What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-10 compared with 2022-02-22 · 141 added, 160 removed, 315 unchanged (49% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Board of Directors and Stockholders

Opinion on the financial statements

24 unchanged sentences

Cash and cash equivalents

Accounts receivable, net

Accounts receivable, net of allowances of $ 679 and $ 0 , respectively

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Operating lease right-of-use asset

Other non-current assets

Liabilities and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Warrant liability

Total current liabilities

Long-term debt

Operating lease liability, non-current portion

Other long-term liabilities

1 unchanged sentence

Commitments and contingencies (Note 10)

Convertible preferred stock, $ 0.01 par value, 10,000,000 and 237,370,645 authorized as of December 31, 2021 and December 31, 2020, respectively;

0 and 223,541,754 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit):

Common stock, $ 0.01 par value, 200,000,000 and 625,217,795 authorized as of December 31, 2021 and December 31, 2020, respectively;

Stockholders’ equity:

Common stock, $ 0.01 par value, 200,000,000 authorized as of December 31, 2022 and December 31, 2021;

20,633,736 and 20,399,337 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

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Accumulated other comprehensive loss

Total stockholders’ equity (deficit)

Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

8 unchanged sentences

Interest expense

Other expense, net

Other income (expense), net

Loss before income taxes

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Exercise of stock options

Repurchase of common stock

Employee stock compensation

Issuance of Series G preferred stock, net of costs

Accretion of Series G issuance costs

Issuance of common stock, net of offering costs

Reverse stock split

Conversion of Series G preferred stock

( 223,541,754 )

Net loss for the year ended December 31, 2021

2 unchanged sentences

Exercise of stock options

Proceeds from Employee Stock Purchase Plan

Employee stock compensation

Issuance of common stock, net of offering costs

Reverse stock split

Conversion of Series G preferred stock

( 223,541,754 )

Net loss for the year ended December 31, 2022

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Proceeds from the exercise of common stock options

Proceeds from issuance of Series G Preferred Stock, net of fees

Proceeds from Employee Stock Purchase Plan

Payments related to reverse stock split

Proceeds from the issuance of common stock, net of offering costs

Proceeds from debt financing

Debt financing costs

Repayment on debt financing

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Cash paid for income taxes

ROU assets exchanged for lease liabilities

The accompanying notes are an integral part of these consolidated financial statements.

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Customer credit terms are established prior to shipment with the standard generally being net 30 days.

We do not record an allowance on our trade accounts receivable but monitor the collectability of individual customer accounts on an ongoing basis.

We evaluate the collectability of our accounts receivable based on known collection risks and historical experience.

In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us, we record a specific allowance for bad debts against amounts due to reduce the carrying amount of accounts receivable to the amount we reasonably believe will be collected.

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

The Company regularly reviews inventory quantities in consideration of actual loss experiences, projected future demand and remaining shelf life to record a provision for excess and obsolete inventory when appropriate.

Operating leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability – non-current portion in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

We used the incremental borrowing rate based on information readily available at the time of recognition to determine the present value of the lease payments.

The determination of our incremental borrowing rate requires management judgement based on information available at lease commencement.

Revenue recognition

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a pulse generator and a stimulation lead.

Under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

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Stock-Based Compensation

We recognize equity-based compensation expense for awards of equity instruments to employees and non- employees based on the grant date fair value of those awards in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”).

ASC 718 requires all equity-based compensation awards to employees and nonemployee directors, including grants of restricted shares and stock options, to be recognized as expense in the statements of operations and comprehensive loss based on their grant date fair values.

We recognize equity-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”).

ASC 718 requires all equity-based compensation awards to employees and non-employee directors, including grants of restricted shares and stock options, to be recognized as expense in the statements of operations and comprehensive loss based on their grant date fair values.

We estimate the grant date fair value of stock options using the Black-Scholes option pricing model.

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.

We account for forfeitures as they occur.

We expense the fair value of our equity-based compensation awards granted to employees on a straight-line basis over the associated service period, which is generally the period in which the related services are received.

Recently accounting pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02, Leases (“Topic 842”).

The purpose of Topic 842 is to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, including those previously classified as operating leases under current U.S.

GAAP and disclosing key information about leasing arrangements.

Topic 842 is effective for private companies and smaller reporting companies for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted, and the Company must elect whether the date of initial application is the beginning of the earliest comparative period presented in the financial statements, or the beginning of the period of adoption.

Under the alternative modified retrospective transition approach, the reported results for 2022 reflect the application of Topic 842 guidance, whereas comparative periods and their respective disclosures prior to the adoption of Topic 842 are presented using the legacy guidance of Accounting Standards Classification (“ASC”) 840.

As a result of adopting the new standard, the Company will recognize right-of-use assets of $ 579,000 and lease liabilities of $ 561,000 million as of January 1, 2022.

difference between the amount of right-of-use assets and lease liabilities recognized includes adjustments to prepaid rent.

There will be no change to net deferred tax balances as a result of the Company’s adoption of Topic 842.

The adoption of Topic 842 did not impact the Company’s results of operations or cash flows.

Recent accounting pronouncements

On January 1, 2022, the Company adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”), utilizing the alternative modified retrospective transition approach.

Under the alternative modified retrospective transition approach, the reported results for 2022 reflect the application of ASC 842 guidance,

whereas comparative periods and their respective disclosures prior to the adoption of ASC 842 are presented using the legacy guidance of ASC 840.

As a result of adopting the new standard, the Company recognized ROU assets of $ 579,000 and lease liabilities of $ 561,000 as of January 1, 2022.

The lease liabilities represent the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as of January 1, 2022.

The corresponding ROU assets are recorded based on the lease liabilities and the cumulative difference between rent expense and the amounts paid under the lease.

The Company did not elect any practical expedients.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("ASU 2016-13"), to require the measurement of expected credit losses for financial instruments held at the reporting date to be based on historical experience, current conditions, and reasonable forecasts.

ASU 2016-13 became effective for us for interim and annual periods beginning January 1, 2023, and we will expand our financial statement disclosures in order to comply with the guidance.

We have determined that the adoption of ASU 2016-13 will not have a material impact on our results of operations, cash flows, or financial position.

Selected balance sheet information

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Accumulated depreciation and amortization

Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years .

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease.

Depreciation expense was $ 0.4 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.

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Customer rebates

Interest payable

Fair value measurements

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

● Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.

● Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

● Level 3 — Inputs are unobservable for the asset or liability.

The following table sets forth the Company’s liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy.

There was no convertible preferred stock warrant liability as of December 31, 2021.

Operating lease liability, current portion

Innovatus Loan Agreement

On October 31, 2022, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Innovatus Life Sciences Fund I, LP, as the collateral agent and a lender, under which the Company may borrow, subject to the Company’s achievement of certain milestones, up to a total of $ 50.0 million in a series of term loans.

On the closing date, the Company borrowed the minimum amount of $ 7.5 million under the Loan Agreement.

The Loan Agreement initially requires interest only payments through November 2027, followed by three monthly principal and interest payments.

A final payment of $ 0.3 million, equal to 4.5 % of the original borrowed principal, is due in January 2028.

The terms loans advanced pursuant to the Loan Agreement (collectively, the “Term Loans”) bear interest at a floating rate per annum equal to the sum of (a) the greater of (i) the prime rate and (ii) 5.50 % plus (b) 2.65 %.

The Term Loans mature on January 31, 2028 and require interest-only payments until November 1, 2027.

The Term Loans are secured by substantially all of the personal property of the Company.

The Company has the option to draw down (i) the remaining $ 7.5 million of the first tranche from the filing date of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 until September 30, 2023, (ii) up to $ 30.0 million less the amount funded from the first tranche between September 1, 2023 and December 15, 2023 if the Company achieves trailing three months revenue of $ 5.75 million prior to June 30, 2023, and (iii) up to $ 20.0 million between September 1, 2024 and December 15, 2024 if the Company achieves trailing three months revenue of $ 9.0 million prior to June 30, 2024.

A performance covenant takes effect at the earlier of September 30, 2025 or the third tranche funding requiring that the Company achieve 50 % of the trailing twelve months revenue target set in the Board-approved revenue plan in effect for such period.

The Loan Agreement requires the payment of certain penalties if the Term Loans are paid off prior to maturity for any reason, including pursuant to an acceleration clause, and includes various restrictive covenants, including a restriction on the payment of dividends or making other distributions or payments on the Company’s capital stock, subject to limited exceptions.

The Company was in compliance with these covenants as of December 31, 2022.

In connection with the Loan Agreement, the Company recorded $ 0.8 million of debt issuance costs and discounts as a reduction of long-term debt.

The annual principal maturities of debt under the Loan Agreement are as follows:

(in thousands)

Balance as of December 31, 2020

Convertible preferred stock warrant liability

Total liabilities

The convertible preferred stock warrant liability related to warrants issued in connection with loan and security agreements entered into in September 2014, as amended in July 2015, in May 2016 and in September 2019.

These warrants were originally issued to purchase shares of Series F-2 convertible preferred stock and Series G convertible preferred stock (“Series G Preferred Shares”).

In connection with the closing of the initial public offering (“IPO”), these convertible preferred stock warrants became warrants to purchase 108,406 shares of common stock and were reclassified to equity.

The convertible preferred stock warrant liability also related to a warrant issued to Biosense Webster, Inc.

(“BWI”), an affiliate of Johnson & Johnson Innovation — JJDC, Inc., to purchase Series G Preferred Shares with an exercise price of $ 0.01 per share.

In connection with the closing of the IPO, the BWI warrant to purchase Series G Preferred Shares became exercisable to purchase 607,725 shares of common stock at an exercise price of $ 0.16 per share .

The Company’s recurring fair value measurements using significant unobservable inputs (Level 3) related solely to the Company’s convertible preferred stock warrant liability.

The convertible preferred stock warrant liability was remeasured at each financial reporting period with any changes in fair value being recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

In connection with the closing of the IPO, all of the outstanding convertible preferred stock warrants were converted to common stock warrants.

The related liability was remeasured at the time of the IPO and reclassed to additional paid-in capital.

The following table sets forth a summary of changes in the estimated fair value of the Company’s convertible preferred stock warrants during the years ended:

Unamortized debt costs and discounts

Long-term debt

We lease 23,890 square feet of office space in Minneapolis, Minnesota, which houses our principal executive offices and our manufacturing facility.

We lease this space under an operating lease agreement that commenced December 1, 2008 and expires July 31, 2024.

We intend to add new facilities as we grow, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Our operating lease agreement includes an option to renew for one additional period of five years .

The exercise of the lease renewal option is at our sole discretion and was not included in the lease term for the calculation of the ROU asset and lease liability upon adoption of ASC 842 on January 1, 2022, as it is not reasonably certain of exercise.

In addition to base rent, we will also pay our proportionate share of operating expenses, as defined in the lease.

These payments will be made monthly and will be adjusted annually to reflect actual charges incurred for operating expenses, such as common area maintenance, taxes and insurance.

The following table presents the lease balances within the consolidated balance sheets:

(in thousands)

Beginning of the period

Change in fair value

Conversion to common stock warrants

End of the period

There were no transfers in or out of Level 1, Level 2 or Level 3 fair value measurements during the periods ended December 31, 2021 and 2020.

Horizon loan agreement

In September 2019, the Company entered into a loan and security agreement (“Horizon loan agreement”) with Horizon Technology Finance Corporation (“Horizon”) under which it could borrow up to a total of $ 20.0 million at a floating per annum rate equal to 10 % plus the amount by which the 30-day U.S.

dollar LIBOR rate on the first business day of the month exceeds 2.2 %.

The Horizon loan agreement initially required interest only payments through October 2021 and then 36 monthly principal and interest payments beginning in November 2021.

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

The Horizon loan agreement initially required the Company 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.

The borrowings were collateralized by all or substantially all of the assets of the Company.

The Horizon loan agreement required the payment of certain penalties if the loan was paid off prior to maturity for any reason, including pursuant to a subjective acceleration clause, and included various restrictive covenants, including a restriction on the payment of dividends.

In August 2020, the Company entered into an amended agreement with Horizon to extend the interest only period through April 2022, followed by 30 monthly principal and interest payments beginning in May 2022.

In connection with the Horizon loan agreement, the Company recorded $ 1.1 million of debt issuance costs and discounts as a reduction of long-term debt.

Of this total, $ 0.5 million related to legal fees and an investment bank fee and $ 0.6 million related to the warrants to purchase Series G Preferred Shares issued by the Company.

These warrants were exercisable on the grant date at a price of $ 0.80 per share and expire in September 2029.

The Company used the Black-Scholes option pricing model to determine the grant date fair value of these warrants.

On November 3, 2021 the Company fully repaid all amounts outstanding under the Horizon loan agreement.

The total repayment amount was $ 21.3 million, inclusive of $ 1.3 million of prepayment and other fees, which represent a loss on extinguishment of debt and are included in Other expense, net on the consolidated statements of operations.

The Company was in compliance with all related covenants at the time the principal balance was fully repaid.

There was no debt outstanding in relation to the Horizon loan agreement as of December 31, 2021.

Stockholders’ equity

Initial Public Offering

During 2016, the Company issued 72,125,000 shares of Series G Preferred Shares at a price of $ 0.80 per share, for net proceeds to the Company of approximately $ 57.4 million after deducting offering expenses payable by the Company.

The same Series G investors agreed to purchase an additional $ 35.3 million of Series G Preferred Shares upon the Company’s achievement of a certain operational milestone, subject to limited closing conditions.

In January 2019, May 2019 and August 2019 , the Series G investors purchased additional Series G Preferred Shares, resulting in net proceeds to the Company of $ 24.7 million.

In July of 2020, the Company issued 62,500,000 additional Series G Preferred Shares, at a price of $ 0.80 per share, for net proceeds to the Company of $ 49.8 million after deducting offering expenses payable by the Company.

On May 31, 2016, holders of the requisite number of the Company’s then-outstanding convertible preferred stock approved the conversion of all preferred stock into shares of the Company’s common stock in connection with a new equity financing.

Accordingly, all of the Company’s then-outstanding preferred stock was converted on a one -for-one basis into shares of the Company’s common stock.

Under the terms of the equity financing, each prior holder of preferred stock who purchased a required amount of securities in the new financing was entitled to exchange certain of the shares of common stock received in the conversion described above into new prime series of preferred stock corresponding to the series of preferred stock from which the common stock was previously converted.

All of the previously held Series A-1, B-1, C-1, D-1, E-1 and F preferred stock had similar features as the Series A-2 preferred stock (“Series A-2 Preferred Shares”), Series B-2 preferred stock (“Series B-2 Preferred Shares”), Series C-2 preferred stock (“Series C-2 Preferred Shares”), Series D-2 preferred stock (“Series D-2 Preferred Shares”), Series E-2 preferred stock (“Series E-2 Preferred Shares”) and Series F-2 preferred stock (“Series F-2 Preferred Shares”) described below.

The Series A-2, Series B-2, Series C-2, Series D-2, Series E-2, Series F-2 and Series G Preferred Shares are referred to collectively as the “Preferred Shares.”

As of December 31, 2020, convertible preferred stock consisted of the following:

Carrying Value

Right-of-use assets:

Operating lease right-of-use asset

Operating lease liabilities:

Accrued expenses

Operating lease liability, non-current portion

Total operating lease liabilities

Maturities of our lease liability for our operating lease are as follows as of December 31, 2022:

(in thousands)

Total undiscounted lease payments

imputed interest

Present value of lease liability

As of December 31, 2022, the remaining lease term was 1.5 years, and the discount rate was 5.0 %.

The operating cash outflows from our operating lease were $ 0.4 million for the year ended December 31, 2022.

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, the minimum lease payments under all operating leases as of December 31, 2021 were as follows for the years ending:

(in thousands)

December 31, 2022

December 31, 2023

December 31, 2024

Prior to January 1, 2022, we recorded operating lease rent expense under ASC 840 on a straight-line basis over the period of the lease.

Rent expense for the year ended December 31, 2021 was $ 0.4 million.

Stockholders’ equity

Initial Public Offering

On July 2, 2021, the Company closed its IPO of 8,050,000 shares of its common stock at a public offering price of $ 18.00 per share, which included 1,050,000 shares of common stock issued upon the exercise in full by the underwriters of their option to purchase additional shares, for net proceeds from the IPO, after deducting the underwriting discount and other offering expenses payable by the Company totaling $ 1.6 million, of $ 133.2 million.

Upon the closing of the IPO, all shares of convertible preferred stock were automatically converted into common stock.

Series G Preferred Shares were converted into common stock on a 15.819 -for-1 basis, and all other shares of convertible preferred stock were automatically converted into common stock on a 39.548 -for-1 basis.

Series G convertible preferred stock was converted into common stock on a 15.819 -for-1 basis, and all other shares of convertible preferred stock were automatically converted into common stock on a 39.548 -for-1 basis.

The conversion of the outstanding preferred stock resulted in an aggregate of 11,929,584 shares of common stock.

As of December 31, 2021, no preferred stock is outstanding.

As of December 31, 2022 and 2021, no preferred stock was outstanding.

Reverse Stock Split

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The par value of the common stock was not adjusted as a result of the reverse stock split.

Adjustments corresponding to the reverse stock split were made to the ratio at which the convertible preferred stock will convert into common stock in connection with the closing of the IPO.

Adjustments corresponding to the reverse stock split were made to the ratio at which the convertible preferred stock converted into common stock in connection with the closing of the IPO.

Accordingly, all share and per-share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split and the adjustment of the conversion ratio of the convertible preferred stock.

Preferred Stock Warrants and Common Stock Warrants

In connection with the loan and security agreement entered into by the Company in September 2014 and the amendment in July 2015, the Company issued a warrant to purchase shares of Series F-2 convertible preferred stock.

In connection with the loan and security agreement entered into in May 2016, the Company issued a warrant to purchase Series G Preferred Shares.

The Company issued to BWI a warrant to purchase shares of Series E-2 convertible preferred stock that only would have become exercisable in the event of an acquisition or asset transfer involving the Company and it expired upon our IPO.

In September of 2018, the Company also issued to BWI a warrant to purchase up to 10,000,000 Series G Preferred Shares with an exercise price of $ 0.01 per share.

The warrant to purchase Series G Preferred Shares became exercisable upon our IPO and would have expired on the earlier of (i) an acquisition or asset transfer involving the Company or (ii) 180 days after receipt of the data from the post-market stage of the BeAT-HF pivotal trial.

Common Stock Warrants

In connection with the IPO, the warrants to purchase shares of convertible preferred stock automatically converted into warrants to purchase common stock, resulting in the reclassification of the related convertible preferred stock warrant liability to additional paid-in capital.

Upon the closing of the IPO, these warrants to purchase convertible preferred stock became exercisable for 716,131 shares of common stock upon conversion at a weighted average exercise price of $ 2.39 per share.

Warrants to purchase shares of our common stock are summarized below:

Weighted Average

Common Stock Warrants

Exercise Price

Outstanding at December 31, 2020

Preferred stock warrants converted to common stock warrants at IPO

Outstanding at December 31, 2021

Stock-Based compensation

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In June 2001, the Company’s Board of Directors and stockholders established the 2001 Stock Incentive Award Plan (“2001 Plan”).

Under the 2001 Plan, as amended, 2,674,749 shares of common stock had been reserved for the issuance of incentive stock options granted to employees, nonemployee directors, consultants or independent contractors.

Options granted under the 2001 Plan have vesting terms that range from the day of grant to four years and expire within a maximum term of 10 years from the grant date.

Under the 2001 Plan, as amended, 2,674,749 shares of common stock had been reserved for the issuance of incentive stock options granted to employees, non-employee directors, consultants or independent contractors.

Options granted under the 2001 Plan have vesting terms that range from the date of grant to four years and expire within a maximum term of 10 years from the grant date.

In connection with the IPO in 2021, the Company’s Board of Directors and stockholders established the 2021 Equity Incentive Plan (“2021 Plan”).

The number of shares of common stock initially reserved for issuance under the 2021 Plan was 1,854,490 newly reserved shares in addition to the 600,737 shares that remained available for issuance under the 2001 Plan.

The shares available for issuance under the 2021 Plan will automatically increase on the first day of each year, commencing January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 5 % of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors.

The 2021 Plan provides for the

issuance of stock options, stock appreciation rights, restricted stock awards, stock unit awards and other stock-based awards and cash incentive awards to employees, consultants and non-employee directors of the Company and its subsidiaries.

The shares available for issuance under the 2021 Plan automatically increase on the first day of each year, commencing January 1, 2022, and ending on (and including) January 1, 2031, in an amount equal to 5 % of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors.

The annual increase resulted in an additional 1,019,967 shares being reserved for issuance under the 2021 Plan as of January 1, 2022.

The 2021 Plan provides for the issuance of stock options, stock appreciation rights, restricted stock awards, stock unit awards and other stock-based awards and cash incentive awards to employees, consultants and non-employee directors of the Company and its subsidiaries.

Awards granted under the 2021 Plan will have such vesting schedules and other terms as determined by the Compensation Committee and stock options and stock appreciation rights have a maximum term of 10 years from the grant date.

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Options are granted at exercise prices not less than the fair market value (as determined by the Board of Directors) of the Company’s common stock on the date of grant.

During the years 2008 through December 31, 2021, the Board of Directors authorized the grant of stock options for the purchase of shares of common stock to the employers of certain nonemployee directors.

The options were not granted under the 2001 Plan or the 2021 Plan, but terms are substantially the same as the Company’s standard form of option agreement for nonemployee directors as they have an exercise price not less than the fair market value on the grant date and vest over 48 months from the date of grant.

During the years 2008 through December 31, 2022, the Board of Directors authorized the grant of stock options for the purchase of shares of common stock to the employers of certain non-employee directors.

The options were not granted under the 2001 Plan or the 2021 Plan, but terms are substantially the same as the Company’s standard form of option agreement for non-employee directors as they have an exercise price not less than the fair market value on the grant date and vest over 48 months from the date of grant.

The following is a summary of stock option activity:

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As of December 31, 2022, stock options outstanding included 8,796 options that were not granted under the 2001 Plan or the 2021 Plan.

For options outstanding as of December 31, 2021, the weighted average remaining contractual life was 8.1 years.

For options outstanding as of December 31, 2022, the weighted average

remaining contractual life was 7.8 years.

For options exercisable as of December 31, 2022, the weighted average remaining contractual life was 6.6 years.

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The number of shares of common stock initially reserved for issuance under the ESPP was 278,170 .

The shares available for issuance under the ESPP will automatically increase on the first day of each year, commencing January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 1 % of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors.

The shares available for issuance under the ESPP automatically increase on the first day of each year, commencing January 1, 2022, and ending on (and including) January 1, 2031, in an amount equal to 1 % of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors.

The annual increase resulted in an additional 203,993 shares being reserved for issuance under the ESPP as of January 1, 2022.

The ESPP will permit certain of the Company’s U.S.

employees to purchase shares of the Company’s common stock at a price per share not less than 85 % of the l ower of (i) the closing market price per share of the Company’s common stock on the first day of the applicable purchase period or (ii) the closing market price per share of the Company’s common stock on the purchase date at the end of the applicable six-month purchase period.

The first purchase period commenced January 1, 2022.

Accordingly, as of December 31, 2021, no shares of common stock have been purchased under the ESPP.

The first purchase date under the ESPP was June 30, 2022.

Accordingly, as of December 31, 2022, 113,890 shares of common stock have been purchased under the ESPP for $ 0.6 million of employee contributions.

As of December 31, 2022, there were 368,273 shares available for issuance under the ESPP.

Stock-based compensation expense

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options on the grant date.

The Company measures stock-based compensation expense based on the grant date fair value of the award and recognizes compensation expense over the requisite service period, which is generally the vesting period.

The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and ESPP purchase rights on the grant date.

The amount of stock-based compensation expense recognized for stock option awards during a period is based on the portion of the awards that are ultimately expected to vest.

The amount of stock-based compensation expense recognized for ESPP purchase rights during a period is based on the estimated purchase rights as of the grant date.

The Company accounts for forfeitures as they occur.

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes option pricing model for the years ended December 31, 2022 and 2021.

Year ended December 31,

Weighted average fair value of options granted

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56.3 % to 60.4

56.1 % to 63.4

Expected dividend yield

2 unchanged sentences

0.17 % to 1.44

The following table provides the weighted average fair value of ESPP purchase rights and the related assumptions used in the Black-Scholes option pricing model for the year ended December 31, 2022.

Weighted average fair value per ESPP purchase right

Expected term (in years)

Expected volatility

51.3 % to 62.9

Expected dividend yield

Risk-free interest rate

0.22 % to 2.52

There were no ESPP purchase rights for the year ended December 31, 2021.

The Company reviews these assumptions on a periodic basis and adjusts them, as necessary.

The expected term of an award was determined based on the Company’s analysis of historical exercise behavior while taking into consideration various participant demographics and option characteristics.

The expected term of a stock option award was determined based on the Company’s analysis of historical exercise behavior while taking into consideration various participant demographics and option characteristics.

The expected term of an ESPP purchase right is based on the offering period.

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

3 unchanged sentences

Treasury securities for a period approximating the expected term of the options being valued.

For the years ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense as follows:

The following table presents the components and classification of stock-based compensation expense for the periods indicated:

Year Ended December 31,

(in thousands)

Stock options

Employee Stock Purchase Plan

Total stock-based compensation expense

Selling, general & administrative

2 unchanged sentences

As of December 31, 2022, unrecognized compensation expense related to unvested stock-based compensation arrangements was $ 8.7 million.

As of December 31, 2021, the related weighted average period over which it is expected to be recognized is approximately 3.3 years.

As of December 31, 2022, the related weighted average period over which the expense is expected to be recognized is approximately 2.5 years.

Early exercise of stock options

5 unchanged sentences

As of December 31, 2022 and 2021, a valuation allowance was recorded against all deferred tax assets due to the Company’s cumulative net loss position.

The components of our provision for income taxes are as follows:

The components of our provision for income taxes are as follows for the periods indicated:

Year Ended December 31,

1 unchanged sentence

Federal and state

Total current

Total provision for income taxes

Provision for income taxes for the years ended December 31, 2021 and 2020 was $ 91,000 and $ 85,000 , respectively.

The reconciliation of taxes at the federal statutory rate to our provision for income taxes are as follows:

The reconciliation of taxes at the federal statutory rate to our provision for income taxes are as follows for the periods indicated:

Year Ended December 31,

6 unchanged sentences

Change in valuation allowance

Significant components of net deferred tax assets were as follows:

Significant components of net deferred tax assets were as follows for the periods indicated:

Year Ended December 31,

3 unchanged sentences

R&D tax credits

IRC Section 59e election

Capitalized R&D expenses

Start-up costs

2 unchanged sentences

Accrued vacation

Preferred stock warrants

Total deferred tax assets

4 unchanged sentences

As of December 31, 2022, the Company had federal and state tax credit carryforwards of approximately $ 9.3 million and $ 1.8 million, respectively.

The federal tax credit carryforwards began expiring in 2021 and the state tax credits began expiring in 2028.

The federal tax credit carryforwards began expiring in 2021 and the state tax credits will begin expiring in 2028.

Utilization of NOLs may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions.

1 unchanged sentence

Such a change of ownership would limit the Company’s utilization of the NOLs and could be triggered by subsequent sales of securities by the Company or its stockholders.

The changes to our gross unrecognized tax benefits were as follows:

The changes to our gross unrecognized tax benefits were as follows of the periods indicated:

Year Ended December 31,

8 unchanged sentences

All of these unrecognized tax benefits, if recognized, would impact the effective tax rate before taking consideration of the valuation allowance.

The amount of unrecognized tax benefits subjected to the valuation allowance was $ 1.6 million and $ 1.5 million for the years ended December 31, 2022 and 2021, respectively.

The Company recognized approximately $ 66,000 and $ 61,000 of interest or penalties for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2021 and 2020, total accrued interest and penalties are $ 0.3 million and $ 0.3 million, respectively.

As of December 31, 2022 and 2021, total accrued interest and penalties were $ 0.4 million and $ 0.3 million, respectively.

The Company recognizes accrued interest and penalties related to unrecognized tax positions as a component of income tax expense.

4 unchanged sentences

The Company does not have any tax audits or other proceedings pending.

(Loss) Earnings Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated for the periods indicated (in thousands, except share and per share data):

Year Ended December 31,

(in thousands)

Accretion of preferred stock to redemption value

Net loss attributable to common stockholders

Weighted average common shares outstanding — basic and diluted

2 unchanged sentences

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period

end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Year Ended December 31,

Options to purchase common stock

Warrants to purchase redeemable convertible preferred stock (as converted to common stock)

Warrants to purchase common stock

Redeemable convertible preferred stock (as converted to common stock)

Commitments and contingencies

Operating Leases

The Company has entered into an operating lease agreement for its office, manufacturing and research facility, which expires in 2024.

Rent expense for the years ended December 31, 2021 and 2020 was $ 0.4 million and $ 0.4 million, respectively.

Future minimum lease payments under all operating leases as of December 31, 2021 are as follows for the years ending:

(in thousands)

December 31, 2022

December 31, 2023

December 31, 2024

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business.

3 unchanged sentences

The Company sponsors a voluntary defined-contribution employee retirement plan (the “401(k) plan”) for its U.S.

The 401(k) plan provides that each participant may contribute pre-tax or post-tax compensation up to the statutory limit allowable.

The 401(k) plan provides that each participant may contribute pre-tax or post-tax

compensation up to the statutory limit allowable.

Under the 401(k) plan, each participant is fully vested in his or her deferred salary contributions when contributed.

5 unchanged sentences

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

and its Chief Executive Officer evaluate performance based primarily on revenue in the geographic locations in which the Company operates.

The Company and its Chief Executive Officer evaluate performance based primarily on revenue in the geographic locations in which the Company operates.

The Company derives all its revenues from sales to customers in Europe and the U.S.

The following table provides revenue by country for each location accounting for more than 10% of the total revenue for the years ended:

The following table provides revenue by country for each location accounting for more than 10% of the total revenue for the periods indicated:

(in thousands)

3 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