What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-09 · 107 added, 112 removed, 239 unchanged (48% of the section changed)

15 unchanged sentences

We have dedicated significant resources to educate physicians who treat HFrEF about the advantages of BAROSTIM NEO and train them on the implant procedure.

The cost for the device and implantation procedure are reimbursed through various third-party payors, such as government agencies and commercial payors.

The costs for the device and implantation procedure are reimbursed through various third-party payors, such as government agencies and commercial payors.

In the U.S., we estimate that 67% of our target patient population is Medicare-eligible based on the age demographic of the HFrEF patient population indicated for BAROSTIM NEO.

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The COVID-19 pandemic has negatively impacted our business, financial condition and results of operations by decreasing and delaying procedures performed to implant our BAROSTIM NEO, and we expect the pandemic will continue to negatively impact our business, financial condition and results of operations.

Beginning in March 2020, our revenue was negatively impacted by COVID-19 as healthcare facilities and clinics began restricting in-person access to their clinicians, reducing patient consultations and treatments or temporarily closing their facilities.

Beginning in March 2020, our revenue was negatively impacted by COVID-19 as healthcare facilities and

clinics began restricting in-person access to their clinicians, reducing patient consultations and treatments or temporarily closing their facilities.

As a result, substantially all of our then-scheduled procedures were postponed, and numerous other cases could not be scheduled.

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● Implementing virtual physician education programs to support opening new accounts with minimal in person interaction;

● Increasing our capital resources through the issuance of shares of Series G Preferred Stock for net proceeds of $49.8 million in July 2020.

● Increasing our capital resources through the issuance of shares of Series G Preferred Shares for net proceeds of $49.8 million in July 2020.

Our hospital customers in the U.S.

and Europe began to gradually perform elective procedures again during the fourth quarter of 2020.

We believe the recovery of our business in the fourth quarter of 2020 and through the first half of 2021 is an encouraging sign for when shelter-in-place and hospital limitations are lifted.

We believe the recovery of our business in the fourth quarter of 2020 and through the first nine months of 2021 is an encouraging sign for when remaining shelter-in-place and hospital limitations are lifted.

As the pandemic has eased, we are experiencing the following positive trends:

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As a result, we expect that U.S.

sales will account for the majority of our revenue going forward.

sales will continue to account for the majority of our revenue going forward.

Cost of goods sold and gross margin

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Interest expense consists of interest on our debt and amortization of associated debt discount.

Other expense, net

Other expense, net consists primarily of the fair value adjustments related to our outstanding convertible preferred stock warrants, which are accounted for as a liability and marked-to-market at each reporting period.

Other income (expense), net

Other income (expense), net consists primarily of the fair value adjustments related to our outstanding convertible preferred stock warrants, which are accounted for as a liability and marked-to-market at each reporting period.

The final fair value adjustment of the warrant liability was recorded upon the closing of the IPO in connection with the conversion of the warrants to common stock warrants.

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Translation adjustments are recorded as foreign currency gains (losses) in the condensed consolidated statements of operations and comprehensive loss.

Income tax expense

Income tax expense consists primarily of income taxes in foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance for deferred tax assets including net operating loss carryforwards, research and development credits and other tax credits.

Provision for income taxes

Provision for income taxes consists primarily of income taxes in foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance for deferred tax assets including NOL carryforwards, R&D credits and other tax credits.

Results of operations

Consolidated results of operations for the three months ended June 30, 2021, compared to the three months ended June 30, 2020

Consolidated results of operations for the three months ended September 30, 2021, compared to the three months ended September 30, 2020

Three months ended

September 30,

(unaudited and in thousands)

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Interest expense

Other (expense) income, net

Other income, net

Loss before income taxes

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Three months ended

September 30,

(unaudited and in thousands)

1 unchanged sentence

Total Revenue

Revenue increased by $1.9 million, or 150%, to $3.1 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Total revenue increased by $2.4 million, or 241%, to $3.4 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Revenue generated in the U.S.

was $2.1 million for the three months ended June 30, 2021, an increase of $1.9 million, or 969%, over the three months ended June 30, 2020.

Total heart failure (“HF”) revenue units in the U.S.

totaled 67 and 2 for the three months ended June 30, 2021 and 2020, respectively.

was $2.6 million for the three months ended September 30, 2021, an increase of $2.3 million, or 769%, over the three months ended September 30, 2020.

HF revenue units in the U.S.

totaled 84 and four for the three months ended September 30, 2021 and 2020, respectively.

HF revenue in the U.S.

totaled $2.0 million and $65,000 for the three months ended June 30, 2021 and 2020, respectively.

The increase was primarily driven by continued growth following the commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of our BAROSTIM NEO.

As of June 30, 2021, we had a total of 31 active implanting centers, as compared to two as of June 30, 2020.

totaled $2.5 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively.

The increase was primarily driven by continued growth following the U.S.

HF commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of our BAROSTIM NEO.

As of September 30, 2021, we had a total of 38 active implanting centers, as compared to four as of September 30, 2020.

Active implanting centers are customers that have completed at least one commercial HF implant in the last 12 months.

The number of sales territories in the U.S.

increased by two to a total of eight during the three months ended June 30, 2021.

increased by three to a total of 11 during the three months ended September 30, 2021.

Legacy hypertension revenue in the U.S.

totaled $0.1 million for each of the three months ended June 30, 2021 and 2020.

Revenue generated in Europe was $1.0 million for the three months ended June 30, 2021, a decrease of $35,000, or 3%, over the three months ended June 30, 2020.

Total revenue units in Europe decreased to 47 from 49 for the three months ended June 30, 2021 and 2020, respectively.

The revenue decrease was primarily due to the impact of the COVID-19 pandemic.

The number of sales territories in Europe remained consistent at six during the three months ended June 30, 2021.

totaled $0.1 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively.

Revenue generated in Europe was $0.8 million for the three months ended September 30, 2021, an increase of $0.1 million, or 17%, over the three months ended September 30, 2020.

Total revenue units in Europe for the three months ended September 30, 2021 increased to 38 from 32 for the three months ended September 30, 2020.

The slight revenue increase was primarily due to the lessening impact of the COVID-19 pandemic in Germany.

The number of sales territories in Europe remained consistent at six during the three months ended September 30, 2021.

Cost of goods sold and gross margin

Cost of goods sold increased $0.6 million, or 165%, to $0.9 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Cost of goods sold increased $0.7 million, or 313%, to $0.9 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

This increase was primarily due to higher sales of our BAROSTIM NEO.

Gross margin decreased to 71% for the three months ended June 30, 2021, compared to 72% for the three months ended June 30, 2020.

Gross margin for the three months ended June 30, 2021 was lower due to a larger percentage of our revenue units coming from full systems, which require an IPG and a stimulation lead, as compared to individual IPG sales.

Gross margin decreased to 74% for the three months ended September 30, 2021, compared to 79% for the three months ended September 30, 2020.

Gross margin for the three months ended September 30, 2021 was lower due to a larger percentage of our revenue units coming from full systems, which require an IPG and a stimulation lead, as compared to individual IPG sales.

This was partially offset by an increase in the average selling price.

Research and development expenses

R&D expenses increased $0.1 million, or 6%, to $2.3 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

This change was primarily due to an increase in non-cash stock-based compensation expense from $11,000 to $0.2 million for the three months ended June 30, 2020 and 2021, respectively.

R&D expenses increased $0.2 million, or 13%, to $1.7 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

This change was primarily due to an increase of $0.1 million in non-cash stock-based compensation expense and an increase of $0.1 million in compensation expenses, including salaries and other employee-related expenses, mainly as a result of increased headcount.

Selling, general and administrative expenses

SG&A expenses increased $3.8 million, or 207%, to $5.6 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

This was driven by an increase of $1.7 million in compensation expenses, including salaries and commissions, and other employee-related expenses, mainly as a result of increased headcount, a $0.7 million increase in marketing and advertising expenses primarily related to the commercial launch of our BAROSTIM NEO in the U.S, a $0.4 million increase in non-cash stock-based compensation expense, a $0.4 million increase in consulting expenses, and $0.3 million of additional travel expenses.

SG&A expenses increased $5.8 million, or 249%, to $8.1 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

This was primarily driven by an increase of $2.8 million in compensation expenses, including salaries and commissions, and other employee-related expenses, mainly as a result of increased headcount, a $0.8 million increase in marketing and advertising expenses primarily related to the commercialization of our BAROSTIM NEO in the U.S., a $0.7 million increase in insurance costs incurred as a result of the IPO, $0.4 million of additional travel expenses, a $0.3 million increase in non-cash stock-based compensation expense, and a $0.3 million increase in consulting expenses.

Interest expense

Interest expense remained consistent at $0.6 million for the three months ended June 30, 2021 and 2020.

Other income (expense), net

Other expense, net was $11.4 million for the three months ended June 30, 2021, compared to other income, net of $33,000 for the three months ended June 30, 2020, driven by an $11.4 million increase in expense related to the increase in fair value of our convertible preferred stock warrants due to the completion of the IPO on July 2, 2021.

Income tax expense

Income tax expenses were nominal for the three months ended June 30, 2021 and June 30, 2020.

Consolidated results of operations for the six months ended June 30, 2021, compared to the six months ended June 30, 2020

Six months ended

Interest expense remained consistent at $0.6 million for each of the three months ended September 30, 2021 and 2020.

Other income, net

Other income, net was $1.8 million for the three months ended September 30, 2021, compared to $0.5 million for the three months ended September 30, 2020, driven by a $1.5 million increase in income related to the decrease in fair value of our convertible preferred stock warrants due to the change in our common stock price from June 30, 2021 to July 2, 2021, which is the date the warrants converted to common stock warrants.

Provision for income taxes

Provision for income taxes was nominal for each of the three months ended September 30, 2021 and September 30, 2020.

Consolidated results of operations for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020

Nine months ended

September 30,

(unaudited and in thousands)

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Revenue by Geography

Six months ended

Nine months ended

September 30,

(unaudited and in thousands)

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Total Revenue

Revenue increased by $3.0 million, or 102%, to $6.0 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Revenue increased by $5.4 million, or 137%, to $9.4 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Revenue generated in the U.S.

was $3.7 million for the six months ended June 30, 2021, an increase of $3.1 million, or 513%, over the six months ended June 30, 2020.

was $6.3 million for the nine months ended September 30, 2021, an increase of $5.4 million, or 597%, over the nine months ended September 30, 2020.

Total HF revenue units in the U.S.

totaled 111 and seven for the six months ended June 30, 2021 and 2020, respectively.

totaled 195 and 11 for the nine months ended September 30, 2021 and 2020, respectively.

HF revenue in the U.S.

totaled $3.3 million and $0.2 million for the six months ended June 30, 2021 and 2020, respectively.

The increase was driven by the continued growth following the commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of our BAROSTIM NEO.

totaled $5.7 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase was primarily driven by the continued growth following the commercial launch in 2020, which resulted in the expansion into new sales territories and increased physician and patient awareness of our BAROSTIM NEO.

The number of sales territories in the U.S.

increased by two to a total of eight during the six months ended June 30, 2021.

increased by five to a total of 11 during the nine months ended September 30, 2021.

Legacy hypertension revenue in the U.S.

totaled $0.5 million and $0.3 million for the six months ended June 30, 2021 and 2020, respectively.

Revenue generated in Europe was $2.3 million for the six months ended June 30, 2021, a decrease of $96,000, or 4%, over the six months ended June 30, 2020.

Total revenue units in Europe decreased to 99 from 106 for the six months ended June 30, 2021 and 2020, respectively.

The revenue decrease was primarily due to the impact of the COVID-19 pandemic, which was partially offset by an increase in our average selling price.

The number of sales territories in Europe remained consistent at six during the six months ended June 30, 2021.

Cost of goods sold increased $1.0 million, or 129%, to $1.8 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

totaled $0.6 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Revenue generated in Europe was $3.1 million for the nine months ended September 30, 2021, a slight increase of $26,000, or 1%, over the nine months ended September 30, 2020.

Total revenue units in Europe decreased to 137 from 138 for the nine months ended September 30, 2021 and 2020, respectively.

The number of sales territories in Europe remained consistent at six during the nine months ended September 30, 2021.

Cost of goods sold and gross margin

Cost of goods sold increased $1.7 million, or 169%, to $2.7 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

This increase was primarily due to higher sales of our BAROSTIM NEO.

Gross margin decreased to 70% for the six months ended June 30, 2021, compared to 74% for the six months ended June 30, 2020.

Gross margin for the six months ended June 30, 2021 was lower due to a larger percentage of our revenue units coming from full systems, which require an IPG and a stimulation lead, as compared to individual IPG sales.

Gross margin decreased to 72% for the nine months ended September 30, 2021, compared to 75% for the nine months ended September 30, 2020.

Gross margin for the nine months ended September 30, 2021 was lower due to a larger percentage of our revenue units coming from full systems, which require an IPG and a stimulation lead, as compared to individual IPG sales.

This was partially offset by an increase in the average selling price.

Research and development expenses

R&D expenses decreased $0.4 million, or 9%, to $4.0 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

This was driven by a $0.9 million decline in clinical study expenses, partially offset by a $0.5 million increase in consulting expenses and a $0.2 million increase in non-cash stock-based compensation expense.

R&D expenses decreased $0.2 million, or 3%, to $5.7 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

This was primarily driven by a $0.8 million decline in clinical study expenses, partially offset by a $0.3 million increase in compensation expenses, including salaries and other employee-related expenses, mainly as a result of increased headcount, and a $0.3 million increase in non-cash stock-based compensation expense.

Selling, general and administrative expenses

SG&A expenses increased $6.0 million, or 144%, to $10.1 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

This was driven by an increase of $3.2 million in compensation expenses, including salaries and commissions, and other employee-related expenses, mainly as a result of increased headcount, a $1.0 million increase in marketing and advertising expenses, primarily related to the commercial launch of our BAROSTIM NEO in the U.S., a $0.7 million increase in consulting expenses, a $0.4 million increase in non-cash stock-based compensation expense, and $0.3 million of additional travel expenses.

SG&A expenses increased $11.7 million, or 182%, to $18.1 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

This was driven by an increase of $6.3 million in compensation expenses, including salaries and commissions, and other employee-related expenses, mainly as a result of increased headcount, a $1.9 million increase in marketing and advertising expenses, primarily related to the commercialization of our BAROSTIM NEO in the U.S., $1.4 million of additional travel expenses, a $1.0 million increase in consulting expenses, and a $0.8 million increase in non-cash stock-based compensation expense.

Interest expense

Interest expense remained consistent at $1.2 million for the six months ended June 30, 2021 and 2020.

Other income (expense), net

Other expense, net was $15.2 million for the six months ended June 30, 2021, compared to other income, net of $0.1 million for the six months ended June 30, 2020.

This change was primarily driven by a $15.1 million increase in expense related to the increase in fair value of our convertible preferred stock warrants due to the completion of the IPO on July 2, 2021.

Income tax expense

Income tax expenses were nominal for the six months ended June 30, 2021 and 2020.

Unaudited pro forma information

Upon the closing of the IPO, all outstanding shares of our convertible preferred stock converted into an aggregate of 11,929,584 shares of common stock.

The unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2021 were computed using the weighted-average number of shares of common stock used to compute basic and diluted net loss per share, including the pro forma effect of the conversion of all outstanding shares of our convertible preferred stock into 11,929,584 shares of common stock as if such event had occurred at the beginning of the period, or the applicable issuance date if later.

Pro forma basic and diluted net loss per share attributable to common stockholders does not include the shares sold in the IPO and any related net proceeds.

The following table sets forth the computation of the unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the periods presented:

Three months ended

Six months ended

June 30, 2021

Net loss used to compute pro forma net loss per share, basic and diluted

Weighted-average common shares used to compute net loss per share, basic and diluted

Weighted-average shares of convertible preferred stock, as converted (unaudited)

Pro forma weighted-average common shares used to compute net loss per share, basic and diluted (unaudited)

Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)

Interest expense remained consistent at $1.8 million for each of the nine months ended September 30, 2021 and 2020.

Other (expense) income, net

Other expense, net was $13.4 million for the nine months ended September 30, 2021, compared to other income, net of $0.6 million for the nine months ended September 30, 2020.

This change was primarily driven by a $13.7 million increase in expense related to the increase in fair value of our convertible preferred stock warrants due to the change in our common stock price from January 1, 2021 to July 2, 2021, which is the date the warrants converted to common stock warrants.

Provision for income taxes

Provision for income taxes was nominal for each of the nine months ended September 30, 2021 and 2020.

Liquidity, capital resources and plan of operations

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years.

As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $47.1 million and $59.1 million, respectively.

For the three months ended June 30, 2021 and 2020, our net losses were $17.7 million, $3.7 million, respectively.

For the six months ended June 30, 2021 and 2020, our net losses were $26.4 million and $7.5 million, respectively.

Our net cash used in operating activities for the six months ended June 20, 2021 and 2020 was $11.5 million and $6.9 million, respectively.

As of September 30, 2021 and December 31, 2020, we had cash and cash equivalents of $170.9 million and $59.1 million, respectively.

For the three months ended September 30, 2021 and 2020, our net losses were $6.1 million and $3.2 million, respectively.

For the nine months ended September 30, 2021 and 2020, our net losses were $32.5 million and $10.7 million, respectively.

Our net cash used in operating activities for the nine months ended September 30, 2021 and 2020 was $20.7 million and $12.0 million, respectively.

Prior to the IPO, our operations were financed primarily by aggregate net proceeds from the sale of our convertible preferred stock of $383.1 million, as well as debt financings.

In July 2020, we completed an equity financing pursuant to which we issued 62,500,000 shares of Series G Preferred Stock at a price of $0.80 per

share, for net proceeds of $49.8 million after deducting offering expenses.

In September 2019, we entered into a loan and security agreement with Horizon Technology Finance Corporation to borrow $20 million.

In January, May and August of 2019, we completed equity financings pursuant to which we issued shares of Series G Preferred Stock at a price of $0.80 per share, for net proceeds of $24.7 million.

On July 2, 2021 we closed our IPO for net proceeds from the offering, after deducting the underwriting discount and other offering expenses payable by us, of approximately $133.3 million.

In July 2020, we completed an equity financing pursuant to which we issued 62,500,000 shares of Series G Preferred Shares at a price of $0.80 per share, for net proceeds of $49.8 million after deducting offering expenses.

In September 2019, we

entered into the Horizon loan agreement to borrow $20.0 million.

On November 3, 2021, we fully repaid our outstanding principal balance of $20.0 million under the Horizon loan agreement.

In January, May and August of 2019, we completed equity financings pursuant to which we issued shares of Series G Preferred Shares at a price of $0.80 per share, for net proceeds of $24.7 million.

On July 2, 2021 we closed our IPO for net proceeds from the offering, after deducting the underwriting discount and other offering expenses payable by us, of $133.2 million.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

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We believe that our existing cash resources together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next 12 months.

If these sources are insufficient to satisfy our liquidity requirements, however, we may seek to sell additional equity, increase the availability under the Horizon loan agreement or enter into an additional loan agreement.

If these sources are insufficient to satisfy our liquidity requirements, however, we may seek to sell additional equity or enter into an additional loan agreement.

If we raise additional funds by issuing equity securities, our stockholders would experience dilution.

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Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Additional financing may not be available at all, or in amounts or on terms that we do not deem to be favorable.

Additional financing may not be available at all, or may only be available in amounts or on terms that we do not deem to be favorable.

If we are unable to obtain additional financing when needed to satisfy our liquidity requirements, we may be required to delay the commercialization and marketing of our BAROSTIM NEO.

The following table sets forth the primary sources and uses of cash for each of the periods presented below:

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Nine months ended

(in thousands)

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Effect of exchange rate changes on cash and cash equivalents

Net change in cash

Net change in cash and cash equivalents

Cash used in operating activities

Net cash used in operating activities for the six months ended June 30, 2021 was $11.5 million and consisted primarily of a net loss of $26.4 million and a decrease in net operating assets of $1.2 million, partially offset by non-cash charges of $15.1 million related to the fair value adjustment to our convertible preferred stock warrants and $0.6 million from non-cash stock-based compensation expense.

Net cash used in operating activities for the nine months ended September 30, 2021 was $20.7 million and consisted primarily of a net loss of $32.5 million and a decrease in net operating assets of $3.0 million, partially offset by non-cash charges of $13.3 million related to the fair value adjustment to our convertible preferred stock warrants and $1.2 million from non-cash stock-based compensation expense.

Net operating assets consisted primarily of inventory, accounts receivable and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the six months ended June 30, 2020 was $6.9 million and consisted primarily of a net loss of $7.5 million, partially offset by an increase in net operating assets of $0.4 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was $12.0 million and consisted primarily of a net loss of $10.7 million and a decrease in net operating assets of $1.3 million.

Net operating assets consisted primarily of inventory, accounts receivable, accounts payable and accrued expenses to support the growth of our operations.

Cash used in investing activities:

Cash used in investing activities was $0.5 million and $92,000 for the six months ended June 30, 2021 and 2020, respectively, and consisted of purchases of property and equipment.

Cash used in investing activities was $0.6 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities were nominal for the six months ended June 30, 2021 and 2020.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $133.2 million and consisted primarily of proceeds from the issuance of common stock of $133.2 million.

Net cash provided by financing activities for the nine months ended September 30, 2020 was $49.8 million and consisted entirely of proceeds from the issuance of Series G Preferred Shares.

In September 2019, we entered into the Horizon loan agreement under which we borrowed $20.0 million, which is the maximum borrowing under the Horizon loan agreement.

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A final payment of $0.7 million, equal to 3.5% of the original principal, is due to be paid in October 2024.

The Horizon loan agreement initially required us to maintain cash on deposit in accounts in which Horizon maintains an account control agreement of not less than $5.0 million.

The Horizon loan agreement initially required us to maintain cash on deposit of not less than $5.0 million in accounts over which Horizon maintained an account control agreement.

This minimum cash on deposit requirement was released in July 2020 following the satisfaction of a financing milestone.

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revenue requirement of approximately $5.9 million during the year ended December 31, 2021, approximately $14.6 million during the year ended December 31, 2022 and $5.0 million during each calendar quarter thereafter;

certain negative covenants, including a requirement that we not receive a final disapproval letter

from the FDA for use of BAROSTIM NEO in certain other HF patients upon our request for additional labeling based upon the results of the post-market stage of our BeAT-HF pivotal trial;

certain negative covenants, including a requirement that we not receive a final disapproval letter from the FDA for use of BAROSTIM NEO in certain other HF patients upon our request for additional labeling based upon the results of the post-market stage of our BeAT-HF pivotal trial;

and various restrictive covenants, including a restriction on the payment of dividends.

We were in compliance with these covenants as of June 30, 2021.

The amount outstanding under the Horizon loan agreement as of June 30, 2021 was $20.0 million.

We were in compliance with these covenants as of September 30, 2021.

The amount outstanding under the Horizon loan agreement as of September 30, 2021 was $20.0 million.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of June 30, 2021, as compared to those disclosed in the final prospectus for the IPO filed with the SEC pursuant to Rule 424(b) on July 1, 2021.

There have been no material changes to our contractual obligations as of September 30, 2021, as compared to those disclosed in the final prospectus for the IPO filed with the SEC pursuant to Rule 424(b) on July 1, 2021.

Off-balance sheet arrangements

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We use an estimate of the value of our common stock, with the assistance of an independent appraiser, to determine the fair value of options.

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (i) fair value of common stock (ii) the expected share price volatility, (iii) the expected term of the award, (iv) the risk-free interest rate and (v) the expected dividend yield.

● Fair value of common stock — Given the absence of a public trading market for our common stock prior to the IPO, the fair value of our common stock was determined by our Board of Directors with the assistance of an unrelated third-party valuation firm.

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (i) the fair value of common stock (ii) the expected share price volatility, (iii) the expected term of the award, (iv) the risk-free interest rate and (v) the expected dividend yield.

assistance of an unrelated third-party valuation firm.

The valuation was determined in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

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● Expected term of an award — Determined based on our analysis of historical exercise behavior while taking into consideration various participant demographics and option characteristics.

We utilize the simplified method to develop the estimate of the expected term.

● Risk-free interest rate — Based on a treasury instrument whose term is consistent with the expected term of the stock options.

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Freestanding preferred stock warrants

Warrants to purchase our preferred stock are classified as a liability on our condensed consolidated balance sheets.

These warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in other (expense) income, net.

We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or when the warrants become exercisable to purchase our common stock at which time the liability will be reclassified to stockholders’ equity (deficit).

The valuation of our warrants requires the input of certain subjective assumptions, including (i) IPO probability, (ii) the future fair value of common stock, (iii) the expected share price volatility, (iv) the expected term, (v) the risk-free interest rate and (vi) the expected dividend yield.

Warrants to purchase our preferred stock were classified as a liability on our condensed consolidated balance sheets.

These warrants were subject to remeasurement at each balance sheet date and any change in fair value was recognized in other income (expense), net.

As a result of the IPO, these warrants were converted to common stock warrants and the liability was reclassified to stockholders’ equity.

The valuation of our warrants required the input of certain subjective assumptions, including (i) IPO probability, (ii) the future fair value of common stock, (iii) the expected share price volatility, (iv) the expected term, (v) the risk-free interest rate and (vi) the expected dividend yield.

● IPO probability — Management, along with the assistance of an unrelated third-party valuation firm, evaluated the likelihood and timing of an IPO and applied these assumptions to the determination of the future fair value of the common stock as well as the expected term assumption.

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● Expected share price volatility — Due to the lack of a public market for the trading of our common stock and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar (guideline) companies that are publicly traded.

The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

● Expected share price volatility — Due to the lack of a public market for the trading of our common stock and a lack of company-specific historical and implied volatility data, we based our estimate of expected volatility on the historical volatility of a group of similar (guideline) companies that are publicly traded.

The historical volatility was calculated based on a period of time commensurate with the expected term assumption.

The group of guideline companies have characteristics similar to us, including stage of product development and focus on the life science industry.

● Expected term — The expected term of the warrant is driven by the probability and timing of an IPO.

● Expected term — The expected term of the warrant was driven by the probability and timing of an IPO.

● Risk-free interest rate — Based on a treasury instrument whose term is consistent with the expected term of the stock options.

● Expected dividend yield — We assume an expected dividend yield of zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

● Expected dividend yield — We assumed an expected dividend yield of zero, as we have never paid dividends and have no current plans to pay any dividends on our common stock.

JOBS Act accounting election

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Recent accounting pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our audited financial statements included elsewhere in this Quarterly Report on Form 10-Q.

A discussion of recent accounting pronouncements is included in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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-Q

Item 2. Management’s Discussion and Analysis