Catheter Precision, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS CATHETER PRECISION, INC. Condensed Consolidated Balance Sheets (in thousands, except share data) (Unaudited) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 1,491 $ 3,565 Accounts receivable 73 137 Inventories 63 44 Prepaid expenses and other current assets 327 415 Total current assets 1,954 4,161 Property and equipment, net 81 70 Lease right-of-use assets 171 179 Intangible assets, net 25,807 26,318 Other non-current assets 8 8 TOTAL ASSETS $ 28,021 $ 30,736 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 543 $ 464 Accrued expenses 1,640 1,733 Notes payable 74 184 Current portion of operating lease liabilities 93 91 Total current liabilities 2,350 2,472 Royalties payable 7,060 6,974 Operating lease liabilities 87 97 Total liabilities 9,497 9,543 Commitments and contingencies (see Note 17) Stockholders' Equity Preferred Stock, $ 0.0001 par value, 10,000,000 shares authorized Series A Convertible Preferred Stock, $ 0.0001 par value, 7,203 shares designated; 3,703 and 4,578 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively — — Series X Convertible Preferred Stock, $ 0.0001 par value, 15,404 shares designated; 12,656 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively — — Common stock, $ 0.0001 par value, 300,000,000 shares authorized; 7,573,403 and 7,026,627 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 1 1 Additional paid-in capital 296,907 296,901 Accumulated deficit ( 278,384 ) ( 275,709 ) Total stockholders' equity 18,524 21,193 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 28,021 $ 30,736 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents CATHETER PRECISION, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited) For the Three Months Ended March 31, 2024 2023 Revenue $ 82 $ 85 Cost of revenues 5 10 Gross profit 77 75 Operating expenses Loss on impairment of goodwill — 56,086 Selling, general and administrative 2,656 10,233 Research and development 37 240 Total operating expenses 2,693 66,559 Operating loss ( 2,616 ) ( 66,484 ) Other income (expense), net Interest income 30 69 Other income (expense), net ( 3 ) 15 Change in fair value of royalties payable ( 86 ) — Total other income (expense), net ( 59 ) 84 Net loss $ ( 2,675 ) $ ( 66,400 ) Deemed dividend - warrant inducement offer — ( 800 ) Net loss attributable to common stockholders $ ( 2,675 ) $ ( 67,200 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.36 ) $ ( 24.65 ) Weighted average common shares used in computing net loss per share, basic and diluted 7,429,198 2,726,442 See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents CATHETER PRECISION, INC. Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share data) (Unaudited) Series A Convertible Preferred Stock Series X Convertible Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders' Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at December 31, 2023 4,578 $ — 12,656 $ — 7,026,627 $ 1 $ 296,901 $ ( 275,709 ) $ 21,193 Stock-based compensation — — — — — — 6 — 6 Conversion of Series A Convertible Preferred Stock ( 875 ) — — — 546,776 — — — — Net loss — — — — — — — ( 2,675 ) ( 2,675 ) Balance at March 31, 2024 3,703 $ — 12,656 $ — 7,573,403 $ 1 $ 296,907 $ ( 278,384 ) $ 18,524 Series A Convertible Preferred Stock Series X Convertible Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders' Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at December 31, 2022 — $ — — $ — 2,161,288 $ — $ 214,397 $ ( 205,137 ) $ 9,260 Common stock issued upon the exercise of options — — — — 301,746 — 179 — 179 Restricted stock awards cancelled or vested — — — — ( 363 ) — — — — Stock-based compensation — — — — — — 1,394 — 1,394 Issuance of Series X Convertible Preferred Stock in merger — — 14,650 — — — 82,925 — 82,925 Conversion of Series X Convertible Preferred Stock — — ( 1,975 ) — 1,974,905 — — — — Issuance of Series A Convertible Preferred Stock in connection with private placement, net 7,203 — — — 497,908 — 7,360 — 7,360 Warrants exercised (see Note 12) 331,608 1,145 1,145 Deemed dividend - warrant inducement offer — — — — — — — — — Net loss — — — — — — — ( 66,400 ) ( 66,400 ) Balance at March 31, 2023 7,203 $ — 12,675 $ — 5,267,092 $ — $ 307,400 $ ( 271,537 ) $ 35,863 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents CATHETER PRECISION, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) For the Three Months Ended March 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 2,675 ) $ ( 66,400 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on impairment of goodwill — 56,086 Depreciation and amortization 522 1,444 Stock-based compensation 6 1,394 Change in fair value of royalties payable 86 — Accretion of royalties payable — 513 Changes in operating assets and liabilities: Accounts receivable 64 ( 9 ) Inventories ( 19 ) ( 18 ) Prepaid expenses and other assets 88 612 Lease right-of-use assets and lease liabilities — 5 Accounts payable 79 ( 434 ) Accrued expenses ( 93 ) ( 5,051 ) Accrued interest - related parties — ( 198 ) Other non-current assets — 3 Net cash used in operating activities ( 1,942 ) ( 12,053 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 22 ) ( 37 ) Cash acquired as part of business combination — 15 Net cash used in investing activities ( 22 ) ( 22 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock and warrants — 179 Payments on note payable ( 110 ) — Proceeds from exercise of warrants — 1,326 Payments of costs related to exercise of warrants — ( 181 ) Payments of convertible promissory notes — ( 250 ) Proceeds from the private placement of securities — 8,000 Payments of offering costs related to the private placement of securities — ( 640 ) Net cash (used in) provided by financing activities ( 110 ) 8,434 NET CHANGE IN CASH AND CASH EQUIVALENTS ( 2,074 ) ( 3,641 ) CASH AND CASH EQUIVALENTS, beginning of period 3,565 15,859 CASH AND CASH EQUIVALENTS, end of period $ 1,491 $ 12,218 SUPPLEMENTAL CASH FLOW INFORMATION Non-cash consideration for Catheter acquisition $ — $ 82,925 Cash payments for interest $ 3 $ 181 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents Note 1 . Organization and Nature of Operations The Company Catheter Precision, Inc. ("Catheter" or the "Company or "Legacy RA Medical"), was incorporated in Delaware in July 2018. Catheter was initially formed to develop, commercialize and market its advanced excimer laser-based platform for use in the treatment of vascular and dermatological immune-mediated inflammatory diseases. On January 9, 2023, Catheter entered into the Amended and Restated Agreement and Plan of Merger, or the "Merger Agreement", with Catheter Precision, Inc., or “Old Catheter”, a privately-held Delaware corporation. Under the terms of the Merger Agreement, Old Catheter became a wholly owned subsidiary of Catheter, together referred to as the Company, in a stock-for-stock merger transaction, or the "Merger". After the Merger and looking forward, the legacy Destruction of Arteriosclerotic Blockages by laser Radiation Ablation laser and single-use catheter, together referred to as "DABRA", and related assets were no longer used and Catheter’s legacy lines of business were discontinued, but instead the Company has shifted the focus of its operations to Old Catheter’s product lines. Accordingly, the Company’s current activities primarily relate to Old Catheter’s historical business which comprises the design, manufacture and sale of new and innovative medical technologies primarily focused in the field of cardiac electrophysiology, or EP. The Company’s primary product is the VIVO System, which is an acronym for View into Ventricular Onset System (“VIVO” or “VIVO System”), is a non- invasive imaging system that offers 3D cardiac mapping to help with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to EP procedures. The VIVO System has achieved a CE Mark allowing it to be commercialized in the European Union and has been placed at several hospitals in Europe. United States Food and Drug Administration ("FDA") 510(K) clearance in the United States was received and the Company began a limited commercial release of VIVO in 2021. The Company’s newest product, Surgical Vessel Closing Pressure Device ("LockeT"), is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient in conjunction with a figure of eight suture closure and is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently. In addition, LockeT is a sterile, Class I product that was registered with the FDA in February 2023, at which time initial shipments began to distributors. Clinical studies for LockeT began during the year ended December 31, 2023. These studies are planned to show the product’s effectiveness and benefits, including faster wound closure, earlier ambulation, potentially leading to early hospital discharge, and cost benefits. This information is intended to provide crucial data for marketing and to expand the Company's indications for use with the FDA. The Company’s product portfolio also includes the Amigo ® Remote Catheter System (the "AMIGO" or "AMIGO System"), a robotic arm that serves as a catheter control device. Prior to 2018, Old Catheter marketed Amigo. The Company owns the intellectual property related to Amigo, and this product is under consideration for future research and development of a generation 2 product. Prior to the Merger, Catheter developed an advanced excimer laser-based platform for use in the treatment of vascular immune-mediated inflammatory diseases. DABRA was developed as a tool in the treatment of Peripheral Artery Disease which commonly occurs in the legs. The Company has ceased marketing and operations related to DABRA. 7 Table of Contents Going Concern As of March 31, 2024, the Company had cash and cash equivalents of approximately $ 1.5 million. For the three months ended March 31, 2024, the Company used $ 1.9 million in cash for operating activities. The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. As of March 31, 2024, the Company had an accumulated deficit of approximately $ 278.4 million. Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company invests in its commercial capabilities. These negative cash flows and additional costs associated with the Merger paid during the year ended December 31, 2023, have substantially depleted the Company’s cash. Following the Merger with Old Catheter, management further reduced staff and other costs while assuming the operating costs of Old Catheter. Management will continue to monitor its operating costs and seek to reduce its current liabilities. Such actions may impair its ability to proceed with certain strategic activities. As of March 31, 2024, the Company had $ 1.5 million of cash and cash equivalents. This amount will not be sufficient to fund the Company's operations through the end of May 2025. Because expected revenues are not adequate to fund planned expenditures and anticipated operating costs beyond such point, the Company is currently evaluating potential means of raising cash through future capital transactions and/or bridge loans. If unable to do so, the Company will be required to reduce its spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that it will be successful in doing so. Accordingly, the Company will likely be required to raise additional cash through debt or equity transactions and/or bridge loans to continue operations. It may not be able to secure financing in a timely manner or on favorable terms, if at all. As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the condensed consolidated financial statements are issued. The Company’s condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Note 2 . Summary of Significant Accounting Policies Principles of Consolidation The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and Old Catheter. All intercompany transactions have been eliminated in consolidation. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP"). The Financial Accounting Standards Board (“FASB”) establishes these principles to ensure financial condition, results of operations, and cash flows are consistently reported. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative nongovernmental GAAP as found in the FASB Accounting Standards Codification ("ASC"). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on April 1, 2024. 8 Table of Contents Use of Estimates The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s unaudited condensed consolidated financial statements are based upon a number of estimates including, but not limited to, the accounting for the Old Catheter business combination (see Note 3, Business Combination), allowance for credit losses, evaluation of impairment of long-lived assets and goodwill, valuation of long-lived assets and their associated estimated useful lives, reserves for warranty costs, fair value of royalties payable, evaluation of probable loss contingencies, fair value of preferred stock and warrants issued, and the fair value of equity awards granted. Concentrations of Credit Risk The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash equivalents represent short-term, highly liquid investments with maturities of 90 days or less at the date of purchase. Credit risk related to cash and cash equivalents is based on the creditworthiness of the financial institutions at which these funds are held. The Company has cash balances at financial institutions which throughout the year may exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. To reduce its risk associated with the failure of any such financial institution, the Company evaluates the rating of the financial institution in which it holds deposits. Any material loss that the Company may experience in the future could have an adverse effect on its ability to pay its operational expenses or make other payments and may require the Company to move its cash to other high quality financial institutions. Currently, the Company is reviewing its bank relationships in order to mitigate its risk to ensure that its exposure is limited or reduced to the Federal Deposit Insurance Corporation protection limits. The Company extends credit to customers in the normal course of business. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the condensed consolidated financial statements. The Company does not require collateral from its customers to secure accounts receivable. The Company had three customers that represented more than 90% of the Companies consolidated revenue for the three months ended March 31, 2024 and three customers that represented more than 79% of the Company's consolidated revenue for the three months ended March 31, 2023. The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements. Segment Reporting The Company operates in one business segment, which is the marketing, sales and development of medical technologies focused in the field of cardiac electrophysiology. Cash and Cash Equivalents Cash equivalents primarily represent funds invested in readily available checking and money market accounts. The Company maintains deposits in financial institutions in excess of federally insured limits of $250,000, in the amount of $ 1.2 million at March 31, 2024. 9 Table of Contents Fair Value Measurements Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to identify inputs used in measuring fair value as follows: Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; Level 2 - Inputs other than the quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. Cash equivalents, prepaid expenses, trade accounts receivable, accounts payable, and accrued expenses are reported on the condensed consolidated balance sheets at carrying value which approximates fair value due to the short-term maturities of these instruments. The royalties payable have unobservable inputs that are not supported by any market data. As such the Company developed its own assumptions and identified the inputs as Level 3. The revenue adjusted discount rate (“RADR”) was calculated using a weighted average cost of capital (“WACC”) approach for the level 3 measurement. The RADR considers the WACC from the Company’s impairment analysis and adjusts certain inputs to represent the risk profile of the revenue. Under the cost of equity section, the risk-free rate has changed to be commensurate with the royalties payable term. Additionally, the Beta and Company Specific Risk Premium have been adjusted to Revenue Beta and Revenue Specific Risk Premium, respectively. This adjustment was calculated by multiplying the respective metric by the quotient of equity volatility over revenue volatility. The remaining inputs from the Impairment WACC have remained unchanged. The following table details the fair value measurements within the fair value hierarchy of the Company’s financial instruments: Fair value at March 31, 2024 Total Level 1 Level 2 Level 3 Assets: Cash Equivalents Mutual Fund $ 1,451 $ 1,451 $ — $ — Money Market fund 5 5 — — Total assets $ 1,456 $ 1,456 $ — $ — Liabilities Royalties payable $ 7,060 $ — $ — $ 7,060 Total liabilities $ 7,060 $ — $ — $ 7,060 10 Table of Contents Fair value at December 31, 2023 Total Level 1 Level 2 Level 3 Assets: Cash Equivalents Mutual Fund $ 3,397 $ 3,397 $ — $ — Money Market fund 10 10 — — Total assets $ 3,407 $ 3,407 $ — $ — Liabilities Royalties payable 6,974 — — $ 6,974 Total liabilities $ 6,974 $ — $ — $ 6,974 Financial Instruments — Credit Losses (ASU 2016-13) Under the Current Expected Credit Loss ("CECL") impairment model, the Company develops and documents its allowance for credit losses on its trade receivables based on three portfolio segments: Hospitals – United States, Hospitals – Europe, and Distributors. The determination of portfolio segments is based primarily on the customers’ industry and geographical location. Our quantitative allowance for credit loss estimates under CECL was determined using the method that uses an aging schedule. The Company also considers qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform our estimate of the allowance for credit losses. Accounts Receivable and Allowances for Credit Losses Trade accounts receivable are recorded at invoiced amounts, net of allowance for credit losses, if applicable, and are unsecured and do not bear interest. The allowance for credit losses is based on the probability of future collection under the CECL impairment model in which the Company determines its allowance by applying the method based on an aging schedule. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred. As of March 31, 2024 and December 31, 2023 there is no reserve for expected credit losses within accounts receivable. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company reduces the carrying value of inventories for those items that were potentially excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors. 11 Table of Contents Property and Equipment Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows: Machinery and equipment 2 - 5 years Computer hardware and software 2 - 5 years VIVO DEMO/Clinical Systems 2 years Furniture and fixtures 5 years Leasehold improvements are depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease. The Company periodically reviews the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering long-term views on its intended use of each class of property and equipment and the planned level of improvements to maintain and enhance assets within those classes. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the account balances and any resulting gain or loss is recognized in income for the period. The cost of repairs and maintenance is expensed as incurred, whereas significant betterments are capitalized. Impairment of Long-Lived Assets In accordance with ASC 360, Impairment and Disposals of Long-lived Assets , the Company periodically reviews its long-lived assets for impairment when certain events or changes in circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. As a result of the sustained decline of the Company's stock price from the date of the Merger, the Company assesses its long-lived assets for impairment. To determine whether the carrying amount of the long-lived asset group is recoverable, the Company determined the estimated future cash flows of the group for a period consistent with that of the primary assets of the group. The sum of the undiscounted cash flows was then compared to the carrying amount of the long-lived assets, as of March 31, 2024. The Company concluded there was no impairment as of March 31, 2024. Goodwill In accordance with ASC 350, Intangibles – Goodwill and Other , goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of net assets acquired. Goodwill, which represents the excess of purchase price of Old Catheter over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable. 12 Table of Contents To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company first has the option to assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using a combination of an income and market approach. To determine fair values, the Company is required to make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations including the rate of future revenue growth, capital requirements, and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. These assumptions require significant judgment. Pursuant to ASU 2017-04, Simplifying the Test for Goodwill Impairment , the single step is to determine the estimated fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. The Company also completes a reconciliation between the implied equity valuation prepared and the Company’s market capitalization. The majority of the inputs used in the discounted cash flow model are unobservable and thus are considered to be Level 3 inputs. The inputs for the market capitalization calculation are considered Level 1 inputs. There were impairment charges of $ 0 and $ 56.1 million recognized during the three months ended March 31, 2024 and 2023, see Note 3, Business Combination and Note 7, Goodwill, for additional details. As of December 31, 2023, goodwill was fully impaired. Royalties Payable The Company is obligated to pay royalties under various royalty agreements Old Cather had entered into. On January 9, 2023, prior to the consummation of the Merger, Old Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Old Catheter's Chairman of the Board of Directors prior to the Merger, and, currently, the Company’s Executive Chairman of the Board of Directors and Chief Executive Officer, to forgive all accrued interest and future interest expense in exchange for a future royalty right. The Company will pay to the Noteholders a total royalty equal to approximately 12% of net sales of LockeT, commencing upon the first commercial sale, through December 31, 2035 (see Note 10, Royalties Payable). In addition, Old Catheter had entered into an agreement with the inventor of LockeT in exchange for the assignment and all rights to LockeT. Pursuant to the agreement, the Company will pay a 5% royalty on net sales up to $1 million in royalties. After $1 million has been paid, and if, and only if, a U.S. patent is granted by the United States Patent and Trademark Office, then the Company will continue to pay a royalty at a rate of 2% of LockeT net sales, until total cumulative royalties of $10 million have been paid (see Note 10, Royalties Payable). During 2006 and 2007, Old Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Old Catheter's AMIGO System. The agreement calls for the payment to the foundation, upon successful commercialization of the AMIGO System (see Note 10, Royalties Payable). As of the date of the Merger, the royalties payable had an estimated fair value of approximately $ 14.2 million. As of March 31, 2024 and December 31, 2023 the royalties payable had an estimated fair value of $ 7.0 million and $ 7.0 million, respectively. At each reporting period, the fair value is calculated using a discounted cash flow method utilizing a RADR which was 24.1 % as of January 9, 2023, 28.0 % as of December 31, 2023 and 29.0 % as of March 31, 2024. Product Warranty The Company’s current products are warrantied against defects in material and workmanship when properly used for their intended purpose and properly maintained. Similarly, the DABRA products were warrantied against defects in material and workmanship when properly used for their intended purpose and appropriately maintained. Accordingly, the Company generally replaced catheters that kinked or failed to calibrate. The product warranty liability was determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor. The product warranty liability also includes the estimated costs of a product recall. 13 Table of Contents Warranty expenses are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals resulted from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense. As of March 31, 2024 and December 31, 2023, there was no accrued warranty balance. Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity , to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares. Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. Revenue Recognition The Company applies the provisions of FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), and all related appropriate guidance. The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company measures revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised goods. To achieve this core principal, the Company applies the following five steps: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the Company satisfies a performance obligation The Company’s primary product in 2024 is the VIVO System. The VIVO System offers 3D cardiac mapping to help with localizing the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to electrophysiology studies. In addition to the VIVO System, customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System to complete the intended output of the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets represents the Company’s primary performance obligation. The Company recognizes revenue upon the delivery of the VIVO system. The Company also provides customers with the option to pay for software upgrades in advance at the time of the contract's inception. Software upgrades are stand-ready services, whereby the Company will provide software upgrade services to the customer when and as upgrades are available. Terms of the period covered by the payment of software upgrades in advance can range from one year to multiple years. Customers have the option to renew terms covered by software upgrades at the end of each term. The stand-ready software upgrades represent the Company's second separate performance obligation and revenue is recognized over the term of the period. 14 Table of Contents The Company invoices the customers after physical possession and control of the VIVO System is transferred to the customer and recognizes revenue upon delivery. The timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract. The Company invoices customers who pay for software upgrades in advance in conjunction with the invoice for the delivery of the VIVO System, and subsequent renewals of software upgrades are invoiced at the inception of the term. Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under ASC 606. Similar to the delivery of the VIVO System, the timing of payment for the corresponding invoices is dependent upon the credit terms identified in each contract. The Company has elected the practical expedient to expense costs to obtain a contract, as incurred, as opposed to recognizing the cost as an asset upon occurrence. Disaggregation of Revenue The following table summarizes disaggregated product sales by geographic area ($ in thousands): For the Three Months Ended March 31, 2024 2023 Product Sales US $ 8 $ 58 Europe 74 27 $ 82 $ 85 Shipping and Handling Costs Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Advertising and Marketing Advertising costs are expensed as incurred and included in selling, general and administrative expenses. Advertising costs were $ 49 thousand and $ 18 thousand during the three months ended March 31, 2024 and 2023. Patents The Company expenses patent costs, including related legal costs, as incurred and records such costs as selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Research and Development Major components of research and development costs include consulting, research grants, supplies and clinical trial expenses. Research and development expenses are charged to operations in the period incurred. 15 Table of Contents Stock-Based Compensation The Company records stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with the authoritative guidance for stock-based compensation. The Company evaluates whether an award should be classified and accounted for as a liability award or equity award for all stock-based compensation awards granted. The cost of an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing valuation model (“Black-Scholes model”) which incorporates various assumptions including expected term, volatility and risk-free interest rate, and is recognized as expense on a straight-line basis over the requisite service period of the award, which is generally the vesting period of the respective award. Share-based compensation for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur. As a result of the Merger, all unvested Old Catheter stock options were subject to accelerated vesting and therefore became fully vested, as of the closing date of the business combination. The Company recognized the fair value of the replacement options as included in consideration transferred to the extent they do not exceed the fair value of the equivalent Old Catheter options. Any incremental fair value was recognized in compensation expense in the post-combination period, with this recognized as a Day 1 expense due to the Old Catheter options becoming fully vested concurrent with the closing of the business combination. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized. The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other expense, respectively. 16 Table of Contents Basic and Diluted Net Loss per Share of Common Stock The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Anti-dilutive common stock equivalents excluded from the computation of diluted net loss per share include warrants, stock options, non-vested restricted stock awards, restricted stock units, Series A Convertible Preferred Stock, and Series X Convertible Preferred (see Note 12, Net loss per Share). Net loss attributable to common stockholders consists of net income or loss, as adjusted for actual and deemed dividends declared. The Company recorded a deemed dividend for the modification of existing warrants and issuance of new warrants during the three months ended March 31, 2023 of $ 0.8 million. The deemed dividend is added to the net loss in determining the net loss available to common stockholders for the three months ended March 31, 2023. Recently Announced Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amendments in ASU 2023-07 require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. These amendments do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The Company is currently reviewing the impact that the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 31, 2025. The Company is currently reviewing the impact that the adoption of ASU 2023-09 may have on our consolidated financial statements and disclosures. Note 3. Business Combination On January 9, 2023, the Company completed the acquisition of Old Catheter for the purpose of acquiring Old Catheter’s existing and developing product lines based on unique electrophysiology technology. Pursuant to the Merger Agreement, all Old Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $ 25.2 million, were converted into a right to receive 14,649 .592 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock. Additionally, all outstanding stock options to purchase Old Catheter common stock were assumed and converted into options to purchase approximately 753,699 shares of the Company's common stock. 17 Table of Contents The total purchase consideration for the Merger was $ 72.5 million which represents the sum of the (i) estimated fair value of the 14,649 .592 Series X Convertible Preferred Stock issued and (ii) the portion of the estimated fair value of $ 3.4 million representing the Company stock options issued in replacement of Old Catheter share-based payment awards as required under FASB Topic 805, Business Combinations ("Topic 805") . The fair value of the Series X Convertible Preferred Stock includes certain discounts applied to the closing stock price of the Company, on January 9, 2023, of $ 6.09 per share. The following table summarizes the fair value of the consideration associated with the Merger ($ in thousands): Description Fair Value as of January 9, 2023 Fair value of 14,649.592 Series X convertible preferred stock issued $ 69,140 Fair value of Old Catheter’s fully vested stock options 3,404 Total Purchase Price $ 72,544 The Merger was accounted for as a business combination in accordance with Topic 805, and the Company has been determined to be the accounting acquirer. The Company allocated the purchase price to the assets acquired and liabilities assumed at fair value. The preliminary purchase price allocation reflects various preliminary fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, liabilities assumed, and goodwill, which were subject to change within the measurement period as preliminary valuations were being finalized (generally one year from the acquisition date). Measurement period adjustments were recorded in the reporting period in which the estimates are finalized, and adjustment amounts were determined. During the three months ended June 30, 2023, the Company recorded measurement period adjustments based on changes to certain estimates and assumptions and their related impact to the purchase price allocation. Developed technology was revised from $ 35.1 million to $ 27.0 million; trademarks were revised from $ 1.7 million to $ 1.3 million; customer relationships were revised from $ 220 thousand to $ 62 thousand; goodwill was revised from $ 56.0 million to $ 60.9 million; and royalties payable were revised from $ 7.6 million to $ 14.2 million. 18 Table of Contents The following table summarizes the final purchase price allocations relating to the Merger ($ in thousands): Description Fair Value Assets acquired: Cash and cash equivalents $ 15 Accounts receivable 71 Inventories 52 Prepaid expenses and other current assets 23 Property and equipment, net 26 Lease right-of-use assets 119 Other assets 8 Developed technology 27,014 Customer relationships 62 Trademarks 1,285 Goodwill 60,934 Total assets acquired $ 89,609 Liabilities assumed: Accounts payable $ 922 Accrued expenses 1,389 Lease liability 124 Interest payable 198 Convertible promissory notes 250 Royalties payable 14,182 Total liabilities assumed 17,065 Total purchase price $ 72,544 All intangible assets acquired are subject to amortization and their associated acquisition date fair values and useful lives are as follows: Intangible Assets Fair Value Useful Life Developed technology- VIVO $ 8,244 15 Developed technology- LockeT 18,770 14 Customer relationships 62 6 Trademark- VIVO 876 9 Trademark- LockeT 409 9 $ 28,361 Notwithstanding the above, as described in Note 7, management determined that there were indicators of asset impairment during the three months ended March 31, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill. As a result, the Company recorded an impairment charge relating to goodwill of $ 56.1 million during the three months ended March 31, 2023. This amount represented the preliminary purchase price amount ascribed to goodwill. 19 Table of Contents Transaction costs incurred in connection with this business combination amounted to approximately $ 1.7 million during the three months ended March 31, 2023. Pro Forma Financial Information The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2023. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods. The following information for the three months ended March 31, 2023 is presented in thousands except for the per share data ($ in thousands, except per share data): Three Months Ended March 31, 2023 Revenues $ 88 Net loss $ ( 66,570 ) Net loss attributable to common stockholders $ ( 67,370 ) Basic and diluted net loss per share – on a pro forma basis $ ( 13.56 ) Note 4 . Inventories Inventories consisted of the following ($ in thousands): March 31, 2024 December 31, 2023 Raw materials $ 32 $ 27 Finished goods 31 17 Inventories $ 63 $ 44 There were no charges for inventory obsolescence or allowance recorded during the three months ended March 31, 2024 and 2023. Note 5 . Property and Equipment Property and equipment, net consisted of the following ($ in thousands): March 31, December 31, 2024 2023 Machinery and equipment $ 26 $ 16 Computer hardware and software 24 17 VIVO DEMO/Clinical Systems 74 69 Property and equipment, gross 124 102 Accumulated depreciation ( 43 ) ( 32 ) Property and equipment, net $ 81 $ 70 Depreciation expense was $ 11 thousand and $ 7 thousand for the three months ended March 31, 2024 and 2023, respectively. 20 Table of Contents Note 6. Intangible Assets The following table summarizes the Company’s intangible assets as of March 31, 2024 ($ in thousands): Estimated Useful Life in Years Gross Carrying Amount at January 9, 2023 Accumulated Amortization Net Book Value at March 31, 2024 Developed technology ‐ VIVO 15 $ 8,244 $ ( 687 ) $ 7,557 Developed technology ‐ LockeT 14 18,770 ( 1,676 ) 17,094 Customer relationships 6 62 ( 13 ) 49 Trademarks/trade names ‐ VIVO 9 876 ( 122 ) 754 Trademarks/trade names ‐ LockeT 9 409 ( 56 ) 353 $ 28,361 $ 2,554 ) $ 25,807 The following table summarizes the Company’s intangible assets as of December 31, 2023 ($ in thousands): Estimated Useful Life in Years Gross Carrying Amount at January 9, 2023 Accumulated Amortization Net Book Value at December 31, 2023 Developed technology ‐ VIVO 15 $ 8,244 $ ( 550 ) $ 7,694 Developed technology ‐ LockeT 14 18,770 ( 1,341 ) 17,429 Customer relationships 6 62 ( 10 ) 52 Trademarks/trade names ‐ VIVO 9 876 ( 97 ) 779 Trademarks/trade names ‐ LockeT 9 409 ( 45 ) 364 $ 28,361 $ ( 2,043 ) $ 26,318 The estimated future amortization expense for the next five years and thereafter is as follows ($ in thousands): Years ending December 31, Future Amortization Expense Remainder of 2024 $ 1,532 2025 2,043 2026 2,043 2027 2,043 2028 2,043 Thereafter 16,103 Total $ 25,807 The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense, included within selling, general and administrative expenses, relating to the Company's intangible assets was $ 0.5 million and $ 1.4 million for the three months ended March 31, 2024 and 2023, respectively. The weighted average remaining amortization period for the Company’s intangible assets as of March 31, 2024, is 12.81 years. 21 Table of Contents Note 7. Goodwill In connection with the Merger, the excess of the purchase price over the estimated fair value of the net assets assumed of $ 60.9 million was recognized as goodwill. The Merger was accounted for as a business combination in accordance with Topic 805, and the Company has been determined to be the accounting acquirer. The Company allocated the purchase price to the assets acquired and liabilities assumed at fair value. During the three months ended June 30, 2023, the Company recorded measurement period adjustments based on changes to certain estimates and assumptions and their related impact to the purchase price allocation. As a result, goodwill was revised from $ 56.0 million to $ 60.9 million. The Company tests Goodwill for impairment at the reporting unit level annually in the fourth quarter or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. Due to a sustained decrease in the Company’s share price during the quarter ended March 31, 2023, the Company concluded that, in accordance with ASC 350, a triggering event occurred indicating that potential impairment exists and required the Company to assess if impairment exists as of March 31, 2023. In accordance with ASC 350, the Company performed a quantitative goodwill impairment test, which resulted in the carrying amount of the reporting unit exceeding the estimated fair value of the reporting unit, indicating that the goodwill of the reporting unit was impaired. The Company utilized a combination of an income and market approach to assess the fair value of the reporting unit. The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions. The guideline public company market approach considered marketplace earnings multiples from within a peer public company group. As of December 31, 2023, cumulative goodwill impairment charges of $ 60.9 million were incurred related to the Company’s single reporting unit and no goodwill remained as of this date. Note 8 . Accrued Expenses Accrued expenses consisted of the following ($ in thousands): March 31, 2024 December 31, 2023 Legal expenses $ 69 $ 102 Offering costs 1,356 1,356 Compensation and related benefits 20 43 Other accrued expenses 195 232 Accrued expenses $ 1,640 $ 1,733 The product warranty accrual related to the voluntary recall of DABRA catheters, was initiated in September 2019. The recall was closed by the FDA in July 2023 and no claims have been submitted in approximately 2 years. As such, the Company derecognized the warranty liability of $ 192 thousand as of December 31, 2023. As of March 31, 2024 and December 31, 2023, there is no accrued warranty balance. Note 9 . Notes Payable The Company purchased director and officer liability insurance coverage on October 16, 2023 for $ 447 thousand. A down payment of $ 157 thousand was made and the remaining balance of $ 291 thousand was financed over 8 months through a short-term financing arrangement with its insurance carrier. The interest rate on the loan is 8.990 %. Interest expense on this loan was $ 3 thousand and $ 0 for the three months ended March 31, 2024 and 2023, respectively. The loan balance was $ 74 thousand and $ 184 thousand as of March 31, 2024 and December 31, 2023, respectively. 22 Table of Contents Note 10. Royalties Payable LockeT Royalty On January 9, 2023 Old Catheter entered into an agreement with the Noteholders to forgive all accrued interest and future interest expense in exchange for a future royalty right. Under these agreements, the Company is obligated to pay the Noteholders a total royalty equal to approximately 12 % of net sales of its LockeT device, commencing upon the first commercial sale, through December 31, 2035. An additional royalty will be paid to the inventor of the LockeT device. In exchange for the assignment and all rights to LockeT, the Company will pay a 5% royalty on net sales up to $1.0 million in royalties, payable annually in arrears, starting with the year ending December 31, 2022. After $1.0 million has been paid, and if, and only if, a US patent is granted by the United States Patent and Trademark Office, the Company will continue to pay a royalty at a rate of 2% of net sales, until total cumulative royalties of $ 10.0 million have been paid. The royalty payments will apply to revenues through February 29, 2032 , then will terminate regardless of whether the full $ 10.0 million has been paid. AMIGO System Royalty During 2006 and 2007, Old Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Old Catheter's AMIGO System, receiving a total of $ 1.6 million from the foundation. The agreement calls for the payment of the following sales-based royalties, by Old Catheter, to the foundation, upon successful commercialization of the AMIGO System: Royalty Percentage Until Royalty Payment Reaches a Total of 4 % $ 1,589,500 2 % $ 3,179,000 1 % In perpetuity The Company is not actively marketing and selling the AMIGO System. There was no royalty expense recorded for the three months ended March 31, 2024 and 2023 in relation to the AMIGO System. The AMIGO System royalty has been earned and payment has been deferred to a future date. The table below represents the change in fair value of level 3 royalties payable for the three months ended March 31, 2024 and 2023 ($ in thousands). See Note 2, Summary of Significant Accounting Policies, for valuation techniques. 2024 2023 Beginning Balance, January 1, $ 6,974 $ — AMIGO royalty payable recognized in connection with the Merger — 160 LockeT royalty payable recognized in connection with the Merger — 7,432 Accretion of LockeT royalty payable — 513 Change in fair value of royalties payable 86 — Ending Balance, March 31, $ 7,060 $ 8,105 23 Table of Contents Note 11. Leases For the three months ended March 31, 2024 and 2023, operating lease expense was $ 24 thousand and $ 15 thousand, respectively, and cash paid was $ 24 thousand and $ 16 thousand, respectively. Variable costs were insignificant for the three months ended March 31, 2024 and 2023. The Company's lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies with similar credit ratings and of comparable quality and derived an imputed rate, which was used in a portfolio approach to discount its real estate lease liabilities. Management used an estimated incremental borrowing rate as detailed below for each lease. Lease Terms and Discount Rate The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases, as of March 31, 2024: Weighted average remaining lease term (in years) - operating leases 1.73 Weighted average discount rate - operating leases 8.64 % South Carolina Office Lease Agreement On September 27, 2022, Old Catheter entered into a lease agreement for office space located in Fort Mill, South Carolina. The space is used for office and general use. The term of the lease began on October 1, 2022, is 38 months, and includes two months of free rental from the commencement date of the lease. The lease contains two separate 36 month renewal periods, which require 180 days notice of the Company's intention to exercise. As of the date of these condensed consolidated financial statements, the Company does not intend to exercise either of the two extension options. Total rent is $ 3,435 per month for the first ten months following the two months of free rent, with annual increases on the anniversary of the effective date. The Company has adopted the practical expedient under Topic 842, which permits the Company to account for each separate lease component of a contract and its associated non-lease components as a single lease payment. As a result, beginning at lease inception on October 1, 2022, the Company recognized both the lease payments and associated common area maintenance payments as a single lease payment. The Company estimated an incremental borrowing rate of 11.09 % for this lease agreement. New Jersey Office Lease Agreement On December 7, 2022, Old Catheter entered into a lease agreement for office space located in Augusta, New Jersey. The space is used for office and general use. The term of the lease is 24 months and began on January 1, 2023. The lease contains one 24 month renewal period, which requires 9 months’ notice if the Company intends to exercise. In March 2024, the Company notified the landlord of its intent to extend the lease for a 12 -month period. In April 2024, a lease extension agreement was entered into extending the lease through December 31, 2025. Total rent is $ 1,207 per month throughout December 31, 2024 and $ 1,267 for the remaining term of the extended lease. The Company estimated an incremental borrowing rate of 10 % for this lease agreement. Park City Office Lease Agreement On March 19, 2023, the Company entered into a lease agreement for office space located in Park City, Utah. The space is used for office and general use. The term of the lease is for 36 months and began on May 1, 2023. The lease contains one 36 month renewal period, which requires 180 days’ notice of the Company's intention to exercise. As of the date of these unaudited condensed consolidated financial statements, the Company does not intend to exercise the extension option. Total rent is $ 3,200 per month for the first year with an annual increase of three percent per year on the anniversary of the effective date. The Company estimated an incremental borrowing rate of 6 % for this lease agreement. 24 Table of Contents Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows ($ in thousands): Years ending December 31: Operating Lease Remainder of 2024 $ 72 2025 96 2026 14 Total minimum lease payments 182 Less effects of discounting ( 2 ) Present value of future minimum lease payments $ 180 Lease right-of-use assets and lease liabilities for the Company's operating leases were recorded in the condensed consolidated balance sheets as follows ($ in thousands): March 31, December 31, 2024 2023 Assets Lease right-of-use assets $ 171 $ 179 Total lease assets $ 171 $ 179 Liabilities Current liabilities: Lease liabilities - current portion $ 93 $ 91 Non-current liabilities: Lease liabilities - net of current portion 87 97 Total lease liabilities $ 180 $ 188 Note 12 . Net Loss per Share The Company’s outstanding warrants to purchase common stock have participation rights to any dividends that may be declared in the future and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company. Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2024 consisted of Series A convertible preferred stock of 2,313,956 shares, Series X Convertible Preferred Stock of 12,656,011 shares, warrants of 11,042,137 , stock options of 614,593 , and no restricted stock awards or restricted stock units. Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at March 31, 2023 consisted of Series A convertible preferred stock of 4,501,060 shares, Series X convertible preferred stock of 12,656,011 shares, warrants of 11,148,858 , stock options of 452,908 , restricted stock awards of 556 , and restricted stock units of 26 . 25 Table of Contents Net loss attributable to common stockholders for the three months ended March 31, 2023, consists of net loss, as adjusted for deemed dividends. The Company recorded a deemed dividend for the modification of existing warrants and issuance of the Series E warrants (see Note 13, Equity Offerings) of $ 0.8 million, during the three months ended March 31, 2023. Note 13 . Equity Offerings Warrant Inducement Offer On January 9, 2023, the Company reduced the exercise price of certain existing warrants (the "Existing Warrants"), exercisable for 331,608 shares of the Company’s common stock held by a certain investor (the “Investor”), with exercise prices ranging from $ 14.00 to $ 526.50 per share to $ 4.00 per share (the "2023 Warrant Repricing"). In connection with the 2023 Warrant Repricing, the Company entered into a warrant inducement offer letter (the "2023 Inducement Letter"), with the Investor pursuant to which it would exercise up to all of the 331,608 Existing Warrants (the "Inducement Offer"). In consideration for exercising the Existing Warrants pursuant to the terms of the 2023 Inducement Letter, the Company received approximately $ 1.3 million in gross proceeds. The Company paid the placement agent aggregate cash fees of approximately $ 0.2 million related to the Inducement Offer which represented 8.0% of the gross proceeds received from the Inducement Offer plus other offering costs resulting in net proceeds to the Company of $ 1.1 million. In consideration for exercising the Existing Warrants pursuant to the terms of the 2023 Inducement Letter, the Company issued the Investor a new Series E common stock purchase warrant, or Series E Warrant (the "Series E Warrant"), to purchase 331,608 shares of common stock at an exercise price of $ 4.00 per share. The Series E Warrant is exercisable for five years from the date of stockholder approval. Exercise of the Series E Warrant in full was subject to approval of the Company's stockholders other than the Investor, which was obtained at a special meeting of the Company's stockholders held on March 21, 2023 (the "Stockholders' Meeting"). The incremental fair value of the repriced warrants amounted to $ 0.3 million and the fair value of Series E warrant totaled $ 1.9 million. The relative fair value of such amounts were recorded to additional paid-in capital concurrent with the exercise of the Existing Warrants. As a result of the 2023 Warrant Repricing and Inducement Offer, the Company presents a deemed dividend for the modification of Existing Warrants and issuance of the Series E Warrants of $ 0.8 million during the three months ended March 31, 2023. The deemed dividend was included in net loss attributable to common stockholders in the calculation of net loss per share in the unaudited consolidated condensed statements of operations. The warrants, other than the Series E Warrants which are presented in a separate table below, were valued on the date of the 2023 Warrant Repricing using the Black-Scholes model based on the following assumptions: 5/22/2020 Raise 8/3/20 Raise Series B Series C Risk-free interest rate 4.06 % 4.06 % 3.60 % 3.66 % Volatility 135.35 % 132.55 % 115.42 % 127.65 % Expected dividend yield 0.00 % 0.00 % 0.00 % 0.00 % Expected life (in years) 2.4 2.6 6.5 4.5 26 Table of Contents The Series E warrants were also valued on the date of the 2023 Warrant Repricing at approximately $ 1.9 million using the Black-Scholes model based on the following assumptions: Risk-free interest rate 3.66 % Volatility 124.07 % Expected dividend yield 0.00 % Expected life (in years) 5 .0 Private Placement On January 9, 2023, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) for a private placement (“Private Placement”), with the Investor. Pursuant to the Securities Purchase Agreement, the Investor agreed to purchase, for an aggregate purchase price of approximately $ 8.0 million, (a) Class A units at a price that was the lower of $ 3.00 per unit and 90% of the 5 day volume weighted average price of the Company’s common stock immediately prior to obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants (as each are defined below), each consisting of one share of common stock, one Series F common stock purchase warrant, or Series F Warrant, and one Series G common stock purchase warrant, or Series G Warrant, and together with the Series F Warrants (the “PIPE Warrants”) and (b) Class B units at a price of $ 1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock (the “PIPE Preferred Stock”), par value $ 0.0001 , and one Series F Warrant and one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock (each share of which is convertible into a number of shares of the Company’s common stock equal to $ 1,000 divided by the lower of $ 3.00 and 90% of the 5 day volume weighted average closing price of the Company’s common stock immediately prior to the obtainment of the approval of the Company’s stockholders of conversion of the PIPE Preferred Stock and PIPE Warrants, or the Preferred Conversion Rate). The closing under the Securities Purchase Agreement and the sale and issuance of the Class A units and Class B units (and the issuance of any underlying common stock) were approved at the Stockholders’ Meeting. At the closing of the Private Placement, the Company issued 497,908 Class A units for proceeds of approximately $ 0.9 million and 7,203 Class B units for proceeds of approximately $ 7.1 million which were convertible into up to 4,501,060 shares of common stock, as well as the issuance of warrants described below. The PIPE Warrants, including Series F warrants and Series G warrants, are exercisable at an exercise price of $ 3.00 per share, subject to adjustments as provided under the terms of the PIPE Warrants. The PIPE Warrants are exercisable at any time on or after the closing date of the Private Placement until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99 %, or the Maximum Percentage, of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99 %. The Series F Warrants have a term of two years from the date of stockholder approval, and the Series G Warrants have a term of six years from the date of stockholder approval. The Series F Warrants and Series G Warrants were approved at the Stockholders’ Meeting. The Series F warrants and Series G warrants were valued, in aggregate, at approximately $ 5.5 million using the Black-Scholes model based on the following assumptions: Series F Series G Risk-free interest rate 3.8 % 3.4 % Volatility 80. 0 % 74.0 % Expected dividend yield 0.0 % 0.0 % Expected life (in years) 2 .0 6 .0 27 Table of Contents The proceeds from the Securities Purchase Agreement were allocated to the equity instruments issued based on their relative fair values and recorded in additional paid-in capital. Shares of PIPE Preferred Stock, the conversion of which was approved at the Stockholders’ Meeting, convert into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Subject to limited exceptions, holders of shares of PIPE Preferred Stock will not have the right to convert any portion of their Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or up to 9.99% at the election of the holder) of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion. Holders of PIPE Preferred Stock will be entitled to receive dividends on shares of PIPE Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the PIPE Preferred Stock does not have voting rights. The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the resale of the shares of common stock, the shares issuable upon exercise of the Warrants and the shares issuable upon the conversion of the PIPE Preferred Stock. Placement Fees In connection with offerings completed by the Company in 2022, (the "2022 Offerings"), the Company entered into an agreement with a placement agent that, subject to satisfaction of the requirements contained therein, called for a placement fee payable based on capital raised from certain investors for a definitive time following the expiration of the agreement. The accrued placement fee of approximately $ 1.4 million related to the 2022 Offerings is included in accrued expenses in the consolidated balance sheet as of March 31, 2024. Additionally, the agreement called for the issuance of warrants with the following terms: Number of shares Exercise Price Expiration 33,000 $ 31.25 5 years 31,000 $ 17.50 5 years The warrants were valued on the date of the 2022 Offerings using the Black-Scholes model based on the following assumptions: Value ( $ in millions) Expected Volatility Risk-Free Interest Rate Expected Dividend Yield Expected Term (years) $ 0.4 93.25 % 1.81 % 0 % 5 .0 $ 0.2 96.70 % 2.87 % 0 % 5 .0 The warrants have not been issued by the Company as of March 31, 2024. 28 Table of Contents Warrants The following table presents the number of common stock warrants outstanding: Warrants outstanding, December 31, 2022 1,150,658 Issued 10,329,794 Exercised ( 331,608 ) Expired ( 106,707 ) Warrants outstanding, December 31, 2023 11,042,137 Issued — Exercised — Expired — Warrants outstanding, March 31, 2024 11,042,137 The following table presents the number and type of common stock warrants outstanding, their exercise price, and expiration dates as of March 31, 2024: Warrant Type Warrants Outstanding Exercise Price Expiration Date May 2020 Warrants 12,743 $ 562.50 5/20/2025 May 2020 Placement Agent Warrants 1,244 $ 703.13 5/20/2025 August 2020 Warrants 19,407 $ 437.50 8/3/2025 August 2020 Placement Agent Warrants 1,918 $ 546.88 7/30/2025 August 2021 Pharos Banker Warrants 1,484 $ 149.50 8/16/2026 February 2022 Series B Warrants 391,527 $ 14.00 2/4/2029 July 2022 Series C Warrants 284,020 $ 14.00 7/22/2027 January 2023 Series E Warrants 331,608 $ 4.00 3/21/2028 March 2023 Series F Warrants 4,999,093 $ 3.00 3/21/2025 March 2023 Series G Warrants 4,999,093 $ 3.00 3/21/2029 11,042,137 As of March 31, 2024, the warrants issued by the Company had a weighted average exercise price of $ 5.31 . Note 14 . Preferred Stock Series X Convertible Preferred Stock As described in Note 3, above, pursuant to the Merger Agreement, all Old Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $ 25.2 million, were converted into a right to receive 14,649.592 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock . Series X Convertible Preferred Stock has no voting rights prior to the conversion into common stock. While there are generally no voting rights of the Series X Convertible Preferred Stock, there are protective rights regarding the sales of the company, change of control, etc. No currently outstanding share of Series X Preferred may convert into common stock until on or after July 9, 2024, and then, only if the Company’s common stock has been delisted from the NYSE American or has been approved for initial listing on the NYSE American or another stock exchange, at a rate of 1,000 shares of common stock for each share of Series X Convertible Preferred Stock. 29 Table of Contents Upon consummation of the Merger, each holder of Old Catheter convertible promissory notes received, in exchange for discharge of the principal of his or its Notes, a number of shares of the Company's Series X Convertible Preferred Stock representing a potential right to convert into the Company's common stock in an amount equal to one common share for each $ 3.20 of principal amount. On March 21, 2023, the Company held the Stockholders' Meeting, at which the stockholders approved, among other things, the issuance of 1,993,581 shares of common stock upon the conversion of 1,993 .581 of Series X Convertible Preferred Stock which were issued upon the closing of the Merger, see Note 3, Business Combination. On March 23, 2023, the Company issued 1,974,905 shares of common stock upon the conversion of 1,974 .905 of Series X Convertible Preferred Stock. On October 24, 2023, the remaining 18,676 shares of common stock were issued upon the conversion of 18 .676 shares of Series X Convertible Preferred Stock. The remaining 12,656.011 shares of Series X Convertible Preferred Stock are expected to remain outstanding until at least July 9, 2024, and will convert thereafter up to 12,656,011 shares of common stock , only if the Company meets the initial listing standards of the NYSE American or another national securities exchange or is delisted from the NYSE American. Series A Convertible Preferred Stock As described in Note 13, on January 9, 2023, the Company entered into a Securities Purchase Agreement for a Private Placement with the Investor. Pursuant to the Securities Purchase Agreement, shares of Series A Convertible Preferred Stock were issued, the conversion of which was approved at the Stockholders’ Meeting. The Series A Convertible Preferred Stock converts into common stock at the option of the holder at the Preferred Conversion Rate, subject to certain ownership limitations as described below. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Subject to limited exceptions, holders of shares of Series A Convertible Preferred Stock will not have the right to convert any portion of their Series A Convertible Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion . Holders of Series A Convertible Preferred Stock will be entitled to receive dividends on shares of Series A Convertible Preferred Stock equal, on an as-if-converted-to-common stock basis, and in the same form as dividends actually paid on shares of the common stock. Except as otherwise required by law, the Series A Convertible Preferred Stock does not have voting rights. The Company also entered into a registration rights agreement with the purchasers requiring the Company to register the shares of common stock, issuable upon the conversion of the Series A Convertible Preferred Stock. The shares have been registered for resale on an effective registration statement on Form S-1. The following conversions of Series A Convertible Preferred Stock occurred subsequent to the issuance: Date of Conversion Series A Shares Converted Common Shares Issued July 5, 2023 1,750 1,093,552 July 24, 2023 875 546,776 January 24, 2024 875 546,776 30 Each share of Series A Convertible Preferred Stock is convertible into approximately 625 shares of common stock. The common stock was issued pursuant to the exemption contained in Section 3(a)(9) of the Securities Act of 1933, as amended (the “Act”), which applies to transactions in which a security is exchanged by an issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. The shares issued have been registered for resale on an effective registration statement on Form S-1. Note 15 . Stock-Based Compensation 2018 Equity Incentive Plan In September 2018, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”) which provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, performance-based stock awards and other forms of equity compensation to the Company’s employees, directors and consultants. Stock options granted under the 2018 Plan generally vest one-fourth on the first anniversary of the vesting commencement date with the balance vesting monthly over the remaining three years. Restricted stock units granted under the 2018 Plan generally vest one third on the first anniversary of the vesting commencement date and one sixth every six months thereafter such that the award will be fully vested on the third anniversary of the vesting commencement date. In July 2023, the 2018 Plan was replaced by the 2023 Equity Incentive Plan (the "2023 Plan"), as described below. As of July 2023, no additional awards could be made under the 2018 Plan and no shares of common stock were reserved for future issuance. 2018 Employee Stock Purchase Plan In September 2018, the Company adopted the 2018 Employee Stock Purchase Plan (the “ESPP”) which permitted eligible employees to purchase the Company’s common stock at a discount through payroll deductions during defined offering periods. Eligible employees could elect to withhold up to 15 % of their base earnings to purchase shares of the Company’s common stock at a price equal to 85 % of the fair market value on the first day of the offering period or the purchase date, whichever was lower. The number of shares of common stock reserved for issuance under the ESPP automatically increased on January 1 of each fiscal year by the lesser of (1) 237 shares, (2) 1.25 % of the total number of shares outstanding on December 31 of the preceding fiscal year, or (3) such other amount as the Company’s board of directors may determine. The Company paused the ESPP in May 2022 and in April 2024, the Company formally terminated the ESPP. For the three months ended March 31, 2024 and 2023, no cash was received from the exercise of purchase rights under the ESPP. As of March 31, 2024, the Company had issued 950 shares of common stock since inception of the ESPP, and 26 shares were reserved for future issuance. Upon termination of the ESPP in April 2024, the reserved shares were released back to the authorized pool. 2020 Inducement Equity Incentive Plan In March 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Plan”) for the purpose of attracting, retaining and incentivizing employees in furtherance of the Company’s success. The 2020 Plan was adopted without stockholder approval pursuant to Rule 303A.08 of the New York Stock Exchange. The 2020 Plan is used to offer equity awards as material inducements for new employees to join the Company. Upon adoption of the 2020 Plan, 640 shares of common stock were reserved for the granting of inducement stock options, restricted stock awards, restricted stock units and other forms of equity awards. As of March 31, 2024 and December 31, 2023, 540 shares of common stock were reserved for future issuance under the 2020 Plan. In April 2024, the Company terminated the 2020 Plan at which time the reserved shares were released back to the authorized pool. Stock Options Assumed in Merger (See Note 3, Business Combination) At the closing of the Merger, each outstanding option to purchase Old Catheter common stock that had not previously been exercised prior to the closing of the Merger was assumed and converted into options to purchase 753,699 shares of the Company’s common stock (“Replacement Options”). Additionally, no Old Catheter options were amended in connection with the Merger. All the Replacement Options vested in accordance with the original terms of the grants in place at the time of the Merger. As a result, $ 3.4 million of purchase price consideration, which represented the estimated fair value of Old Catheter’s assumed stock options, and $ 1.1 million of stock-based compensation expense, which represents the excess of the estimated fair value of the Replacement Options over the assumed Old Catheter stock options, were recognized upon the closing of the Merger. 2023 Equity Incentive Plan In July 2023, the Company’s stockholders approved, the 2023 Plan, as defined above, which provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, performance-based stock awards and other forms of equity compensation to the Company’s employees, directors and consultants. Stock options granted under the 2023 Plan to employees and consultants generally will vest annually over a five-year period or as determined by the Board’s Compensation Committee, while grants to non-employee directors generally vest quarterly over a three-year period. As of March 31, 2024 and December 31, 2023, 146,546 and 501,868 shares of common stock were reserved for future issuance pursuant to the 2023 Plan. The number of shares available for issuance under the 2023 Plan also includes a quarterly increase commencing on September 1, 2023 by an amount equal to the lesser of (i) 10 % of the number equal to the number of shares of common stock outstanding on the applicable adjustment date less the number of shares of common stock outstanding at the beginning of the fiscal quarter immediately preceding the adjustment date, but if such number is a negative number, then the increase will be zero; or (ii) such lesser number of shares as may be determined by the Board. On January 8, 2024, the Board approved the issuance of a total of 285,000 non-qualified stock options under the 2023 Plan. 75,000 of these non-qualified options were issued to non-employee directors that vest at 8 1/3% per quarter for 3 years with an exercise price of $0.40 and expiration date of January 8, 2034 . The remaining 210,000 non-qualified options were issued to employees and consultants and vest at 20% per year for 5 years with an exercise price of $0.40 and expiration date of January 8, 2034 . On February 26, 2024, the Board approved the issuance of a total of 150,000 incentive stock options under the 2023 Plan. All options were issued to employees and vest at 20% per year for 5 years with an exercise price of $ 0.43 and expiration date of February 26, 2034 . The options issued during the quarter ended March 31, 2024 were valued at approximately $ 170 thousand using the Black-Scholes model based on the following assumptions on the date of issue: Non-Employee Director Options Issued January 8, 2024 Employee Options Issued January 8, 2024 Employee Options Issued February 26, 2024 Risk-free interest rate 4.01 % 4.01 % 4.28 % Volatility 175.36 % 175.36 % 178.14 % Expected dividend yield 0 % 0 % 0 % Expected life (in years) 6.5 6.5 6.5 See Note 20, Subsequent Events, for additional options issued under the 2023 Plan in April 2024 and non-Plan options issued in May 2024. 31 Table of Contents The following is a summary of stock option activity for the three months ended March 31, 2024: Stock Options Weighted Average Exercise Price Weighted Average Remaining Life (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 214,652 $ 6.47 6.38 Options exercised — $ — — — Options granted 435,000 $ 0.41 — — Canceled/forfeited ( 35,059 ) $ 0.45 — — Outstanding at March 31, 2024 614,593 $ 2.52 8.59 $ 32,260 Vested and expected to vest at March 31, 2024 614,593 $ 2.52 8.59 $ 32,260 Exercisable at March 31, 2024 204,593 $ 6.76 6.09 $ — Restricted Stock Units All restricted stock units have been forfeited or vested as of December 31, 2023. Restricted Stock Awards All restricted stock awards have been forfeited or vested as of December 31, 2023. 32 Table of Contents Stock-based compensation expense for the three months ended March 31, 2024 and 2023 was $ 6 thousand and $ 1,394 thousand, which was recorded in selling, general and administrative expense in the Company's condensed consolidated statements of operations. Total unrecognized estimated stock-based compensation expense by award type and the remaining weighted average recognition period over which such expense is expected to be recognized at March 31, 2024 was as follows: Unrecognized Expense (in thousands) Remaining Weighted Average Recognition Period (in years) Stock options $ 154 4.5 Restricted stock awards $ — — Restricted stock units $ — — Note 16. Income Taxes The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2024 and 2023, respectively. For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future. The Company has no open tax audits with any taxing authority as of March 31, 2024, except for the California Department of Tax and Fee Administration sales and use tax audit. The period covered by the audit is October 1, 2020 through March 31, 2023. Note 17. Commitments and Contingencies In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company. As of March 31, 2024, the Company had no outstanding litigation. 33 Table of Contents Note 18 . Employee Benefit Plan In January 2019, the Company established a defined contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”). Under the terms of the 401(k) Plan, all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100 % of each employee’s contribution up to 3 % and 50 % of contributions between 3 % and 5 %, with the match-eligible contribution limited to 4 % of the employee’s eligible compensation. The Company cancelled the 401(k) Plan effective March 10, 2023 and distributed all assets held by the 401(k) Plan to the participants. The Company had no expenses related to the matching contributions for the three months ended March 31, 2024 and 2023. 34 Table of Contents Note 19. Related Parties Prior to the Merger, David A. Jenkins, the Company’s current Executive Chairman of the Board and Chief Executive Officer, and Old Catheter’s then Chairman of the Board of Directors, and his affiliates held approximately $ 25.1 million of Old Catheter’s Convertible Promissory Notes, or the Notes, that were converted in the Old Catheter merger into 7,856,251 shares of Series X Convertible Preferred Stock (see Note 3, Business Combination, and Note 14, Preferred Stock). In consideration for forgiving the interest accrued but remaining unpaid under the Notes in an aggregate amount of approximately $ 13.9 million, Mr. Jenkins and his affiliates also received royalty rights equal to approximately 12% of the net sales, if any, of LockeT, commencing upon the first commercial sale and through December 31, 2035 (see Note 10, Royalties Payable). In addition to the shares described above that were issued in connection with the Notes, Mr. Jenkins and his affiliates received 1,325.838 shares of Series X Convertible Preferred Stock in the merger, and Mr. Jenkins’ adult children received 1,284.344 shares of Series X Convertible Preferred Stock in the merger, all in exchange for their equity interests in Old Catheter in accordance with the merger exchange ratio . In connection with the Merger (see Note 3, Business Combination), the Company assumed $ 1.4 million of accrued expenses and advances, of which $ 1.1 million was due to Mr. Jenkins and was paid on January 10, 2023. Mr. Jenkins’ daughter, the Company’s non-executive Chief Operating Officer, received options to purchase 144,169 shares of the Company’s common stock upon the closing of the merger in exchange for her options to purchase shares of Old Catheter common stock, converted based on the exchange ratio in the merger. Of the total options to purchase 144,169 shares of the Company’s common stock, 140,816 options have an exercise price of $ 0.59 per share, and the remaining 3,353 options have an exercise price of $ 2.02 per share. Margrit Thomassen, the Company's Interim Chief Financial Officer, received options to purchase 16,764 shares of the Company's common stock upon the closing of the merger in exchange for her options to purchase shares of Old Catheter common stock, converted based on the exchange ratio in the merger. The options have an exercise price of $ 0.59 per share. In January 2024, she received an option to purchase 25,000 shares of the Company's common stock under the 2023 Plan. The options have an exercise price of $ 0.40 per share, vest at 20 % per year for 5 years and expire in January 2034. Following stockholder approval on March 21, 2023, the Company issued 991,828 shares of common stock to Mr. Jenkins and affiliates upon conversion of 991.828 shares of Series X Convertible Preferred Stock, and 235,320 shares of common stock to his adult children upon conversion of 235.320 shares of Series X Convertible Preferred S tock. Note 20. Subsequent Events Options Issued Under the 2023 Equity Incentive Plan On April 24, 2024, the Board approved the issuance of a total of 125,000 incentive stock options under the 2023 Equity Incentive Plan. All options were issued to employees and vest at 20% per year for 5 years with an exercise price of $ 0.46 and expiration date of April 24, 2034 . Non-Plan Options Issued On April 24, 2024, the Board approved the issuance of a total of 250,000 Non-Plan Options as an employment incentive for the position of Chief Commercial Officer. The options will be issued as of the first day of employment and vest at 20% per year for 5 years with an exercise price to be the closing market price of the Company’s common stock on the day immediately preceding the issuance date of the options . The options will expire 10 years from the issuance date. 35 Table of Contents