetting net operating losses.

However, if required, the Company will recognize interest and penalties within income tax expense and within the related tax liability.

A reconciliation of the change in federal and state unrecognized tax benefits for 2024, 2023 and 2022 is presented below:

8 unchanged sentences

The Company does not expect that its unrecognized tax benefits for research credits will significantly change within twelve months of December 31, 2024.

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

employees of the Company.

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

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.

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

During the years ended December 31, 2024, 2023 and 2022, the Company matching contribution was 50 % on the first 8 % of employee contributions to the 401(k) Plan.

The Company’s matching contributions in 2024, 2023 and 2022 were $ 5,477 , $ 4,949 and $ 4,447 .

1 unchanged sentence

however, no such discretionary contributions were made in 2024, 2023 or 2022.

The Company also provides retirement benefits for

ATRICURE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In Thousands, Except Per Share Amounts)

employees of its foreign subsidiaries.

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

Total contributions to foreign retirement plans were $ 702 , $ 503 and $ 446 in 2024, 2023 and 2022.

2 unchanged sentences

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

Under the 2023 Plan, the Board of Directors may grant restricted stock awards or restricted stock units (collectively RSAs), nonstatutory stock options, performance share awards (PSAs) or stock appreciation rights to Company employees, directors and consultants, and may grant incentive stock options to Company employees.

Under the 2023 Plan, the Board of Directors may grant restricted stock awards or restricted stock units (collectively RSAs), nonstatutory stock options, performance share awards, performance share units or stock appreciation rights to Company employees, directors and consultants, and may grant incentive stock options to Company employees.

The Compensation Committee of the Board of Directors, as the administrator of the 2023 Plan, has the authority to determine the terms of any awards, including the number of shares subject to each award, the exercisability of the awards and the form of consideration.

8 unchanged sentences

Total $ 40,405 $ 35,728 $ 28,771

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.

Performance Share Awards and Units.

The award agreements for the performance share awards (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.

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.

PSAs have two weighted performance targets:

(i) the Company’s compound annual revenue 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 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 outstanding as of December 31, 2024 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 since 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.

1 unchanged sentence

All or a portion of the PSAs may vest following a change of control or a termination of service by reason of death or disability.

During 2024, the Compensation Committee approved the grant of Performance Share Units (PSUs) to the Company's President and Chief Executive Officer.

The award agreement for the PSUs provides that each PSU that vests represents the right to receive one share of the Company's common stock at the end of the measurement periods.

The number of shares that vest and are issued are based on the attainment of specified stock prices over three measurement periods over a four year period.

PSUs vest in defined tranches on the last day of the measurement period, subject to a market vesting condition upon the simple moving average of the closing share price during the 60 consecutive calendar days immediately prior to

ATRICURE, INC.

2 unchanged sentences

(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

and including the measurement period date.

PSUs that do not vest on the last day of the measurement period are forfeited.

PSUs may vest following termination of service by reason of death or disability or change in control based on the performance criteria achieved as of the termination date or in connection with the change in control as specified in the award agreement.

Performance share activity at target attainment under the plans during 2024 was as follows:

Performance Share Awards and Units

Number of Shares Outstanding

Outstanding at January 1, 2024 353 $ 61.09

3 unchanged sentences

Outstanding at December 31, 2024 688 $ 37.63

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 2024, 2023 and 2022 was $ 3,459 , $ 4,955 and $ 5,185 .

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:

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

2024 2023 2022

1 unchanged sentence

Expected term (years) 2.8 to 4.0

2.8 2.6 to 2.8

Company volatility 45.0 % 44.8 % 43.5 - 46.9 %

Market index average volatility †

92.7 % 91.0 % 90.3 - 92.0 %

Market index average correlation †

30.1 % 32.2 % 33.5 - 35.4 %

Risk-free interest rate 4.2 - 4.3 %

4.6 % 1.4 - 2.7 %

Dividend yield 0.0 % 0.0 % 0.0 %

Not applicable to valuation of performance share units.

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.

The risk-free interest rate is based upon the United States 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:

2 unchanged sentences

Expense 11,356 11,417 8,731

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.

As of December 31, 2024, $ 14,230 of unrecognized compensation costs related to non-vested performance share awards and performance share units are expected to be recognized over a weighted-average period of 1.8 years.

ATRICURE, INC.

17 unchanged sentences

Expense 26,975 21,797 17,621

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.

As of December 31, 2024, $ 37,067 of unrecognized compensation costs related to non-vested restricted stock awards and restricted stock units are expected to be recognized over a weighted-average period of 1.8 years.

Stock Options.

12 unchanged sentences

For 2024, 2023 and 2022, $ 1,022 , $ 2,316 and $ 1,816 in cash proceeds from the exercise of stock options were included in the Consolidated Statements of Cash Flows.

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

No options were granted during 2023 or 2022.

No options were granted in 2024, 2023, or 2022.

Option expense was $ 328 , $ 765 , and $ 1,012 for the years ended December 31, 2024, 2023 and 2022.

As of December 31, 2024 there is no unrecognized compensation costs related to non-vested stock options.

ATRICURE, INC.

2 unchanged sentences

(In Thousands, Except Per Share Amounts)

Options granted in 2021 included the following assumptions:

Range of risk-free interest rate 0.43 - 1.22 %

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

Range of expected volatility of stock 40.00 - 43.00 %

Weighted-average volatility 41.84 %

Dividend yield 0.00 %

The Company’s estimate of volatility is based solely on the Company’s stock price over the expected option life.

The risk-free interest rate assumption is based upon the U.S.

treasury yield curve at the time of grant for the expected option life.

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

Based on the assumptions noted 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 $ — $ — $ 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

5 unchanged sentences

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

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

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

2024 2023 2022

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

Total accumulated other comprehensive loss at beginning of period

$ ( 993 ) $ ( 4,096 ) $ ( 948 )

Unrealized (losses) gains on investments

1 unchanged sentence

Other comprehensive income (loss) before reclassifications 800 2,898 ( 2,739 )

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

Amounts reclassified from accumulated other comprehensive loss to interest income

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

2 unchanged sentences

Other comprehensive income (loss) before reclassifications ( 951 ) 154 ( 774 )

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

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

Balance at end of period $ ( 1,035 ) $ ( 193 ) $ ( 398 )

2 unchanged sentences

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