What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 379 added, 263 removed, 645 unchanged (50% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data)

June 30, 2024

(in thousands, except per share data)

September 30, 2024

December 31, 2023

5 unchanged sentences

Property and equipment, net

Lease right-of-use assets

Operating lease right-of-use assets, net

Intangible assets, net

Deferred financing costs

Other non-current assets

4 unchanged sentences

Notes payable

Notes payable due to related parties

Interest payable to related parties

3 unchanged sentences

Royalties payable

Notes payable due to related parties

Operating lease liabilities

4 unchanged sentences

Series A Convertible Preferred Stock, $ 0.0001 par value, 7,203 shares designated;

3,703 and 4,578 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

0 and 4,578 shares issued and outstanding as of September 30, 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 June 30, 2024 and December 31, 2023

12,656 shares issued and outstanding as of September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 30,000,000 shares authorized;

757,340 and 702,662 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

3,452,652 and 702,662 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

5 unchanged sentences

Condensed Consolidated Statements of Operations

(in thousands, except shares and per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands, except per share data)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Cost of revenues

7 unchanged sentences

Interest income

Other income (expense), net

Interest expense

Other expense, net

Change in fair value of royalties payable

8 unchanged sentences

(in thousands, except share data)

Series A Convertible

Preferred Stock

Series X Convertible

Preferred Stock

Series A Convertible Preferred Stock

Series X Convertible Preferred Stock

Additional Paid-In

8 unchanged sentences

$ ( 282,604 )

Series A Convertible

Preferred Stock

Series X Convertible

Preferred Stock

Issuance of common stock and other equity-classified contracts from September 2024 Public Offering, net of issuance costs

Issuance of common stock upon exercise of Pre-Funded Warrants (see Note 13)

Conversion of Series A Convertible Preferred Stock

Stock-based compensation

Balance at September 30, 2024

$ ( 286,724 )

Series A Convertible Preferred Stock

Series X Convertible Preferred Stock

Additional Paid-In

Total Stockholders'

2 unchanged sentences

Common stock issued upon the exercise of options

Restricted stock awards cancelled or vested

Restricted stock awards cancelled

Stock-based compensation

3 unchanged sentences

Warrants exercised (see Note 13)

Deemed dividend - warrant inducement offer

Balance at March 31, 2023

3 unchanged sentences

Balance at June 30, 2023

Stock-based compensation

Conversion of Series A Convertible Preferred Stock

Balance at September 30, 2023

$ ( 275,040 )

3 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Prepaid expenses and other assets

Lease right-of-use assets and lease liabilities

Operating lease right-of-use assets and lease liabilities

Current portion of royalties payable

1 unchanged sentence

Accrued expenses

Accrued interest - related parties

Interest payable to related parties

Net cash used in operating activities

5 unchanged sentences

Proceeds from issuance of common stock and warrants

Proceeds from issuance of common stock and other equity-classified contracts from the September 2024 Public Offering, net of issuance costs

Proceeds from notes payable due to related parties

Payments on note payable

Payments on deferred financing costs

Payment on note payable

Proceeds from note payable

Proceeds from exercise of warrants

Payments of costs related to exercise of warrants

Payments of convertible promissory notes

Payments of costs related to the warrant repricing

Payments of convertible promissory notes and accrued interest

Proceeds from the private placement of securities

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CASH AND CASH EQUIVALENTS, end of period

SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash consideration for Catheter acquisition

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash payments for interest

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES

Non-cash consideration for Catheter acquisition

Property and equipment reclassified from inventories

Conversion of Series A Convertible Preferred Stock for common stock

See accompanying notes to unaudited condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

(in thousands, except share data)

(in thousands, except per share data)

Organization and Nature of Operations

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" or the "Company”) 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, 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".

On January 9, 2023, Catheter entered into the Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") with Catheter Precision, Inc.

(“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 (the "Merger").

Prior to the Merger, Catheter developed an advanced excimer laser-based platform for use in the treatment of vascular immune-mediated inflammatory diseases designed to be used as a tool in the treatment of Peripheral Artery Disease, which commonly occurs in the legs.

After the Merger and looking forward, this 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, the Company ceased operations and marketing with respect to DABRA, and Catheter’s legacy lines of business were discontinued.

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 focused in the field of cardiac electrophysiology, or EP.

After the Merger, and looking forward, this 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.

The Company ceased operations and marketing with respect to DABRA, and Catheter’s legacy lines of business were discontinued.

Instead, the Company 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 focused in the field of cardiac electrophysiology (“EP”).

One of the Company’s two primary products is the VIVO System, which is an acronym for View into Ventricular Onset (“VIVO” or “VIVO System”).

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United States Food and Drug Administration ("FDA") 510(k) clearance was received, and the Company began a limited commercial release of VIVO in 2021 in the United States.

The Company’s 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 and is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently.

The Company’s newest product, LockeT ® (“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.

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On July 3, 2024, at the annual meeting of stockholders of the Company, the stockholders 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.

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 the Company’s 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 have been retrospectively adjusted to reflect the Reverse Stock Split of the Company’s common stock for all periods presented.

All references to share and per share amounts for all periods presented in the unaudited condensed consolidated financial statements have been retrospectively restated to reflect this Reverse Stock Split.

All rights to receive shares of common stock under outstanding securities, including but not limited to, warrants and options were adjusted to give effect to the reverse stock split.

Furthermore, proportionate adjustments were made to the per share exercise price and the number of shares of Common Stock that may be purchased upon exercise of outstanding warrants and stock options granted by the Company, and the number of shares of Common Stock reserved for future issuance under the Company’s Equity Incentive Plan.

Going Concern

As of June 30, 2024, the Company had cash and cash equivalents of approximately $ 16 thousand.

For the six months ended June 30, 2024, the Company used $ 3.6 million in cash for operating activities.

The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.

The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception.

As of June 30, 2024, the Company had an accumulated deficit of approximately $ 282.6 million.

As of September 30, 2024, the Company had cash and cash equivalents of approximately $ 1.3 million.

For the nine months ended September 30, 2024, the Company used $ 6.4 million in cash for operating activities.

As of September 30, 2024, the Company had an accumulated deficit of approximately $ 287 million.

Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company invests in its commercial capabilities.

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

As of June 30, 2024, the Company had $ 16 thousand of cash and cash equivalents.

This amount will not be sufficient to fund the Company's operations through the end of August 2025.

Because expected revenues are not adequate to fund planned expenditures and anticipated operating costs beyond such point, the Company has obtained an additional $ 850 thousand in bridge loans subsequent to June 30, 2024 and is currently evaluating potential means of raising cash through future capital transactions and additional 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 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 unaudited condensed consolidated financial statements are issued.

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

From May to July 2024, the Company issued five short-term promissory notes with related parties totaling $ 1.5 million with an 8 % interest rate and a maturity date of August 30, 2024 (the “Related Party Notes”).

On August 23, 2024, the Company amended the Related Party Notes to extend the maturity date to January 31, 2026.

As part of the amendment, all interest accrued as of the amendment date was repaid to the noteholders and the contractual interest rate increased to 12% per annum as of the amendment date.

See Note 9, Notes Payable for additional information.

On August 30, 2024, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co.

as representative (the “Representative”) of the underwriters named in the Underwriter Agreement (the “Underwriters”).

Pursuant to the Underwriting Agreement, the Company completed a public offering of its securities on September 3, 2024 (the “September 2024 Public Offering”) and sold an aggregate of (i) 805,900 Common Stock Units and (ii) 2,773,000 Pre-Funded Units.

The Company collected gross proceeds of approximately $ 3.6 million before deducting underwriting discounts, commissions, and offering expenses payable by the Company of $ 1.0 million.

See Note 13, Equity Offerings for additional information.

On October 24, 2024, the Company entered into Warrant Inducement Offer Letters (the “2024 Inducement Offer”) with certain holders of the Company’s existing warrants.

Following the closing of the 2024 Inducement Offer, such warrant holders immediately exercised up to an aggregate of (i) 33,160.8 Series E Warrants, (ii) 499,909.34 Series F Warrants, (iii) 499,909.34 Series G Warrants, (iv) 1,990,000 Series H Warrants, and (v) 2,325,000 Series I Warrants (collectively the “Existing Warrants”) to purchase up to approximately 5.3 million shares of the Company’s Common Stock at a reduced exercise price of $0.70 per share.

In consideration for the immediate exercise of the Existing Warrants for cash, the Company agreed to issue unregistered new Series K Common Stock Purchase Warrants (“Series K Warrants”) to purchase up to 10.7 million shares of common stock.

The Company expects to receive aggregate gross proceeds of approximately $3.7 million in cash from the exercise of these warrants pursuant to the 2024 Inducement Offer, prior to deducting placement agent fees and offering expense of $0.4 million.

As of the date of the 2024 Inducement Offer, 578,900 Series H and 1,078,900 Series I warrants remained unexercised.

As additional consideration, the Company issued placement agent warrants to purchase up to 320,879 shares of common stock on the same terms as the Series K warrants, except the exercise price is $1.085 per share and have a termination date of October 28, 2029 .

Management estimates that based on the Company’s liquidity resources, there is substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date of issuance of the unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of the Company continuing to operate in the normal course of business and do not reflect any adjustments to the assets and liabilities related to the substantial doubt of its ability to continue as a going concern.

Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding.

Management plans to raise additional capital through public or private equity or debt financings to fulfill its operating and capital requirements for at least 12 months from the date of the issuance of the unaudited condensed consolidated financial statements.

However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all.

Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.

Summary of Significant Accounting Policies

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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.

In the opinion of management, such statements include all adjustments which are considered necessary for 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.

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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.

Actual results may differ materially 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.

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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 from time to time 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 generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits.

The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements.

The Company extends credit to customers in the normal course of business.

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The Company does not require collateral from its customers to secure accounts receivable.

The Company had three and five customers that represented 92 % and 88 %, of the Company's consolidated revenue for the three and six months ended June 30, 2024, respectively;

and three and four customers that represented 76 % and 84 % of the Company's consolidated revenue for the three and six months ended June 30, 2023, respectively.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements.

The Company had three and five customers that represented 90 % and 86 % of the Company's consolidated revenue for the three and nine months ended September 30, 2024, respectively;

and three and four customers that represented 71 % and 73 % of the Company's consolidated revenue for the three and nine months ended September 30, 2023, respectively.

Reclassifications

Certain prior year financial statement amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on our previously reported results of operations or accumulated deficit.

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.

The Company’s Board of Directors and executive management team represents the entity’s chief operating decision makers.

To date, the Company’s executive management team has viewed the Company’s operations as one segment that includes the marketing, sales, and development of medical technologies in the field of cardiac electrophysiology.

As a result, the financial information disclosed materially represents all of the financial information related to the Company’s sole operating segment.

Cash and Cash Equivalents

Cash equivalents primarily represent funds invested in readily available checking and money market accounts.

The Company did not maintain deposits in financial institutions in excess of federally insured limits of $250,000 at June 30, 2024.

The Company maintains deposits in financial institutions in excess of federally insured limits of $250,000, in the amount of $987 thousand at September 30, 2024.

Fair Value Measurements

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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 June 30, 2024

Fair value at September 30, 2024

Cash Equivalents

Money Market fund

Money Market Funds

Royalties payable

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Cash Equivalents

Money Market fund

Money Market Funds

Royalties payable

Total liabilities

The royalties payable have significant 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 measurement of the Level 3 liability.

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 summarizes the significant unobservable inputs used in the fair value measurement of Level 3 instruments as of September 30, 2024 and December 31, 2023:

September 30, 2024

Valuation Technique

Unobservable Input

Royalties Payable

Discounted future cash flows

Revenue adjusted discount rate

December 31, 2023

Valuation Technique

Unobservable Input

Royalties Payable

Discounted future cash flows

Revenue adjusted discount rate

Increases or decreases in the fair value of the royalties payable can result from updates to assumptions, such as changes in discount rates, project cash flows, among other assumptions.

Judgment is used in determining these assumptions as of the initial valuation date and at each subsequent reporting period.

Changes or updates to assumptions could have a material impact on the reported fair value, the change in fair value, and the results of operations in any given period.

Accounts Receivable and Allowances for Credit Losses

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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 allowance for credit losses is based on the probability of future collection under the CECL impairment model in which the Company determines its estimated loss rates 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.

Trade 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 for credit losses, if any.

Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred.

As of June 30, 2024 and December 31, 2023 there is no reserve for expected credit losses within accounts receivable.

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value.

The allowance for credit losses within trade accounts receivable was not material as of September 30, 2024 and December 31, 2023.

Inventories are stated at the lower of cost (determined by the 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.

The Company reduces the carrying value of inventories for those items that are potentially in excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors.

Property and Equipment

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Computer hardware and software

LockeT animation video

VIVO DEMO/Clinical Systems

Furniture and fixtures

Leasehold improvements are depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease.

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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.

The recurring negative cash flows and losses from operating activities indicates a triggering event.

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 June 30, 2024.

The Company concluded there was no impairment as of June 30, 2024.

In accordance with ASC 360, Impairment and Disposals of Long-lived Assets , the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value of the long-lived assets may not be recoverable.

If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded in the Company’s consolidated statements of operations at that date.

The Company concluded there was no impairment as of September 30, 2024.

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.

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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 $ 4.8 and $ 60.9 million recognized during the three and six months ended June 30, 2023, see Note 3, Business Combination and Note 7, Goodwill, for additional details.

There were impairment charges of $ 60.9 million recognized during the nine months ended September 30, 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 Catheter had entered into.

The Company is obligated to pay royalties under various royalty agreements executed by Old Catheter.

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).

Catheter recognizes a liability for future payments to the Noteholders pursuant to the Royalty Right at fair value (the “Royalty Payable”).

The value of the Royalty Payable is an estimate, as future sales of the LockeT product are unknown, and is calculated as Management’s projected sales for LockeT through the end of 2035, multiplied by the royalty rate of 11.82 %, then discounting that amount back to present value.

Jenkins, previously Old Catheter's Chairman of the Board of Directors, 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 royalty equal to 11.82% of net sales of LockeT, commencing on the first commercial sale through December 31, 2035 (see Note 10, Royalties Payable).

The Company recognizes a current liability for royalty fees incurred and payable to the Noteholders based on actual sales of LockeT devices.

The liability is recorded as current portion of royalties payable in the condensed consolidated balance sheet.

The Company further recognizes a liability for future, estimated royalty payments to the Noteholders at fair value, which is recorded as royalties payable in the condensed consolidated balance sheet (the “Royalties Payable”).

The fair value of the Royalties Payable is an estimate that is based on the projected sales of LockeT through the end of 2035.

The projected sales are then multiplied by the royalty rate of 11.82 % and discounted back to their present value using the RADR.

At each reporting date, the fair value of the Royalty Payable is re-measured in connection with any changes to Management’s projections as a change in estimate.

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.

The Company offers product warranties against defects in material and workmanship when properly the products are used for their intended purpose and properly maintained.

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 June 30, 2024 and December 31, 2023, there was no accrued warranty balance.

Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense.

As of September 30, 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 sheets.

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.

The Company evaluates equity or liability classification for freestanding financial instruments, including convertible preferred stock, warrants, and options, pursuant to the guidance under ASC Topic 480 , Distinguishing Liabilities from Equity (“ASC 480”).

The Company classifies as liabilities all freestanding financial instruments that are (i) mandatorily redeemable, (ii) represent an obligation to repurchase the Company’s equity shares by transferring assets, or (iii) represent an unconditional obligation (or conditional obligation if the financial instrument is not an outstanding share) to issue a variable number of shares predominantly based on a fixed monetary amount, variations in something other than the fair value of the Company’s equity shares, or variations inversely related to changes in fair value of the Company’s equity shares.

If a freestanding financial instrument does not represent an outstanding equity share and does not meet liability classification under ASC 480, the Company then assesses whether the freestanding financial instrument is indexed to its own stock and meets equity classification pursuant to ASC 815-40, Derivatives and Hedging (“ASC 815”).

The Company further assesses whether the freestanding financial instruments should be classified as temporary equity.

Freestanding financial instruments that are redeemable for cash or other assets at a fixed or determinable date, at the option of the holder, or upon the occurrence of an event are classified in temporary equity in accordance with ASC 480.

Otherwise, the freestanding financial instruments is classified in 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 principle, the Company applies the following five steps:

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company accounts for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable.

Revenue is measured as the amount of consideration expected to be received in exchange for transferring promised goods or services.

The amount of consideration to be received and revenue recognized may vary due to discounts.

A performance obligation is a promise in a contract to transfer a distinct good or service.

If there are multiple performance obligations in the customer contract, the Company allocates the transaction price in the contract to each performance obligation based on the relative standalone selling price.

Revenue is recognized when performance obligations in the customer contract are satisfied.

This generally occurs when the customer obtains control of a promised good at a point in time or when a customer receives a promised service over time.

Pursuant to ASC 606, the Company applies the following five steps to each customer contract:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Determine the transaction price in the contract

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the Company satisfies a performance obligation

One of the Company’s 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.

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.

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 VIVO System offers 3D cardiac mapping to help localize the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to electrophysiology studies.

Customers are provided with VIVO Positioning Patch Sets, which are custom patches, that are used in conjunction with the VIVO System.

The VIVO Positioning Patch Sets are integral to the functionality of the VIVO System.

The VIVO System, including the VIVO Positioning Patch Sets, represents the Company’s primary performance obligation.

The Company recognizes revenue when physical possession and control of the VIVO System is transferred to the customer upon delivery.

The Company also offers customers software upgrades for the VIVO System, which may be purchased and paid in advance at contract inception.

Software upgrades represent stand-ready services, whereby the Company promises to provide software upgrades to the customer when and as upgrades are available.

Software upgrade services may be offered for initial contract terms of one to multiple years.

Customers have the option to renew terms for software upgrades services at the end of each term.

The software upgrade services represent the Company's second performance obligation, which is recognized evenly over time over the contract term.

The Company invoices the customer 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.

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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.

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

LockeT was launched by the Company in February 2023 and 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.

LockeT is intended to temporarily secure sutures and aid clinicians in locating and removing sutures efficiently.

The LockeT device represents a performance obligation in the customer contract.

The Company recognizes revenue when it transfers control of the LockeT device to the customer, which happens when the Company delivers the product to the customer.

For both LockeT and VIVO System, the Company has elected the practical expedient to expense costs incurred to obtain a contract, rather than recognizing these costs as an asset at the time of occurrence.

Disaggregation of Revenue

The following table summarizes disaggregated product sales by geographic area (in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended

September 30,

Product Sales

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Advertising costs are expensed as incurred and included in selling, general and administrative expenses.

Advertising costs were $ 48 thousand and $ 96 thousand during the three and six months ended June 30, 2024, respectively.

Advertising costs were $ 41 thousand and $ 58 thousand during the three and six months ended June 30, 2023, respectively.

Advertising costs were $ 31 thousand and $ 127 thousand during the three and nine months ended September 30, 2024, respectively.

Advertising costs were $ 309 thousand and $ 914 thousand during the three and nine months ended September 30, 2023, respectively.

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.

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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 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 guidance under ASC Topic 718 , Compensation – Stock Compensation (“ASC 718”).

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 that is a stock option 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.

Stock-based compensation expense for stock options 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.

Stock-based compensation expense for stock options is recognized 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.

If the outcome of such performance condition is not probable or is not met, no stock-based 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.

As a result of the Merger, all unvested Old Catheter stock options were subject to accelerated vesting and 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.

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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 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 an 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.

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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).

Earnings per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines earnings per share for the holders of the Company’s common shares and participating securities.

The Company’s Series A Convertible Preferred Stock, Series X Convertible Preferred Stock, and outstanding warrants contain participating rights in distributions made to common stockholders and, therefore, are participating securities.

The Company did not declare nor pay any dividends nor distributions in the current period.

Furthermore, the participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss.

In addition, common stock equivalent shares (whether or not participating) are excluded from the computation of diluted earnings per share in periods in which they have an anti-dilutive effect on net loss per common share.

Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method and treasury stock method, as applicable.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from warrants, stock options, non-vested restricted stock awards, restricted stock units, Series A Convertible Preferred Stock, and Series X Convertible Preferred Stock were antidilutive (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 and six months ended June 30, 2023 of $ 0 and $ 0.8 million, respectively.

The deemed dividend is added to the net loss in determining the net loss available to common stockholders for the six months ended June 30, 2023.

There was no deemed dividend for the three months ended June 30, 3023 or for the three and six months ended June 30, 2024.

The Company recorded a deemed dividend for the modification of existing warrants and issuance of new warrants during the three and nine months ended September 30, 2023 of $ 0 and $ 0.8 million, respectively.

The deemed dividend is added to the net loss in determining the net loss available to common stockholders for the three and nine months ended September 30, 2023.

There was no deemed dividend for the three and nine months ended September 30, 2024.

Recently Announced Accounting Pronouncements

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Trademark- LockeT

Notwithstanding the above, as described in Note 7, management determined that there were indicators of asset impairment during the period ended June 30, 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 $ 4.8 million during the three months ended June 30, 2023, resulting in a goodwill balance of $ 0 as of June 30, 2023 and a total impairment charge of $ 60.9 million for the six months ended June 30, 2023.

Notwithstanding the above, as described in Note 7, management determined that there were indicators of asset impairment during the nine months ended September 30, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill.

As a result of the impairment analysis in prior periods, the Company recorded an impairment charge of $ 60.9 million for the nine months ended September 30, 2023.

This amount represented the purchase price amount ascribed to goodwill.

Transaction costs incurred in connection with this business combination amounted to approximately $ 0 and $ 1.7 million during the three and six months ended June 30, 2023, respectively.

Transaction costs incurred in connection with this business combination amounted to approximately $ 0 and $ 1.7 million during the three and nine months ended September 30, 2023, respectively.

Pro Forma Financial Information

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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 and six months ended June 30, 2023 is presented in thousands except for the per share data ($ in thousands, except per share data):

Three Months Ended June 30,

Six Months Ended June 30,

The following information for the three and nine months ended September 30, 2023 is presented in thousands except for the per share data (in thousands, except per share data):

Three Months Ended September 30,

Nine Months Ended September 30,

Net loss attributable to common stockholders

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Inventories consisted of the following (in thousands):

June 30, 2024

December 31, 2023

September 30, 2024

Raw materials

Finished goods

There were no charges for inventory obsolescence or allowance recorded during the three and six months ended June 30, 2024 and 2023.

Property and Equipment

There were no charges for inventory obsolescence or allowance recorded during the three and nine months ended September 30, 2024 and 2023.

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

June 30, 2024

December 31, 2023

September 30, 2024

Machinery and equipment

5 unchanged sentences

Property and equipment, net

Depreciation expense was $ 15 thousand and $ 26 thousand for the three and six months ended June 30, 2024, respectively.

Depreciation expense was $ 9 thousand and $ 15 thousand for the three and six months ended June 30, 2023, respectively.

Depreciation expense was $ 19 thousand and $ 45 thousand for the three and nine months ended September 30, 2024, respectively.

Depreciation expense was $ 9 thousand and $ 26 thousand for the three and nine months ended September 30, 2023, respectively.

Intangible Assets

The following table summarizes the Company’s intangible assets as of June 30, 2024 ($ in thousands):

The following table summarizes the Company’s intangible assets as of September 30, 2024 (in thousands):

Estimated Useful Life in Years

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Accumulated Amortization

Net Book Value at June 30, 2024

Net Book Value at September 30, 2024

Developed technology ‐ VIVO

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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 $ 1.0 million for the three and six months ended June 30, 2024, respectively, and $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2023, respectively.

The weighted average remaining amortization period for the Company’s intangible assets as of June 30, 2024, is 12.57 years.

Amortization expense, included within selling, general and administrative expenses, relating to the Company's intangible assets was $ 0.5 million and $ 1.5 million for the three and nine months ended September 30, 2024 and 2023, respectively.

The weighted average remaining amortization period for the Company’s intangible assets as of September 30, 2024, is 12.32 years.

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.

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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.

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 remains as of this date.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

June 30, 2024

December 31, 2023

September 30, 2024

Legal expenses

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As such, the Company derecognized the warranty liability of $ 192 thousand as of December 31, 2023.

As of June 30, 2024 and December 31, 2023, there is no accrued warranty balance.

As of September 30, 2024 and December 31, 2023, the accrued warranty balance was $ 0 .

Notes Payable

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The interest rate on the loan is 8.990 %.

Interest expense on this loan was $ 1 thousand and $ 4 thousand for the three and six months ended June 30, 2024, respectively.

The loan balance was $ 184 thousand as of as December 31, 2023.

The loan balance was paid off in May of 2024 and therefore there is no balance as of June 30, 2024.

Interest expense on this loan was $ 1 thousand and $ 4 thousand for the three and nine months ended September 30, 2024, respectively.

The loan balance was $ 184 thousand as of December 31, 2023.

The loan balance was paid off in May of 2024 and therefore there is no balance as of September 30, 2024.

The Company purchased director and officer liability insurance coverage on September 26, 2024 for $ 293 thousand.

A down payment of $ 44 thousand was made and the remaining balance of $ 249 thousand was financed over 10 months through a short-term financing arrangement with its insurance carrier.

The interest rate on the loan is 9.990 %.

Interest expense on this loan was $ 0 for the three and nine months ending September 30, 2024.

The loan balance was $ 249 thousand as of September 30, 2024.

Short Term Promissory Notes (collectively, the “Related Party Notes”)

On May 30, 2024, David A.

Jenkins, Executive Chair and Chief Executive Officer, loaned $ 500,000 to the Company in exchange for a short term promissory note (the "May Related Party Note").

Jenkins loaned $ 500,000 to the Company in exchange for a short-term promissory note.

On June 25, 2024, an entity controlled by Mr.

Jenkins loaned $ 150,000 to the Company in exchange for a short term promissory note (the "June Related Party Note").

The Related Party Notes have a maturity date of August 30, 2024 , and bear interest at the rate of 8 % per annum.

Jenkins loaned $ 150,000 to the Company in exchange for a short-term promissory note.

On July 1, 2024 and July 18, 2024, the Company entered into two short-term promissory notes with an affiliate of Mr.

Jenkins, where the affiliate loaned $ 250,000 and $ 100,000 , respectively, to the Company in exchange for the notes.

On July 25, 2024, the Company entered into a short-term promissory note with a Trust, of which Mr.

Jenkins’ adult daughter is the trustee, where the Trust loaned $ 500,000 to the Company in exchange for the note.

All of these short-term promissory notes (the “Related Party Notes”) had a maturity date of August 30, 2024 , and bear interest at the rate of 8 % per annum.

On August 23, 2024, the Company entered in the first amendment of the Related Party Notes, which extended the maturity date to January 31, 2026 and increased the interest rate to 12 % per annum after August 31, 2024.

All other terms and conditions remained substantially unchanged.

As part of the amendment, the Company paid down all accrued interest to date of $ 21 thousand.

The first amendment was accounted for as a debt modification in accordance with ASC 470-50, Debt Modifications and Extinguishment (“ASC 470-50”).

Since the modified terms and conditions were not substantially different from the prior terms and conditions, the Company accounted for the debt modification as a continuation of the original debt instrument.

The Company further concluded that the debt modification did not result in any adjustments to the carrying value of the Notes.

The Related Party Notes and the debt evidenced thereby, including all principal and interest, accelerate and become immediately due and payable upon the occurrence of certain customary events of default, including failure to pay amounts owing when due, material breach of representations or warranties by the Company (unless waived by the holder of the Related Party Note or cured within 10 days following notice) and/or certain events involving a discontinuation of the Company’s business or certain types of proceedings involving insolvency, bankruptcy, receivership and the like.

Interest expense on the Related Party Notes was $ 4 thousand for the three and six months ended June 30, 2024.

The balance of the Related Party Notes and accrued interest was $ 654 thousand as of June 30, 2024, $ 4 thousand of which is related to the Interest payable to related parties on the condensed consolidated balance sheets.

Interest expense on the Related Party Notes was $ 33 thousand and $ 36 thousand for the three and nine months ended September 30, 2024, respectively.

The balance of the Related Party Notes and accrued interest was $ 1.5 million as of September 30, 2024, $ 16 thousand of which relates to accrued interest and is recorded under interest payable to related parties on the condensed consolidated balance sheets.

See Note 19, Related Parties for additional details.

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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.

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 on a quarterly basis, commencing upon the first commercial sale through December 31, 2035.

An additional royalty will be paid to the inventor of the LockeT device as detailed in the Royalty Agreement.

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The royalty payments will apply to revenues through December 31, 2033 , then will terminate regardless of whether the full $ 10.0 million has been paid.

The LockeT device had sales during the three and six months ended June 30, 2024, and as such the Company owes the first royalty payment in relation to the Royalty Agreement.

As of June 30, 2024, the Company owes $ 6 thousand in relation to LockeT sales.

The LockeT device had sales during the three and nine months ended September 30, 2024, and as such the Company owes the first royalty payment in relation to the Royalty Agreement.

As of September 30, 2024, the Company owes $ 17 thousand in relation to LockeT sales.

AMIGO System Royalty

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The Company is not actively marketing and selling the AMIGO System.

There was no royalty expense recorded for the three and six months ended June 30, 2024 and 2023 in relation to the AMIGO System.

There was no royalty expense recorded for the three and nine months ended September 30, 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 six months ended June 30, 2024 and 2023 ($ in thousands).

The table below represents the change in fair value of Level 3 royalties payable for the nine months ended September 30, 2024 and 2023 ($ in thousands).

See Note 2, Summary of Significant Accounting Policies, for valuation techniques.

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Change in fair value of royalties payable

Ending Balance, June 30,

For the three and six months ended June 30, 2024 and 2023 operating lease expense and cash paid for leases were as follows:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Ending Balance, September 30,

For the three and nine months ended September 30, 2024 and 2023 operating lease expense and cash paid for leases were as follows:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Operating lease expense

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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 June 30, 2024:

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 September 30, 2024:

Weighted average remaining lease term (in years) - operating leases

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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 term of the lease began on October 1, 2022, is 38 months, and includes two months of free rent 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.

2 unchanged sentences

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.

As a result, beginning at lease inception on October 1, 2022, the Company recognized the lease payments and associated common area maintenance payments as a single lease payment.

New Jersey Office Lease Agreement

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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.

Total rent is $ 1,207 per month through December 31, 2024, and $ 1,267 for the remaining term of the extended lease.

Park City Office Lease Agreement

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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.

Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows (in thousands):

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Present value of future minimum lease payments

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):

Lease right-of-use assets

Operating lease right-of-use assets and lease liabilities for the Company's operating leases were recorded in the condensed consolidated balance sheets as follows:

September 30,

Operating lease right-of-use assets, net

Total lease assets

Current liabilities:

Lease liabilities - current portion

Current portion of operating lease liabilities

Non-current liabilities:

Lease liabilities - net of current portion

Operating lease liabilities

Total lease liabilities

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.

The Company’s Series A Convertible Preferred Stock, Series X Convertible Preferred Stock and 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 June 30, 2024, consisted of Series A convertible preferred stock of 231,412 shares, Series X Convertible Preferred Stock of 1,265,601 shares, warrants of 1,104,218 , stock options of 91,456 , 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 June 30, 2023, consisted of Series A convertible preferred stock of 450,123 shares, Series X convertible preferred stock of 1,267,469 shares, warrants of 1,104,217 , stock options of 21,531 , and restricted stock units of 2 .

Net loss attributable to common stockholders for the six months ended June 30, 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 six months ended June 30, 2023.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at September 30, 2024, consisted of Series X Convertible Preferred Stock of 1,265,601 shares, warrants of 13,170,652 , stock options of 95,813 , and no Series A convertible preferred stock, restricted stock awards or restricted stock units.

Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at September 30, 2023, consisted of Series A convertible preferred stock of 286,125 shares, Series X convertible preferred stock of 1,267,469 shares, warrants of 1,104,215 , stock options of 21,465 , and restricted stock units of 2 .

Net loss attributable to common stockholders for the nine months ended September 30, 2023, consists of net loss, as adjusted for deemed dividends.

Equity Offerings

Warrant Inducement Offer

On January 9, 2023, the Company reduced the exercise price of certain existing warrants (the "Existing Warrants"), exercisable for 33,161 shares of the Company’s common stock held by a certain investor (the “Investor”), with exercise prices ranging from $ 140.00 to $ 5,265 per share to $ 40.00 per share (the "2023 Warrant Repricing").

On January 9, 2023, the Company reduced the exercise price of all existing warrants (the "Existing Warrants"), exercisable for 33,161 shares of the Company’s common stock held by an investor (the “Investor”), with exercise prices ranging from $ 140.00 to $ 5,265 per share to $ 40.00 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 33,161 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 33,161 shares of common stock at an exercise price of $ 40.00 per share.

The Company paid placement agent aggregate cash fees plus other offering costs of approximately $ 0.2 million related to the Inducement Offer, 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 (the "Series E Warrant") to purchase 33,161 shares of common stock at an exercise price of $ 40.00 per share.

The Series E Warrant is exercisable for five years from the date of stockholder approval.

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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 presented a deemed dividend for the modification of Existing Warrants and issuance of the Series E Warrants of $ 0 and $ 0.8 million during the three and six months ended June 30, 2023, respectively.

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 and $ 0.8 million during the three and nine months ended September 30, 2023, respectively.

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:

The warrants, other than the Series E Warrants that 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

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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), without adjusting such price for the reverse stock split, 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 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 tenth of one Series F Warrant and one tenth of one Series G Warrant for each one-tenth of one 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 $ 30.00 and 90% of the 5 day volume weighted average closing price, multiplied by ten in order to reflect the impact of the reverse stock split 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).

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), without adjusting such price for the reverse stock split, each consisting of one tenth of one share of common stock, one tenth of one Series F common stock purchase warrant (“Series F Warrant”), and one tenth of one Series G common stock purchase warrant (“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 tenth of one Series F Warrant and one tenth of one Series G Warrant for each one-tenth of one 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 $ 30.00 and 90% of the 5 day volume weighted average closing price, multiplied by ten in order to reflect the impact of the reverse stock split 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.

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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 sheets as of June 30, 2024.

The accrued placement fee of approximately $ 1.4 million related to the 2022 Offerings is included in accrued expenses in the consolidated balance sheets as of September 30, 2024.

Additionally, the agreement called for the issuance of warrants with the following terms:

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Expected Term (years)

The warrants have not been issued by the Company as of June 30, 2024.

September 2024 Public Offering

On September 3, 2024, in connection with the September Public Offering (see Note 1), the Company sold an aggregate of 805,900 Common Stock Units and 2,773,000 Pre-Funded Warrant Units at a public offering price of $ 1.00 per Common Stock Unit and $ 0.9999 per Pre-Funded Warrant Unit.

The Company received gross proceeds of approximately $ 3.6 million less underwriting discounts and commissions of $ 1.0 million, resulting in net proceeds of $ 2.6 million.

Each Common Stock Unit consists of:

(i) one share of the Company's Common Stock, (ii) a Series H Warrant to purchase one share of Common Stock at an exercise price of $ 1.00 per share that expires six months from the date of issuance, (iii) a Series I Warrant to purchase one share of Common Stock at an exercise price of $ 1.00 per share that expires eighteen months from the date of issuance, and (iv) a Series J Warrant to purchase one share of Common Stock at an exercise price of $ 1.00 per share that expires five years from the date of issuance.

Each Pre-Funded Warrant Unit consists of:

(i) a Pre-Funded Warrant to purchase one share of Common Stock at an exercise price of $ 0.0001 per share with no expiration date, (ii) one Series H Warrant, (iii) one Series I Warrant (iv) and one Series J Warrant.

Pursuant to the Underwriting Agreement, the Company granted the Representative a 45-day Overallotment Option to purchase up to (i) 468,041 additional shares of Common Stock, (ii) 468,041 additional Series H Warrants, (iii) 468,041 additional Series I Warrants, and/or (iv) 468,041 additional Series J Warrants, solely to cover over-allotments.

On August 30, 2024, the Underwriters partially exercised the Overallotment Option to purchase an additional 458,623 shares of Common Stock, 458,623 Series H Warrants, 458,623 Series I Warrants, and 458,623 Series J Warrants, or 458,623 Common Stock Units.

The Common Stock Units issued through the exercise of the Overallotment Option are included in the 805,900 Common Stock Units noted above.

The Overallotment Option expires on October 14, 2024, and is not expected to be exercised.

The remaining balance of the Overallotment Option is not material to the condensed consolidated financial statements as of September 30, 2024.

Furthermore, at the closing date, the Company agreed to deliver warrants to purchase an aggregate number of shares of Common Stock equal to 6% of the shares of Common Stock (i) issued in connection with the September 2024 Public Offering and (ii) issuable upon the exercise of the Pre-Funded Warrants.

Therefore, the Company issued 214,734 warrants to the Representative and its designees (the “Representative Warrants”).

The Representative Warrants are part of the underwriter costs and commissions incurred in connection with the September 2024 Public Offering.

The Representative Warrants may be exercised to purchase one share of Common Stock at an exercise price of $ 1.55 per share and expires five years from the date of issuance.

Each Series H Warrant, Series I Warrant, Series J Warrant (collectively, the “Series Warrants”), and Pre-Funded Warrant is immediately exercisable.

The exercise price of the Series Warrants and Pre-Funded Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s Common Stock.

Subject to limited exceptions, a holder of the Series Warrants will not have the right to exercise any portion of its Series Warrants if the holder (together with such holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99% of the shares of Common Stock then outstanding (the “Beneficial Ownership Limitation”).

Similarly, a holder of the Pre-Funded Warrants has a Beneficial Ownership Limitation of 9.99%.

At the holder’s option, the holder of the Series Warrants may increase the beneficial ownership limitation to 19.99% of the shares of Common Stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.

The Representative Warrants are exercisable after six months from the effective date of the Registration Statement filed by the Company on August 29, 2024.

The Representative Warrants further have a Beneficial Ownership Limitation of 4.99 %, which may be increased to 9.99 % of the shares of Common Stock then outstanding at the option of the Representative.

Any increase in the Beneficial Ownership Limitation will become effective upon 61 days’ prior notice to the Company.

The Company assessed the Series Warrants, Pre-Funded Warrants, and Representative Warrants issued in connection with the September 2024 Public Offering (collectively, the “September 2024 Warrants”) and determined that they do not require liability classification pursuant to ASC 480.

Furthermore, the September 2024 Warrants do not have any net cash settlement provisions that would preclude equity classification under ASC 815-40.

Accordingly, the September 2024 Warrants were recorded to additional paid-in capital in the condensed consolidated balance sheets.

The following table presents the number of common stock warrants outstanding:

Warrants outstanding, December 31, 2023

Warrants outstanding, June 30, 2024

During the three and six months ended June 30, 2024, no warrants were issued, exercised, or expired.

The following table presents the number and type of common stock warrants outstanding, their exercise price, and expiration dates as of June 30, 2024:

( 1,658,000 )

Warrants outstanding, September 30, 2024

As of September 30, 2024, and December 31, 2024, all warrants outstanding are recorded in additional paid-in capital in the condensed consolidated balance sheets.

The following table presents the number and type of common stock warrants outstanding, their exercise price, and expiration dates as of September 30, 2024:

Warrants Outstanding

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March 2023 Series G Warrants

As of June 30, 2024, the warrants issued by the Company had a weighted average exercise price of $ 53.07 .

September 2024 Pre-Funded Warrants

September 2024 Series H Warrants

September 2024 Series I Warrants

September 2024 Series J Warrants

September 2024 Representative Warrants

As of September 30, 2024, the warrants issued by the Company had a weighted average exercise price of $ 5.29 .

Preferred Stock

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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 100 shares of common stock for each share of Series X Convertible Preferred Stock.

Series X Preferred Stock may convert into common stock 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 100 shares of common stock for each share of Series X Convertible Preferred Stock.

Other than dividends payable in shares of Common Stock, Holders of Series X Convertible Preferred Stock will be entitled to receive dividends on shares of Series X 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 Common Stock.

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 $ 32.00 of principal amount.

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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 and prior to June 30, 2024:

The following conversions of Series A Convertible Preferred Stock occurred subsequent to the issuance and prior to September 30, 2024:

Date of Conversion

3 unchanged sentences

January 24, 2024

July 11, 2024

July 22, 2024

July 23, 2024

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

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The shares issued have been registered for resale on an effective registration statement on Form S-1.

After the final conversion on July 23, 2024, the Company had no shares of Series A Convertible Preferred Stock outstanding.

Stock-Based Compensation

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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.

As of September 30, 2024, there are 7 non-statutory stock options outstanding under the 2018 Plan.

Three expire in June 2028 and four expire in January 2030.

2018 Employee Stock Purchase Plan

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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) 23 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 and six months ended June 30, 2024 and 2023, no cash was received from the exercise of purchase rights under the ESPP in each respective period.

As of June 30, 2024, the Company had issued 95 shares of common stock since inception of the ESPP, and no shares were reserved for future issuance.

In April 2024, the Company formally terminated the ESPP.

For the three and nine months ended September 30, 2024 and 2023, no cash was received from the exercise of purchase rights under the ESPP in each respective period.

As of September 30, 2024, the Company had issued 95 shares of common stock since inception of the ESPP, and no shares were reserved for future issuance.

As of December 31, 2023, the Company had issued 95 shares of common stock since inception of the ESPP, and 2 shares were reserved for future issuance.

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Upon adoption of the 2020 Plan, 64 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 June 30, 2024 and December 31, 2023, zero and 54 shares of common stock were reserved for future issuance under the 2020 Plan.

As of September 30, 2024 and December 31, 2023, zero and 54 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.

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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 June 30, 2024 and December 31, 2023, 9,653 and 50,186 shares of common stock were reserved for future issuance pursuant to the 2023 Plan.

As of September 30, 2024 and December 31, 2023, 225,085 and 50,186 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;

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All options were issued to employees and vest at 20% per year for 5 years with an exercise price of $ 4.60 and expiration date of April 24, 2034 .

The 2023 Plan options issued during the six months ended June 30, 2024 were valued at approximately $ 227 thousand using the Black-Scholes model based on the following assumptions on the date of issue:

On July 9, 2024, the Board approved the issuance of a total of 10,000 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 $ 3.50 and expiration date of July 9, 2034 .

The options issued during the three and nine months ended September 30, 2024 were valued at approximately $ 262 thousand using the Black-Scholes model based on the following assumptions on the date of issue:

Non-Employee Director Options Issued January 8, 2024

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Employee Options Issued April 24, 2024

Employee Options Issued July 9, 2024

Risk-free interest rate

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The options were issued on May 1, 2024, the first day of employment and vest at 20% per year for 5 years with an exercise price of $5.321 and an expiration date of May 1, 2034 .

The non-plan options issued during the quarter ended June 30, 2024 were valued at approximately $ 131 thousand using the Black-Scholes model based on the following assumptions on the date of issue:

The non plan options issued were valued at approximately $ 131 thousand using the Black-Scholes model based on the following assumptions on the date of issue:

Non-Plan Options Issued May 1, 2024

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Expected life (in years)

The following is a summary of stock option activity for the six months ended June 30, 2024:

The following is a summary of stock option activity for the nine months ended September 30, 2024:

Stock Options

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Options granted

Canceled/forfeited

Outstanding at June 30, 2024

Vested and expected to vest at June 30, 2024

Exercisable at June 30, 2024

Cancelled/forfeited

Outstanding at September 30, 2024

Vested and expected to vest at September 30, 2024

Exercisable at September 30, 2024

Restricted Stock Units

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All restricted stock awards have been forfeited or vested as of December 31, 2023.

Stock-based compensation expense for the three and six months ended June 30, 2024 was $ 13 thousand and $ 19 thousand respectively, in the Company's condensed consolidated statements of operations.

Stock-based compensation expense for the three and six months ended June 30, 2023 was $( 174 ) thousand and $ 1.2 million respectively, 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 June 30, 2024 was as follows:

Stock-based compensation expense for the three and nine months ended September 30, 2024 was $ 17 thousand and $ 36 thousand, respectively, in selling, general and administrative expenses in the condensed consolidated statements of operations.

Stock-based compensation expense for the three and nine months ended September 30, 2023 was $ 2 thousand and $ 1.2 million respectively, in the Company's condensed consolidated statements of operations.

Unrecognized Expense (in thousands)

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Restricted stock units

The Company recorded no provision or benefit for income tax expense for the three and six months ended June 30, 2024 and 2023.

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 provision for income taxes for interim periods is determined using an estimated annual effective tax rate.

The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.

For the three and nine months ended September 30, 2024 and 2023, the Company did not record any federal or state income tax provision or benefit due to net losses incurred for all periods presented.

The Company’s net deferred tax assets generated mainly from net operating losses are fully offset by a valuation allowance as the Company believes it is not more likely than not that the benefit will be realized.

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.

As of June 30, 2024, the Company has an open sales and use tax audit with California Department of Tax and Fee Administration covering the period from October 1, 2020 through March 31, 2023.

As of September 30, 2024, the Company has an open sales and use tax audit with the California Department of Tax and Fee Administration covering the period from October 1, 2020 through March 31, 2023.

Commitments and Contingencies

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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 June 30, 2024, the Company had no outstanding litigation.

As of September 30, 2024, the Company had no outstanding litigation.

Employee Benefit Plan

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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 and six months ended June 30, 2024 and 2023.

The Company had no expenses related to the matching contributions for the three and nine months ended September 30, 2024 and 2023.

Related Parties

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The options have an exercise price of $ 5.321 per share, vest at 20 % per year for 5 years and expire in May 2034 .

On May 30, 2024, the Company entered into the May Related Party Note (see Note 9, Notes Payable) with Mr.

Jenkins, where Mr.

Jenkins loaned $ 500,000 to the Company in exchange for the Note.

The May Related Party Note has a maturity date of August 30, 2024, and bears interest at the rate of 8 % per annum.

On June 25, 2024, the Company entered into the June Related Party Note (see Note 9, Notes Payable) with an affiliate of Mr.

Jenkins, where the affiliate loaned $ 150,000 to the Company in exchange for the Note.

The June Related Party Note has a maturity date of August 30, 2024 and bears interest at a rate of 8 % per annum.

During the three months ended September 30, 2024, the Company entered into various short-term promissory notes with various related parties (the “Related Party Notes”).

These Related Party Notes had a maturity date of August 30, 2024 and interest rates of 8 % per annum.

On August 23, 2024, the Notes were amended to extend the maturity date to January 31, 2026 and increase the interest rate to 12 % per annum effective August 31, 2024.

See Note 9, Notes Payable for further information.

The related parties and the amounts owed to each related party are summarized in the following table (in thousands):

Related Party

Issuance Date

Principal Amount

Interest Paid

Interest Accrued

David Jenkins

FatBoy Capital

Jenkins Family Charitable Institute

On September 3, 2024, the Jenkins Family Charitable Institute also invested approximately $ 500,000 in the Company’s public offering and received 265,000 shares of common stock;

235,000 pre funded warrants with an exercise price of $ 0.0001 and no expiration date;

500,000 Series H Warrants with an exercise price of $ 1.00 per share that expire on March 3, 2025 ;

500,000 Series I Warrants with an exercise price of $ 1.00 per share that expire on March 3, 2026 ;

and 500,000 Series J Warrants with an exercise price of $ 1.00 per share that expire on September 3, 2029 .

Subsequent Events

2023 Equity Incentive Plan

On July 3, 2024, at the annual meeting of stockholders of the Company, the stockholders of the Company approved an additional 200,000 shares of common stock for issuance pursuant to the Company’s 2023 Equity Incentive Plan.

On July 9, 2024, the Board approved the issuance of a total of 10,000 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 $3.50 and expiration date of July 9, 2034 .

Amendment to the Amended and Restated Certificate of Incorporation

On July 3, 2024, at the annual meeting of stockholders of the Company, the stockholders 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.

The financial statements have been retrospectively adjusted to reflect the reverse stock split of the Company’s common stock for all periods presented.

Issuance of Securities in Private Placement

The Company issued common stock in connection with the following conversions of its Series A Convertible Preferred Stock:

Conversion Date

2024 Warrant Inducement Offer

On October 24, 2024, the Company executed the 2024 Inducement Offer with certain holders of the Existing Warrants.

The Existing Warrants had exercise prices ranging from $ 1.00 to $ 40.00 per share.

Following the closing of the 2024 Inducement Offer, such holders immediately exercised an aggregate of (i) 33,160.8 Series E Warrants, (ii) 499,909.34 Series F Warrants, (iii) 499,909.34 Series G Warrants, (iv) 1,990,000 Series H Warrants, and (v) 2,325,000 Series I Warrants to purchase up to 5.3 million shares of Common Stock at a reduced exercise price of $0.70 per share .

In consideration for the immediate exercise of the Existing Warrants for cash, the Company issued unregistered new Series K Common Stock Purchase Warrants (“Series K Warrants”) to purchase up to a number of shares equal to 200% of the number of shares of Common Stock issued pursuant to the exercise of the Existing Warrants.

The Series K Warrants have an exercise price of $ 0.70 per share, a term of 5.5 years following stockholder approval, and are not exercisable until such approval is obtained.

As additional consideration, the company issued placement agent warrants to purchase up to 320,879 shares of common stock on the same terms as the Series K warrants, except the exercise price is $1.085 per share and have a termination date of October 28, 2029 .

The Company received aggregate gross proceeds of approximately $ 3.7 million in cash from the exercise of the Existing Warrants pursuant to the 2024 Inducement Offer, prior to deducting placement agent fees and offering expenses of $ 0.4 million.

As of the date of the 2024 Inducement Offer, 578,900 Series H and 1,078,900 Series I warrants remained unexercised.

Prior to the repricing and execution of the 2024 Inducement Offer, the Company received additional gross proceeds of approximately $ 1.2 million from the exercise of 1,010,000 Series H Warrants and 175,000 Series I Warrants in accordance with their original terms (as summarized below).

Issuance of Securities from Warrant Exercises

Aside from the common stock issued in connection with the 2024 Warrant Inducement Offer, the Company also issued common stock in connection with the following exercises of warrants (in thousands):

Name of Warrant

Exercise Date

Shares Common Stock Issued

Shares of Series A Convertible Preferred Converted

Each share of Series A Convertible Preferred Stock was convertible into approximately 62.5 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, 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.

After the final conversion on July 23, 2024, the Company had no shares of Series A Convertible Preferred Stock outstanding.

8% Short Term Promissory Notes (collectively, the " Quarter Three Related Party Notes")

On July 1, 2024 and July 18, 2024, the Company entered into two Short-Term Promissory Notes (the “First July Related Party Note" and the "Second July Related Party Note”) with an affiliate of Mr.

Jenkins, where the affiliate loaned $ 250,000 and $ 100,000 , respectively, to the Company in exchange for the Notes.

The Notes have a maturity date of August 30, 2024 and bear interest at a rate of 8 % per annum.

On July 25, 2024, the Company entered into a Short-Term Promissory Note (the “Third July Related Party Note”) with a Trust, of which Mr.

Jenkins’ adult daughter is the trustee, where the Trust loaned $ 500,000 to the Company in exchange for the Note.

The Note has a maturity date of August 30, 2024 and bears interest at a rate of 8 % per annum.

Number of Warrants Exercised

September 2024 Pre-Funded Warrant

September 2024 Series H Warrant

September 2024 Series I Warrant

September 2024 Pre-Funded Warrant

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 1. Financial Statements