What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-09 compared with 2023-02-10 · 105 added, 140 removed, 316 unchanged (44% of the section changed)

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of CVRx, Inc.

(a Delaware corporation) and subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”).

(a Delaware corporation) and subsidiary (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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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

Common stock, $ 0.01 par value, 200,000,000 authorized as of December 31, 2023 and 2022;

20,879,199 and 20,663,736 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital

13 unchanged sentences

Interest expense

Other income (expense), net

Other income, net

Loss before income taxes

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

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

stockholders’

preferred stock

comprehensive

stockholders’

Balances as of December 31, 2021

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

5 unchanged sentences

Net loss for the year ended December 31, 2023

Cumulative translation adjustment

Balances as of December 31, 2023

6 unchanged sentences

Depreciation of property and equipment

Loss on disposal of equipment

Amortization of deferred financing costs and loan discount

Loss on debt extinguishment

Changes in fair value of convertible preferred stock warrants

Changes in operating assets and liabilities:

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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

Net cash provided by financing activities

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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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(the “Company”) was incorporated in Delaware and is headquartered in Minneapolis, Minnesota.

The Company has developed and is marketing a medical device, Barostim, for heart failure (“HF”) and resistant hypertension.

The Company is focused on the sale of its product in the U.S.

We have developed and is marketing a medical device, Barostim, for heart failure (“HF”) and resistant hypertension.

We are focused on the sale of our product in the U.S.

Management expects that operating losses and negative cash flows from operations could continue in the foreseeable future.

There is no assurance that the Company will generate sufficient product sales to produce positive earnings or cash flows.

There is no assurance that we will generate sufficient product sales to produce positive earnings or cash flows.

Summary of significant accounting policies

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Securities and Exchange Commission (“SEC”).

The consolidated financial statements include the accounts of CVRx, Inc., its wholly owned subsidiary, CVRx Switzerland LLC, and its sales branch in Italy.

The consolidated financial statements include the accounts of CVRx, Inc., its wholly owned subsidiary, CVRx Switzerland LLC, and its sales branch in Italy, which was closed during 2023.

All intercompany balances and transactions have been eliminated in consolidation.

JOBS Act accounting election

The Company is an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

As a result, the Company has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

As a result, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

Use of estimates

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As of December 31, 2023 and 2022, cash equivalents consisted of money market funds, which are stated at cost and approximate fair value.

Additionally, as of December 31, 2023 and 2022, a majority of our cash and cash equivalents were maintained with two financial institutions in the U.S., and our current deposits are likely in excess of insured limits.

Accounts Receivable

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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.

ASU 2016-13 became effective for us for interim and annual periods beginning January 1, 2023.

We have determined that the adoption of ASU 2016-13 did not have a material impact on our results of operations, cash flows, or financial position as we do not have a history of credit losses.

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.

We regularly review 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.

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Revenue recognition

The Company sells its products primarily through a direct sales force and to a lesser extent through a combination of sales agents and independent distributors.

The Company’s revenue consists primarily of the sale of its Barostim, which consists of two implantable components:

We sell our products primarily through a direct sales force and to a lesser extent through a combination of sales agents and independent distributors.

Our revenue consists primarily of the sale of our Barostim, which consists of two implantable components:

a pulse generator and a stimulation lead.

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:

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

(i) identify the contract(s) with a customer;

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

The Company recognizes net revenue on product sales when the customer obtains control of the Company’s product, which generally occurs at a point in time upon delivery based on the contractual shipping terms of a contract.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services it transfers to the customer.

We recognize net revenue on product sales, adjusted for any applicable estimates of variable consideration, when the customer obtains control of our product, which generally occurs at a point in time upon delivery based on the contractual shipping terms of a contract.

All our contracts have a single performance obligation and our payment terms with customers are generally between 30 and 90 days.

Variable consideration related to certain customer rebates is estimated based on the amounts expected to be paid based on the agreement with the customer.

Stock-Based Compensation

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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.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public companies to disclose for each reportable segment the significant expense categories and amounts for such expenses.

ASU 2023-07 is effective for annual periods beginning December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

This ASU will be effective for our annual period ended December 31, 2024.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

ASU 2023-09 is effective for annual periods beginning after December 15, 2023.

This ASU will be effective for our annual period ended December 31, 2024.

Selected balance sheet information

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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.

On October 31, 2022, we 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 we may borrow, subject to our achievement of certain milestones, up to a total of $ 50.0 million in a series of term loans.

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

On March 10, 2023, we borrowed the $ 7.5 million remaining under the first tranche of the Loan Agreement.

On December 15, 2023, we borrowed an additional $ 15.0 million under the second tranche of 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 $ 1.4 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 term 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 are secured by substantially all of our personal property.

We have the option to draw down up to $ 20.0 million between September 1, 2024 and December 15, 2024 if we achieve 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 we achieve 50 % of the trailing twelve months revenue target set in the Board-approved revenue plan in effect for such period.

We were in compliance with these covenants as of December 31, 2023.

In connection with the Loan Agreement, we recorded $ 1.0 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:

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We lease 31,505 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 lease this space under an operating lease agreement that commenced December 1, 2008 and was scheduled to expire August 31, 2024.

On April 21, 2023, we extended the operating lease for our office space in Minneapolis, Minnesota for an additional 49 consecutive months through August 31, 2028.

On November 7, 2023, we expanded our existing office space with the addition of 7,615 square feet of property adjacent to our principal executive offices and our manufacturing facility.

The term on this expanded property is for 57 consecutive months that will run concurrently with the term on the existing lease.

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.

Our operating lease agreement includes an option to renew for one additional period of three 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, as it is not reasonably certain of exercise.

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

These payments are made monthly and are 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:

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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.

As of December 31, 2023, the remaining lease term was 4.7 years, and the weighted average discount rate was 6.7 %.

The operating cash outflows from our operating lease were $ 0.4 million for each of the years ended December 31, 2023 and 2022.

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 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, 2022 and 2021, no preferred stock was outstanding.

Reverse Stock Split

In connection with the IPO, the Company’s Board of Directors and stockholders approved a 1-for- 39.548 reverse stock split of the Company’s common stock.

The reverse stock split became effective on June 22, 2021.

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 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.

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.

We have common stock warrants exercisable for 716,131 shares of common stock upon conversion at a weighted average exercise price of $ 2.39 per share.

Stock-based compensation

Summary of plans and activity

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

In June 2001, our 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, 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”).

In 2021, our 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 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 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 our 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 1,033,186 shares being reserved for issuance under the 2021 Plan as of January 1, 2023.

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As of December 31, 2023, there were 1,671,202 shares available for future issuance under the 2021 Plan.

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, 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.

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

During the years 2008 through the IPO, 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 our 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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For options exercisable as of December 31, 2023, the weighted average remaining contractual life was 6.3 years.

In connection with the IPO, the Company’s Board of Directors and stockholders also established an Employee Stock Purchase Plan (the “ESPP”).

Our Board of Directors and stockholders also established an Employee Stock Purchase Plan (the “ESPP”).

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 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 our 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 206,637 shares being reserved for issuance under the ESPP as of January 1, 2023.

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 ESPP permits certain of our U.S.

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

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.

For the year ended December 31, 2023, 71,276 shares of common stock were purchased under the ESPP for $ 0.9 million of employee contributions.

As of December 31, 2023, there were 503,634 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 and ESPP purchase rights 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 for stock options and the offering period for ESPP purchase rights.

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

We measure 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 for stock options and the offering period for ESPP purchase rights.

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.

We account 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, 2023 and 2022.

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1.75 % to 4.18

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.

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 years ended December 31, 2023 and 2022.

Weighted average fair value per ESPP purchase right

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76.2 % to 84.6

51.3 % to 62.9

Expected dividend yield

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4.77 % to 5.53

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 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 .

0.22 % to 2.52

We review these assumptions on a periodic basis and adjust them, as necessary.

We utilize the simplified method to develop the estimate of the expected term for stock option awards and ESPP purchase rights.

The expected volatility is based upon observed volatility of comparable public companies.

The expected dividend yield is assumed to be zero , as the Company has never paid dividends and has no current plans to do so.

The expected dividend yield is assumed to be zero , as we have never paid dividends and have no current plans to do so.

The risk-free interest rate is based on the yield on U.S.

1 unchanged sentence

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

Year Ended December 31,

(in thousands)

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As of December 31, 2023, the related weighted average period over which the expense is expected to be recognized is approximately 2.4 years.

Early exercise of stock options

Under the 2001 Plan, the Company has issued options to certain executive officers with early-exercise provisions.

The options may be exercised by the holder any time after they are granted.

The Company has the right to repurchase, at the original option exercise price, shares issued pursuant to such early-exercise provisions, upon the termination of employment or death of the stockholder.

This repurchase right expires based upon the original option vesting schedule.

As of December 31, 2022 and 2021, there have been no early exercises and therefore there is no liability recorded for the early exercise of stock options.

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.

As of December 31, 2023 and 2022, a valuation allowance was recorded against all deferred tax assets due to our cumulative net loss position.

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

Year Ended December 31,

(in thousands)

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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,

Tax at federal statutory rate

Permanent differences

Research and development ("R&D") tax credit

Uncertain tax position

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

Year Ended December 31,

(in thousands)

3 unchanged sentences

Capitalized R&D expenses

Start-up costs

Non-qualified stock options

Property and equipment

Start-up costs

Accrued vacation

Property and equipment

Total deferred tax assets

1 unchanged sentence

Net deferred tax assets

As of December 31, 2022, the Company had federal and state net operating loss carryforwards (“NOLs”) of approximately $ 361.0 million and $ 6.2 million, respectively.

As of December 31, 2023, we had federal and state net operating loss carryforwards (“NOLs”) of approximately $ 389.9 million and $ 7.3 million, respectively.

The federal NOLs began expiring in 2021 and the state NOLs began expiring in 2020.

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

As of December 31, 2023, we had federal and state tax credit carryforwards of approximately $ 9.8 million and $ 2.0 million, respectively.

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.

The Company has not performed a detailed analysis to determine whether an ownership change has occurred.

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 of the periods indicated:

Year Ended December 31,

We have not performed a detailed analysis to determine whether an ownership change has occurred.

Such a change of ownership would limit our utilization of the NOLs and could be triggered by subsequent sales of securities by us or our stockholders.

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

(in thousands)

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The amount of unrecognized tax benefits subjected to the valuation allowance was $ 1.7 million and $ 1.6 million for the years ended December 31, 2023 and 2022, respectively.

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

We recognized approximately $ 0.1 million of interest or penalties for each of the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, total accrued interest and penalties were $ 0.5 million and $ 0.4 million, respectively.

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

The Company does not expect a significant change in the amount of unrecognized tax benefits in the next year.

The Company is subject to U.S.

We recognize accrued interest and penalties related to unrecognized tax positions as a component of income tax expense.

We do not expect a significant change in the amount of unrecognized tax benefits in the next year.

We are subject to U.S.

federal income tax as well as income tax of multiple state and foreign jurisdictions.

Tax years from 2004 through present remain open for audit under the applicable statute of limitations due to the carryover of the unused NOLs and tax credit carryforwards.

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

We do not have any tax audits or other proceedings pending.

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,

Weighted average common shares outstanding — basic and diluted

Net loss per share attributable to common stockholders — basic and diluted

The Company’s potentially dilutive securities, which include stock options, shares of convertible preferred stock, warrants to purchase shares of convertible preferred stock and warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders, as the effect would be to reduce the net loss per share attributable to common stockholders.

Our potentially dilutive securities, which include stock options and warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders, as the effect would be to reduce the net loss per share attributable to common stockholders.

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:

Year Ended December 31,

We 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:

Options to purchase common stock

1 unchanged sentence

Commitments and contingencies

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

The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

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

We accrue a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

There have been no contingent liabilities requiring accrual or disclosure as of December 31, 2023 or December 31, 2022.

Employee benefit plans

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.

We sponsor 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.

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

The Company does not provide matching contributions to employees.

We do not provide matching contributions to employees.

Segment, geographic information and revenue disaggregation

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

Our chief operating decision maker is our Chief Executive Officer.

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

The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level.

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

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.

We have one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level.

Accordingly, we have determined that we have a single reportable and operating segment structure.

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

We derive all our 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 periods indicated:

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As of December 31, 2023 and 2022, long-lived assets were located primarily in the U.S.

Subsequent events

On January 31, 2024, we announced that our Board of Directors appointed Kevin Hykes as President and Chief Executive Officer, effective February 12, 2024 to succeed Nadim Yared, who previously announced his plans to retire upon the appointment of his successor.

In connection with a transition and consulting agreement we entered into with Mr.

Yared, we also modified certain terms and conditions of Mr.

Yared’s stock options granted under the 2001 Plan and 2021 Plan, however, the impact of this modification on the amount of stock-based compensation expense cannot yet be quantified.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data