What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-06 · 78 added, 66 removed, 228 unchanged (39% of the section changed)

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our VIVO launch plans require significant investment in infrastructure and sales representatives, our research and development and commercialization efforts may depend on entering into agreements with corporate collaborators, we have entered into joint marketing agreements with respect to our products, and may enter into additional join marketing agreements, that will reduce our revenues from product sales, royalty agreements with respect to LockeT, the surgical vessel closing pressure device, will reduce any future profits from this product, if we experience significant disruptions in our information technology systems, our business may be adversely affected, litigation and other legal proceedings may adversely affect our business, if we make acquisitions or divestitures, we could encounter difficulties that harm our business, failure to attract and retain sufficient qualified personnel could also impede our growth, our revenues may depend on our customers’ receipt of adequate reimbursement from private insurers and government sponsored healthcare programs, we may be unable to compete successfully with companies in our highly competitive industry, many of whom have substantially greater resources than we do, our future operating results depend upon our ability to obtain components in sufficient quantities on commercially reasonable terms or according to schedules, prices, quality and volumes that are acceptable to us, and suppliers may fail to deliver components, or we may be unable to manage these components effectively or obtain these components on such terms, if hospitals, physicians and patients do not accept our current and future products or if the market for indications for which any product candidate is approved is smaller than expected, we may be unable to generate significant revenue, if any, the recent coronavirus outbreak (“COVID-19”) adversely affected our financial condition and results of operations and we cannot provide any certainty as to whether there will be future impacts from COVID-19 or another pandemic, a variety of risks associated with marketing our products internationally could materially adversely affect our business, the impact of the military conflicts in Ukraine and Israel, and the actions that have been and could be taken by other countries, including new and stricter sanctions and actions taken in response to such sanctions, have affected, and may continue to affect, our business and results of operations, including our supply chain, if the third parties on which we rely for the conduct of our clinical trials and results do not perform our clinical trial activities in accordance with good clinical practices and related regulatory requirements, we may be unable to obtain regulatory approval for or commercialize our product candidates, we may be adversely affected by product liability claims, unfavorable court decisions or legal settlements, our ability to use our net operating loss carryforwards may be limited, we may have to make milestone payments under the Settlement Agreement we entered into with the Department of Justice (“DOJ”), we are subject to pervasive and continuing regulation by the FDA and other regulatory agencies.

and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products, increased tariffs or the imposition of other barriers to international trade could have a material adverse effect on our revenues and operating results, product clearances and approvals can often be denied or significantly delayed, although we have obtained regulatory clearance for our VIVO and LockeT products in the U.S.

Our products may be subject to additional recalls, revocations or suspensions after receiving FDA or foreign approval or clearance, which could divert managerial and financial resources, harm our reputation, and adversely affect our business, changes in trade policies among the United States (“U.S.”) and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products, increased tariffs or the imposition of other barriers to international trade could have a material adverse effect on our revenues and operating results, product clearances and approvals can often be denied or significantly delayed, although we have obtained regulatory clearance for our VIVO and LockeT products in the U.S.

and certain non-U.S.

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References to “we”, “us”, “our” and “the Company” refer to Catheter Precision, Inc.

The registrant (together with our consolidated operating subsidiary, the “Company” or “Catheter”) was incorporated under the name “Ra Medical Systems, Inc.” as a Delaware corporation in July 2018.

A predecessor had been incorporated in California in September of 2002, but was reincorporated in 2018 in connection with our initial public offering.

The Company was initially formed to develop, commercialize and market an excimer laser-based platform for use in the treatment of vascular and dermatological immune-mediated inflammatory diseases, including the DABRA product line.

Catheter Precision, Inc.

("Catheter" or the "Company or "Legacy RA Medical") was incorporated in California on September 4, 2002, and reincorporated 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, the Company merged with the former Catheter Precision, Inc., or “Old Catheter”, a privately-held Delaware corporation (the “Merger”), and the business of Old Catheter became a wholly owned subsidiary of the Company, which today is our only operating subsidiary.

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Accordingly, our current activities primarily relate to Old Catheter’s historical business which comprises the design, manufacture and sale of new and innovative medical technologies focused in the field of cardiac electrophysiology, or “EP.”

Our primary product is the View into Ventricular Onset System or VIVO System (“VIVO” or “VIVO System”) which 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.

One of our two primary products is the View into Ventricular Onset (“VIVO” or “VIVO System”).

VIVO 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.

Our newest product, 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.

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on August 16, 2021.

The board of directors approved a reduction in force ("RIF") effective June 6, 2022, under which approximately 65% of Ra Medical's full-time employees were immediately terminated and provided one-time severance payments totaling approximately $0.6 million.

In August and September 2022, an additional 20% of Legacy Ra Medical's employees were terminated and provided one-time severance payments totaling approximately $0.3 million.

The purpose of the RIF was to preserve capital with the goal of maximizing the opportunities available to Legacy Ra Medical during the board of directors’ review of strategic alternatives.

As a result of the RIF and the board of directors’ review of strategic alternatives, the Company paused all engineering activities in June 2022.

The Company has ceased marketing the DABRA Excimer Laser System and does not currently intend to commercialize the DABRA 2.0 catheter.

In June 2022, the board of directors reviewed strategic alternatives, and as a result, the Company paused all engineering activities related to DABRA in June 2022.

The Company ceased marketing the DABRA Excimer Laser System and does not currently intend to commercialize the DABRA 2.0 catheter.

Post-Merger Operations

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Accordingly, our current activities primarily relate to Old Catheter’s historical business, which comprises the design, manufacture and sale of new and innovative medical technologies focused in the field of cardiac electrophysiology, or EP.

Our primary product is the VIVO System.

One of our two primary products is the VIVO System.

We are focused on the design, market development and usage adoption of our VIVO System by cardiac electrophysiologists to enhance their ability to diagnose and treat cardiac arrhythmias.

We have completed development, received regulatory clearance, and initiated sales of the VIVO System in the U.S.

and Europe (“EU”).

Our business strategy is to become a leading medical imaging company in the field of cardiac electrophysiology, and we are dedicated to developing and delivering electrophysiology products to provide patients, hospitals, and physicians with novel technologies and solutions to improve the lives of patients with cardiac arrhythmias.

We aim to establish VIVO as an integral tool used by cardiac electrophysiologists during ablation treatment of ventricular arrhythmias by reducing procedure time and patient complications and increasing procedural success.

We have received FDA clearance to market and promote the VIVO System in the United States as a pre-procedure planning tool for patients with structurally normal hearts undergoing ablation treatment for idiopathic ventricular arrhythmias.

We have received FDA clearance to market and promote the VIVO System in the U.S.

as a pre-procedure planning tool for patients with structurally normal hearts undergoing ablation treatment for idiopathic ventricular arrhythmias.

VIVO allows for the acquisition, analysis, display and storage of cardiac electrophysiological data and maps for analysis by a physician.

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Catheter’s international distributors are supported by two EU based full time consultants.

In addition, LockeT, a suture retention device, is a sterile, Class I product that was registered with the FDA in February 2023, at which time we began initial shipments to distributors.

In addition, our newest product, LockeT, a suture retention device, is a sterile, Class I product that was registered with the FDA in February 2023, at which time we began initial shipments to distributors.

In May 2024, we recognized our first sale of LockeT.

In May 2023, Catheter submitted LockeT for CE Mark approval.

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Recent Developments

Reverse Stock Split

On July 3, 2024, at the annual meeting of shareholders of the Company, the shareholders approved an amendment to the Amended and Restated Certificate of Incorporation of the Company (the “Amendment”) which included a decrease in the authorized common stock and authorization for the Board, in its discretion, to effect a reverse stock split within specified parameters.

The Amendment was effective July 15, 2024, reducing the authorized common stock to 30 million shares and effecting a reverse stock split in which each ten (10) shares of the Company’s common stock, par value $0.0001 per share, issued and outstanding immediately prior to the effective time automatically combined into one (1) validly issued, fully paid and non-assessable share of common stock, par value $0.0001 per share.

No fractional shares were issued as a result of the Reverse Stock Split.

Stockholders who would otherwise have been entitled to receive a fractional share were entitled to receive their pro rata portion of the net proceeds obtained from the aggregation and sale by the exchange agent of the fractional shares resulting from the reverse stock split (reduced by any customary brokerage fees, commissions and other expenses).

The financial statements and all share and per share information contained in this Form 10-Q have been retrospectively adjusted to reflect the Reverse Stock Split of the Company’s common stock for all periods presented.

Expansion of Sales Force

Beginning in the first quarter of 2024, we began to rejuvenate our sales force with plans to engage a new Chief Commercial Officer ("CCO").

As of May 1, 2024, nine sales people and one clinical support staff have been hired, along with the new COO.

As of August 1, 2024, ten sales people and three clinical support staff have been hired, along with the new CCO.

Settlement Agreements with the Department of Justice and Participating States

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On January 9, 2023, we entered into a Securities Purchase Agreement (the "Securities Purchase Agreement"), for a private placement (the "Private Placement"), with the Investor.

Pursuant to the Securities Purchase Agreement, on March 23, 2023, the Investor purchased, for an aggregate purchase price of approximately $8.0 million, (a) 497,908 Class A Units at a price of $1.60029 per Class A Unit, 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 Warrant, the PIPE Warrants, and (b) 4,501,060 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, par value $0.0001, or the PIPE Preferred Stock, 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 approximately 625 shares of the Company’s common stock, or the Preferred Conversion Rate.

Pursuant to the Securities Purchase Agreement, on March 23, 2023, the Investor purchased, for an aggregate purchase price of approximately $8.0 million, (a) 497,908 Class A Units at a price of $1.60029 per Class A Unit, each consisting of one tenth of one share of common stock, one tenth of one Series F Common Stock Purchase Warrant, or Series F Warrant, and one tenth of one Series G Common Stock Purchase Warrant, or Series G Warrant, and together with the Series F Warrant, the PIPE Warrants, and (b) 4,501,060 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, par value $0.0001, or the PIPE Preferred Stock, and one tenth of one Series F Warrant and one tenth of 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 approximately 62.5 shares of the Company’s common stock, 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) was approved at the special Stockholders’ Meeting held March 21, 2023.

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Issuance of Securities upon Conversion of Series A Preferred

On July 5, 2023, the Company issued 1,093,552 shares of its common stock in connection with the conversion of 1,750 shares of its outstanding Series A Convertible Preferred Stock.

The shares were issued in connection with two separate conversions of 875 shares of Series A Convertible Preferred Stock into 546,776 shares of common stock that occurred on July 3, 2023.

The following conversions of Series A Convertible Preferred Stock occurred subsequent to issuance:

Conversion Date

Shares Common Stock Issued

Shares of Series A Convertible Preferred Converted

Each share of Series A Convertible Preferred Stock is convertible into approximately 62.5 shares of common stock.

On July 24, 2023, the Company issued 546,776 shares of its common stock in connection with the conversion of 875 shares of its outstanding Series A Convertible Preferred Stock.

On January 24, 2024, the Company issued 546,776 shares of its common stock in connection with the conversion of 875 shares of its outstanding Series A Convertible Preferred Stock.

All series A Convertible Preferred Stock has been converted and no shares are outstanding subsequent to the last conversion on July 23, 2024.

Adoption of 2023 Equity Incentive Plan

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No issuance of options were granted under the 2023 Plan during the year ended December 31, 2023.

As of March 31, 2024, options to purchase an aggregate of 410,000 shares were outstanding and 146,546 shares remain available for grant under the 2023 Plan, subject to adjustment as provided therein.

See Note 20, Subsequent Events, of our accompanying unaudited consolidated financial statements for a discussion of option grants made subsequent to March 31, 2024.

Components of our Results of Operations for the Three Months Ended March 31, 2024 and 2023

As of June 30, 2024, options to purchase an aggregate of 46,000 shares were outstanding and 9,653 shares remain available for grant under the 2023 Plan, subject to adjustment as provided therein.

In July 2024, the shareholders approved an additional 200,000 shares of common stock for issuance under the plan.

Components of our Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Product sales revenues prior to the Merger consisted of sales of catheters for use with the DABRA laser in our atherectomy clinical trials.

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Our primary product in 2024 is the VIVO System.

One of our two primary products 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.

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We have elected the practical expedient to expense costs to obtain a contract, as incurred, as opposed to recognizing the cost as an asset upon occurrence.

Our second primary product is LockeT.

During the three months ended June 30, 2024, we recognized our first sales of LockeT.

Revenue is recognized at the point in time that the product is delivered to the customer.

We are a business that has operations within multiple countries.

During the three months ended March 31, 2024, approximately 90% of our sales were derived from customers outside the United States.

This shift of revenue to predominantly international customers is a result of timing of orders placed and not expected to continue.

During the three and six months ended June 30, 2024, approximately 35% and 38%, respectively, of our sales were derived from customers outside the United States.

Cost of Revenues

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and cost of outside consultants who assist with technology development and clinical affairs.

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

The following table sets forth the results of the Company's operations for the periods presented ($ in thousands):

For the Three Months

Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenues

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Other income, net

The decrease in revenues of approximately $3 thousand for the three months ended March 31, 2024 as compared to the corresponding period in the prior year was due to lower product sales of the VIVO System products.

The decrease in revenues of approximately $3 thousand and $6 thousand for the three and six months ended June 30, 2024 as compared to the corresponding period in the prior year was due to lower product sales of the VIVO System products that was partially offset by our first LockeT product sales in 2024.

LockeT sales for the three and six months ended June 30, 2024 were approximately $38 thousand for both periods.

Cost of Revenues

The decrease in cost of revenues of approximately $5 thousand for the three months ended March 31, 2024 as compared to the corresponding period in the prior year was due to the lower cost of revenues of the VIVO Positioning Patches.

During 2024, changes to the manufacturing process of the Vivo Positioning Patches led to a reduction in the manufacturing cost of approximately 40%.

The increase in cost of revenues of approximately $9 thousand for the three months ended June 30, 2024 as compared to the corresponding period in the prior year was due to order fulfillment charges that are now being incurred for LockeT.

The increase in cost of revenues of approximately $4 thousand for the six months ended June 30, 2024 as compared to the corresponding period in the prior year was due to order fulfillment charges that are now being incurred for LockeT, offset by the lower cost of revenues of the VIVO Positioning Patches.

During 2024 the manufacturing process was changed from 3D printing components of the VIVO Positioning Patches to the use of a cheaper specialized mold.

This new process also allowed for larger build quantities which in turn further reduced costs and led to a reduction in the manufacturing cost of VIVO Positioning Patches of approximately 40%.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses of approximately $7.6 million for the three months ended March 31, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in salaries and benefits of $2.0 million relating to the Company's former Chief Executive Officer, a decrease in legal fees of $2.0 million that were primarily incurred in connection with the Merger, a decrease in depreciation and amortization of approximately $1.4 million that resulted from intangible assets acquired in the Merger, of which the useful lives and fair value of those intangible assets were finalized during the three months ended June 30, 2023.

Further, a decrease in stock based compensation of approximately $1.4 million, of which, $1.3 million was related to the one time stock compensation for Old Catheter stock options assumed in the Merger, a decrease of accounting/audit fees of approximately $0.5 million, a decrease of investor relations and SEC fees of approximately $0.1 million, a decrease in other selling, general and administrative expenses of $0.1 million, and a decrease of other fees of approximately $0.1 million.

The increase in selling, general and administrative expenses of approximately $1.3 million for the three months ended June 30, 2024 as compared to the corresponding period in the prior year was due primarily to an increase in salaries and benefits of $0.3 million relating to the Company hiring additional sales force and CCO, an increase in depreciation and amortization of approximately $1.4 million that resulted from intangible assets acquired in the Merger, of which the useful lives and fair value of those intangible assets were finalized during the three months ended June 30, 2023, causing negative amortization during that period, partially offset by a decrease in legal fees of $0.1 million in 2024 as compared to legal fees incurred in 2023.

Further, an increase in stock based compensation of approximately $0.2 million, was related to the one time stock compensation for Old Catheter stock options assumed in the Merger being adjusted during the three months ended June 30, 2023, a decrease of accounting/audit fees of approximately $0.3 million, a decrease in other selling, general and administrative expenses of $0.1 million, and a decrease of other professional fees of approximately $0.1 million also impacted selling, general and administrative expenses.

The decrease in selling, general and administrative expenses of approximately $6.3 million for the six months ended June 30, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in salaries and benefits of $1.7 million relating to the Company's former Chief Executive Officer, and a decrease in legal fees of $2.1 million that were primarily incurred in connection with the Merger.

Further, a decrease in stock based compensation of approximately $1.2 million, which was related to the one time stock compensation for Old Catheter stock options assumed in the Merger, a decrease of accounting/audit fees of approximately $0.7 million, a decrease of investor relations and SEC fees of approximately $0.1 million, a decrease in insurance of $0.1 million, a decrease in other selling, general and administrative expenses of $0.2 million, and a decrease of other professional fees of approximately $0.2 million also impacted selling, general and administrative expenses.

Research and Development Expenses

The decrease in research and development expenses of approximately $0.1 million for the three months ended March 31, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in clinical study costs of $0.1 million.

This decrease was primarily the result of the discontinuation of the historical products of Ra Medical that were under development.

The decrease in research and development expenses of approximately $0.1 million for the three months ended June 30, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in regulatory affairs related expenditures of $0.1 million.

The decrease in research and development expenses of approximately $0.3 million for the six months ended June 30, 2024 as compared to the corresponding period in the prior year was primarily due to a decrease in salaries and benefits of $0.1 million, a decrease in regulatory affairs related expenditures of $0.1 million, and a decrease in clinical costs of $0.1 million.

This decrease was primarily the result of the discontinuation of the historical products of the Company that were previously under development.

Impairment Charges

We test for goodwill impairment at the reporting level annually in the fourth quarter or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists.

As a result of the Merger with Old Catheter the Company recognized $56.1 million of goodwill for the three months ended March 31, 2023.

As a result of the Merger with Old Catheter the Company recognized $4.8 million and $60.9 million of goodwill for the three and six months ended June 30, 2023.

Due to a sustained decrease in our share price during the quarters ended March 31, 2023 and June 30, 2023, we concluded that in accordance with ASC 350 a triggering event occurred indicating that potential impairment exists that required us to assess if impairment existed as of March 31, 2023 and June 30, 2023.

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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 while the guideline public company market approach considered marketplace earnings multiples from within a peer public company group.

We recorded the impairment charge of $60.9 million within loss on impairment of goodwill in the consolidated statement of operations.

We recorded the impairment charge of $4.8 million and $60.9 million for the three and six month ended June 30, 2023 within loss on impairment of goodwill in the consolidated statement of operations.

As of December 31, 2023, cumulative goodwill impairment charges of $60.9 million were incurred related to our single reporting unit.

The remaining balance of goodwill was reduced to zero as of December 31, 2023.

For the three months ended March 31, 2024, no impairment charges were incurred.

For the three and six months ended June 30, 2024, no impairment charges were incurred.

Change in fair value of royalties payable

As of the date of the Merger, the royalties payable was calculated using a discounted cash flow method utilizing a discount rate of 24.1%.

From the Merger date through March 31, 2023, the Company's accounting policy was to accrete the royalties payable, which was included in selling, general, and administrative expenses on the unaudited condensed consolidated statement of operations.

Subsequent to March 31, 2023, the Company changed its accounting policy to remeasure the royalties payable and record it at fair value, which is presented within other income on the unaudited condensed consolidated statement of operations.

At each reporting period, the fair value of the royalties payable is calculated using the discounted cash flow method.

At March 31, 2024, the discount rate was 29%, The change in fair value of the royalties payable for the three months ended March 31, 2024 as compared to the corresponding periods in the prior year was a decrease of $0.1 million.

The change between three months ended March 31, 2024 and 2023 is driven by both the change in fair value of the royalties payable as well the change in accounting policy.

At June 30, 2024, the discount rate was 26.0%.

The change in fair value of the royalties payable for the three and six months ended June 30, 2024 as compared to the corresponding periods in the prior year was a decrease of $6.1 million and $6.2 million, respectively.

The change between the three and six months ended June 30, 2024 and 2023 is driven by both the change in fair value of the royalties payable as well the change in accounting policy.

Other income, Net

The decrease in other income (expense), net of approximately $0.1 million for the three months ended March 31, 2024 as compared to the corresponding periods in the prior year was primarily due to a decrease in investment income.

The decrease in other income (expense), net of approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively, as compared to the corresponding periods in the prior year was primarily due to a decrease in investment income.

Liquidity and Capital Resources

As of March 31, 2024, we had cash and cash equivalents of approximately $1.5 million and an accumulated deficit of approximately $278.4 million.

For the three months ended March 31, 2024, net cash used from operating activities was approximately $1.9 million.

As of June 30, 2024, we had cash and cash equivalents of approximately $16 thousand and an accumulated deficit of approximately $282.6 million.

For the six months ended June 30, 2024, net cash used from operating activities was approximately $3.6 million.

We have incurred recurring net losses from operations and negative cash flows from operating activities since inception.

We received short-term loans of $850 thousand in July 2024, and as of August 5, 2024, our cash position was approximately $340 thousand.

We have a total of $1.5 million of short-term loans that will become due and payable on August 30, 2024.

We expect operating losses and negative cash flows to continue for the foreseeable future as we invest in our commercial capabilities.

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Such actions may impair our ability to proceed with certain strategic activities.

As of March 31, 2024, we had $1.5 million of cash and cash equivalents.

We believe that this amount will not be sufficient to fund our operations through the end of May 2025.

Because expected revenues are not adequate to fund our planned expenditures and anticipated operating costs beyond such point, we are currently evaluating potential means of raising cash through future capital transactions and/or bridge loans.

We believe that our current cash on hand will not be sufficient to fund our operations through the end of August 2025, including without limitation, to repay our outstanding short-term notes that will become due and payable on August 30, 2024.

Because expected revenues are not adequate to fund our planned expenditures and anticipated operating costs and liabilities beyond such point, we are currently evaluating potential means of raising cash through future capital transactions and additional bridge loans.

If we are unable to do so, we will be required to reduce our spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that we will be successful in doing so.

Accordingly, we will likely be required to raise additional cash through debt or equity transactions and/or bridge loans to continue our operations, and if we are unable to do so, we will be required to suspend a portion or all of our operations.

Accordingly, we will likely be required to raise additional cash through debt or equity transactions and bridge loans to continue our operations and pay our debts as they come due, and if we are unable to do so, we will be required to suspend a portion or all of our operations and/or potentially seek relief from our creditors.

We 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 unaudited condensed consolidated financial statements for the quarter ended March 31, 2024 are issued.

The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows for the Three Months Ended March 31, 2024 and 2023 ($ in thousands)

For the Three Months

Ended March 31,

Cash Flows for the Six Months Ended June 30, 2024 ($ in thousands)

For the Six Months Ended June 30,

Net cash provided by (used in):

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Net Cash Used in Operating Activities

During the three months ended March 31, 2024, net cash used in operating activities of $1.9 million consisted of a net loss of $2.6 million, partially offset by an increase in operating assets and liabilities of $0.1 million and non-cash expenses of $0.6 million, consisting primarily of depreciation and amortization of $0.5 million and a change in fair value of royalties payable of $0.1 million.

During the three months ended March 31, 2023, net cash used in operating activities of $12.1 million consisted of a net loss of $66.4 million, a decrease in operating assets and liabilities of $5.1 million, partially offset by non-cash expenses of $59.4 million, consisting primarily of a loss on impairment of goodwill of $56.1 million, non-cash stock-based compensation of $1.4 million, depreciation and amortization of $1.4 million and accretion of royalties payable of $0.5 million.

During the six months ended June 30, 2024, net cash used in operating activities of $3.6 million consisted of a net loss of $6.9 million, partially offset by an increase in operating assets and liabilities of $0.6 million and non-cash expenses of $2.7 million, consisting primarily of depreciation and amortization of $1.0 million, stock-based compensation of $19 thousand and a change in fair value of royalties payable of $1.6 million.

During the six months ended June 30, 2023, net cash used in operating activities of $16.9 million consisted of a net loss of $68.0 million, a decrease in operating assets and liabilities of $7.5 million, partially offset by non-cash expenses of $58.6 million, consisting primarily of a loss on impairment of goodwill of $61.0 million, non-cash stock-based compensation of $1.2 million, depreciation and amortization of $1.0 million, offset by a change in fair value of royalties payable of 4.6 million.

Net Cash Used in Investing Activities

During the three months ended March 31, 2024, net cash used in investing activities of $22 thousand consisted of purchases of property and equipment.

During the three months ended March 31, 2023, net cash used in investing activities of $22 thousand consisted of purchases of property and equipment of approximately $37 thousand, offset by proceeds from cash acquired as part of business combination of approximately $15 thousand.

Net Cash (Used in)/Provided by Financing Activities

During the three months ended March 31, 2024, net cash used in financing activities of $0.1 million primarily consisting of payments on notes payable.

During the three months ended March 31, 2023, net cash provided by financing activities of $8.4 million, consisted of cash proceeds from the private placement of $8.0 million, proceeds from issuance of common stock and warrants of $0.2 million and proceeds from the exercise of warrants of $1.3 million, offset by the payment of offering costs of $0.6 million, the payment of costs related to exercise of warrants $0.2 million and the payment of convertible promissory notes of $0.3 million.

During the six months ended June 30, 2024, net cash used in investing activities of $67 thousand consisted of purchases of property and equipment.

During the six months ended June 30, 2023, net cash used in investing activities of $42 thousand consisted of purchases of property and equipment of approximately $57 thousand, offset by proceeds from cash acquired as part of business combination of approximately $15 thousand.

Net Cash Provided by Financing Activities

During the six months ended June 30, 2024, net cash provided by financing activities of $0.2 million primarily consisting of proceeds from notes payable from related parties of $0.7 million, offset by payments on deferred financing costs of $0.3 million and payments on notes payable of $0.2 million.

During the six months ended June 30, 2023, net cash provided by financing activities of $8.5 million, consisted of cash proceeds from the private placement of $8.0 million, proceeds from issuance of common stock and warrants of $0.2 million and proceeds from the exercise of warrants of $1.4 million, offset by the payment of offering costs of $0.6 million, the payment of costs related to exercise of warrants of $0.2 million and the payment of convertible promissory notes of $0.3 million.

Off-Balance Sheet Arrangements

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We believe certain of our accounting policies are critical to understanding our financial position and results of operations.

Management’s discussion and analysis of the Company's financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of these unaudited consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures.

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Stock-Based Compensation

We calculate the cost of awards of equity instruments based on the grant date fair value of the awards issued to employees, members of our board of directors and nonemployee consultants using the Black-Scholes option pricing valuation model, or Black-Scholes model, which incorporates various assumptions including volatility, expected term and risk-free interest rate.

We calculate the cost of awards of equity instruments based on the grant date fair value of the option awards issued to employees, members of our board of directors and nonemployee consultants using the Black-Scholes option pricing valuation model, or Black-Scholes model, which incorporates various assumptions including volatility, expected term and risk-free interest rate.

The expected term of the options is the estimated period of time until exercise and was determined using the SEC’s safe harbor rules, using an average of vesting and contractual terms, as we did not have sufficient historical experience of similar awards.

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We 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.

In addition, Old Catheter had entered into an agreement with the inventor of LockeT in exchange for the assignment and all rights to LockeT.

In addition, the Company finalized an Invention Assignment and Royalty Agreement (the "Royalty Agreement") that had previously been entered into by Old Catheter with the inventor of LockeT in exchange for the assignment and all rights to LockeT.

Pursuant to the agreement, we will pay a 5% royalty on net sales up to $1 million in royalties.

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patent is granted by the United States Patent and Trademark Office, then we 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.

No further royalty payments will be due under this Royalty Agreement after December 31, 2033.

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.

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The accounting pronouncement is not expected to have a material impact on the Company's related disclosures.

Effective January 1, 2023, repurchases are subject to a nondeductible excise tax under the Inflation Reduction Act of 2022 equal to 1.0% of the fair market value of the shares repurchased, subject to certain limitations.

There was no impact to our financial condition or results of operations in 2023 or for the three months ended March 31, 2024 as a result of the excise tax.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis