What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 114 added, 72 removed, 234 unchanged (44% of the section changed)

11 unchanged sentences

These risks include, but are not limited to, that:

we will be required to raise additional funds to finance our operations and continue as a going concern , and we may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us, our business has a history of losses, will incur additional losses, and may never achieve profitability, we have identified material weaknesses in our internal control over financial reporting and these material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, compliance with Sarbanes-Oxley Act Section 404 could have a material adverse impact on our business, we will not be able to reach profitability unless we are able to achieve our product expansion and growth goals;

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

our ability to obtain CE Mark approval for LockeT is subject to the discretion of EU regulators, and they may require additional information from us or that we conduct additional studies or trials that we may not be able to easily or cost effectively provide or complete, we will be required to raise additional funds to finance our operations and continue as a going concern, and we may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us, our business has a history of losses, will incur additional losses, and may never achieve profitability, we have identified material weaknesses in our internal control over financial reporting and these material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, compliance with Sarbanes-Oxley Act Section 404 could have a material adverse impact on our business, we will not be able to reach profitability unless we are able to achieve our product expansion and growth goals;

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

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

11 unchanged sentences

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.

25 unchanged sentences

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

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

and Europe (“EU”).

We have completed development, received regulatory clearance, and initiated sales of the VIVO System in the U.S., Europe (“EU”) and the Middle East.

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

9 unchanged sentences

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

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

In addition, our newest product is LockeT, a suture retention device.

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

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

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

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

CE Mark approval is expected in the second half of 2024, at which time initial international shipments to distributors will begin.

CE Mark approval is expected in March 2025, at which time initial international shipments to distributors will begin.

In September 2024, we received notification of the issuance of our first LockeT patent in the country of China and we also completed a Middle East distribution agreement for LockeT.

Clinical studies for LockeT began during the year ended December 31, 2023.

2 unchanged sentences

Recent Developments

September 2024 Public Offering

On August 30, 2024, the Company entered into an underwriting agreement to issue and sell in a public offering (i) 347,277 Common Stock Units, priced at a public offering price of $1.00 per unit, with each unit consisting of (a) one share of Common Stock, (b) one warrant to purchase one share of Common Stock at an exercise price of $1.00 per share that expires on the six month anniversary of the date of issuance (a “Series H Warrant”), (c) one warrant to purchase one share of Common Stock at an exercise price of $1.00 per share that expires on the eighteenth month anniversary of the date of issuance (a “Series I Warrant”), and (d) one warrant to purchase one share of Common Stock at an exercise price of $1.00 per share that expires on the five year anniversary of the date of issuance (a “Series J Warrant”), and (ii) 2,773,000 Pre-Funded Warrant Units, priced at a public offering price of $0.9999 per unit, with each unit consisting of (a) one pre-funded warrant to purchase one share of Common Stock at an exercise price of $0.0001 per share that has no expiration date (a “Pre-Funded Warrant”), (b) one Series H Warrant, (c) one Series I Warrant, and (d) one Series J Warrant.

In addition to the securities described above, the Company granted the underwriter 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.

In the aggregate, the Company issued and sold (i) 805,900 Common Stock Units, (ii) 2,773,000 Pre-Funded Warrant Units, and (iii) 214,734 warrants that were issued as part of the underwriter’s compensation, which have an exercise price of $1.55, are not exercisable until March 1, 2025 and expire on August 29, 2029.

The public offering closed on September 3, 2024.

The net proceeds to the Company, after deducting the underwriting discount, commissions, and management fee and offering expenses payable by the Company, were approximately $2.6 million.

Debt Modification

Between May 30, 2024 and July 25, 2024, the Company issued five short-term promissory notes to related parties totaling $1.5 million with an 8% interest rate and a maturity date of August 30, 2024.

On August 23, 2024, the Company amended the promissory 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 notes holders and the contractual interest rate increased to 12% per annum as of the amendment date.

The modified terms and conditions were not substantially different from the original terms and conditions, and the Company applied modification accounting, which resulted in the new carrying amount of the debt being equal to the remaining principal balance of the old debt.

The previously outstanding accrued interest through August 30, 2024 was repaid in accordance with the terms of the amendment.

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

Number of Warrants Exercised

September 2024 Pre Funded

September 2024 Series H

September 2024 Series I

September 2024 Pre-Funded

Reverse Stock Split

6 unchanged sentences

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

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

As of November 2024, the sales force is placed fully in service and ten sales people and three clinical support staff have been hired, along with the new CCO.

Settlement Agreements with the Department of Justice and Participating States

2 unchanged sentences

As a result of the Merger, the Company made payments of $4.7 million and $0.3 million to the DOJ and participating states, respectively, in February 2023.

Warrant Inducement Offer

On January 9, 2023, we reduced the exercise price of certain existing warrants, or 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, or the Warrant Repricing.

In connection with the Warrant Repricing, we entered into a warrant inducement offer letter, or the Inducement Letter, with the Investor pursuant to which it would exercise up to all of the 33,161 Existing Warrants, or the Inducement Offer.

Additional contingent payments may be required in the future if certain revenue milestones are achieved.

However, no liability has been recorded for additional payments based on the Company’s determination that additional future payments are not probable at this time.

Warrant Inducement Offers

On January 9, 2023, we reduced the exercise price of certain 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 to $5,265 per share to $40 per share, or the Warrant Repricing.

In connection with the Warrant Repricing, we entered into a warrant inducement offer letter (the “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 Inducement Letter, we received approximately $1.3 million in gross proceeds.

We 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.

In consideration for exercising the Existing Warrants pursuant to the terms of the Inducement Letter, we issued the Investor a new Series E common stock purchase warrant, or Series E Warrant, to purchase 33,161 shares of common stock at an exercise price of $40.00 per share.

In consideration for exercising the existing warrants pursuant to the terms of the Inducement Letter, we issued the Investor a new Series E common stock purchase warrant (“Series E Warrant”), to purchase 33,161 shares of common stock at an exercise price of $40 per share.

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

2 unchanged sentences

The relative fair values of such amounts were recorded to additional paid-in capital concurrent with the exercise of the existing warrants.

The Company registered the shares of common stock underlying the Series E Warrant for resale in February 2023.

We registered the shares of common stock underlying the Series E Warrant for resale in February 2023.

On October 24, 2024, we 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 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.

We received 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.

Due to beneficial ownership blockers we have issued 2,251,981 shares of common stock and 3,096,000 outstanding pre-funded warrants related to the 2024 Inducement Offer as of November 1, 2024.

The Series K Warrants are not exercisable unless and until we obtain stockholder approval of their exercise.

In connection with the 2024 Inducement Offer, we repriced all outstanding Series H and Series I Warrants to $0.70 per share, including those that were not exercised.

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

Securities Purchase Agreement

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

Pursuant to the Securities Purchase Agreement, on March 23, 2023, the Investor purchased, for an aggregate purchase price of approximately $8.0 million, (a) 497,908 Class A Units at a price of $1.60029 per Class A Unit, each consisting of one tenth of one share of common stock, one tenth of one Series F Common Stock Purchase Warrant, or Series F Warrant, and one tenth of one Series G Common Stock Purchase Warrant, or Series G Warrant, and together with the Series F Warrant, the PIPE Warrants, and (b) 4,501,060 Class B Units at a price of $1,000 per unit, each consisting of one share of a new series of the Company’s preferred stock, designated as Series A Convertible Preferred Stock, par value $0.0001, or the PIPE Preferred Stock, and one tenth of one Series F Warrant and one tenth of one Series G Warrant for each share of the Company’s common stock underlying the PIPE Preferred Stock, each share of which is convertible into approximately 62.5 shares of the Company’s common stock, or the Preferred Conversion Rate.

The closing under the Securities Purchase Agreement and the sale and issuance of the Class A Units and Class B Units (and the issuance of any underlying common stock) was approved at the special Stockholders’ Meeting held March 21, 2023.

We paid placement agent aggregate cash fees plus other offering costs of approximately $0.2 million related to the Inducement Offer, resulting in net proceeds of $1.1 million.

The PIPE Warrants are exercisable at an exercise price of $30 per share, subject to adjustments as provided under the terms of the PIPE Warrants.

The PIPE Warrants are exercisable at any time until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99%, or the Maximum Percentage, of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99%.

The PIPE Warrants are exercisable at any time until the expiration thereof, except that the PIPE Warrants cannot be exercised if, after giving effect thereto, the purchaser would beneficially own more than 4.99% (the “Maximum Percentage”), of the outstanding shares of common stock of the Company, which Maximum Percentage may be increased or decreased by the purchaser with written notice to the Company to any other percentage specified not in excess of 9.99%.

The Series F Warrants have a term of two years from the date of stockholder approval, and the Series G Warrants have a term of six years from the date of stockholder approval.

12 unchanged sentences

Conversion of Series X Convertible Preferred Stock

On March 21, 2023, the Company held a special meeting of stockholders (the “Stockholders’ Meeting”), at which the stockholders approved, among other things, the issuance of 199,359 shares of common stock upon conversion of 1,993.581 shares of Series X Convertible Preferred Stock which were issued upon the closing of the Merger (see Note 3, Business Combination of our accompanying unaudited consolidated financial statements).

On March 23, 2023, the Company issued 197,491 shares of common stock upon the conversion of 1,974.905 shares of Series X Convertible Preferred Stock.

On October 24, 2023, the remaining 1,868 shares of common stock were issued upon the conversion of 18.676 shares of Series X Convertible Preferred Stock.

The remaining 12,656.011 shares of Series X Convertible Preferred Stock are expected to remain outstanding until at least July 9, 2024, and will convert thereafter up to 1,265,601 shares of common stock, only if the Company meets the initial listing standards of the NYSE American or another national securities exchange or is delisted from the NYSE American.

As of September 30, 2024, 12,656.011 shares of Series X Convertible Preferred Stock remain outstanding.

These shares will convert up to 1,265,601 shares of common stock, only if the Company meets the initial listing standards of the NYSE American or another national securities exchange or is delisted from the NYSE American.

Issuance of Securities upon Conversion of Series A Preferred

5 unchanged sentences

All series A Convertible Preferred Stock has been converted and no shares are outstanding subsequent to the last conversion on July 24, 2024.

Adoption of 2023 Equity Incentive Plan

2023 Equity Incentive Plan

On July 11, 2023, we held an Annual Meeting where our stockholders approved the 2023 Equity Incentive Plan (“2023 Plan”) that authorizes us to grant options, restricted stock and other equity-based awards.

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

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

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

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

As of September 30, 2024, options to purchase an aggregate of 53,709 shares were outstanding and 225,085 shares remain available for grant under the 2023 Plan.

The number of shares available for grant under the 2023 Plan also includes a quarterly increase commencing on September 1, 2023 by an amount equal to the lesser of (i) 10% of the number equal to the number of shares of common stock outstanding on the applicable adjustment date less the number of shares of common stock outstanding at the beginning of the fiscal quarter immediately preceding the adjustment date, but if such number is a negative number, then the increase will be zero;

or (ii) such lesser number of shares as may be determined by the Board.

Components of our Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

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

14 unchanged sentences

We invoice customers who pay for software upgrades in advance in conjunction with the invoice for the delivery of the VIVO System, and subsequent renewals of software upgrades are invoiced at the inception of the term.

Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under ASC 606.

Revenue for these stand-ready services is recognized evenly over the term of the upgrade period, consistently with similar stand-ready services under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

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.

1 unchanged sentence

Our second primary product is LockeT.

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

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

We recognize sales of LockeT at the point in time that the product is delivered to the customer.

We are a business that has operations within multiple countries.

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

During the three and nine months ended September 30, 2024, approximately 35% and 52%, respectively, of our sales were derived from customers outside the United States.

Cost of Revenues

2 unchanged sentences

Selling, general and administrative ("SG&A"), expenses consist of employee-related costs, including salaries, benefits and stock-based compensation expenses.

Other SG&A expenses include amortization of intangible assets and accretion of royalties payable acquired in the Merger (for the three months ended March 31, 2023), professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses and facility-related expenses.

Other SG&A expenses include amortization of intangible assets, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses and facility-related expenses.

Research and Development Expenses

Research and development ("R&D"), expenses are expensed as incurred and include the following:

research grants;

research grants paid to other parties;

product development;

2 unchanged sentences

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

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

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenues

1 unchanged sentence

Research and development expenses

Impairment charges

Loss on impairment of goodwill

Change in fair value of royalties payable

Other income, net (1)

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

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

Constitutes the operating activities within other income, net, except for the change in fair value of royalties payable component which is presented separately.

The decrease in revenues of approximately $37 thousand and $43 thousand for the three and nine months ended September 30, 2024 as compared to the corresponding periods in the prior year was due to lower product sales of the VIVO System products that was partially offset by our first LockeT product sales in 2024.

LockeT sales for the three and nine months ended September 30, 2024 were approximately $62 thousand and $100 thousand.

The decrease in VIVO System product sales was caused mainly by on hospital, who accounted for the most VIVO disposable sales in 2023 and place a large order in late 2023.

Therefore, this hospital did not need to place additional orders prior to September 30, 2024, despite regular use of the product.

In October 2024, this hospital placed an order of disposable VIVO patches totaling $30 thousand.

Cost of Revenues

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

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

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

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

The increase in cost of revenues of approximately $4 thousand for the three months ended September 30, 2024 as compared to the corresponding period in the prior year was due to order fulfillment charges that are now being incurred for LockeT.

The increase in cost of revenues of approximately $8 thousand for the nine months ended September 30, 2024 as compared to the corresponding period in the prior year was due to order fulfillment charges that are now being incurred for LockeT, offset by the lower cost of revenues of the VIVO Positioning Patches.

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

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

Selling, General and Administrative Expenses

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

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

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

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

The increase in selling, general and administrative expenses of approximately $0.1 million for the three months ended September 30, 2024 as compared to the corresponding period in the prior year was due primarily to an increase in salaries and benefits of $0.6 million relating to the Company hiring additional sales force and a CCO, partially offset by a decrease in professional accounting, consulting, investor relations fees, and insurance services totaling $0.5 million.

The decrease in selling, general and administrative expenses of approximately $6.1 million for the nine months ended September 30, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in legal fees of $2.1 million and a decrease in professional accounting fees of $1.1 million that were primarily incurred in connection with the Merger in 2023.

Further, there was a decrease in salaries and benefits of $1.1 million, resulting from a $1.7 million decrease in costs related to the Company's former Chief Executive Officer’s compensation, partially offset by a $0.6 increase in salaries and benefits for increasing other departmental headcount.

Additionally, the decrease in selling, general and administrative expenses was impacted by a decrease in stock based compensation of $1.2 million relating to the one time stock compensation for Old Catheter stock options assumed in the Merger during 2023, an additional decrease of approximately $0.6 million in other consulting services, as a result of certain efforts being absorbed by internal employees, lower investor relations fees as a result of fewer 2024 year to date special stockholder meetings relative to the year to date 2023 period, and lower insurance premiums during the 2024 period.

Research and Development Expenses

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

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

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

Impairment Charges

The decrease in research and development expenses of approximately $49 thousand for the three months ended September 30, 2024 as compared to the corresponding period in the prior year was due primarily to a decrease in regulatory affairs related expenditures, product development costs, and clinical studies, as to which $89 thousand was incurred, partially offset by an increase of $40 thousand in consulting fees.

The decrease in research and development expenses of approximately $0.3 million for the nine months ended September 30, 2024 as compared to the corresponding period in the prior year was primarily due to a decrease in salaries and benefits of $0.1 million, a decrease in product development costs of $0.1 million, and a decrease in regulatory affairs related expenditures of $0.1 million, partially offset by an increase in professional fees of $0.1 million.

The net decreases were primarily the result of the discontinuation of the historical products of the Company that were previously under development.

Loss on Impairment of Goodwill

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

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

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

As a result of the Merger with Old Catheter the Company recognized $60.9 million of goodwill.

Due to a sustained decrease in our share price during 2023, we concluded that in accordance with ASC 350 a triggering event occurred indicating that potential impairment exists that required us to assess if impairment during 2023.

In accordance with ASC 350 we performed a quantitative goodwill impairment test, which resulted in the carrying amount of the reporting unit exceeding its fair value, indicating that the goodwill of the reporting unit was impaired.

We utilized a combination of an income and market approach to assess the fair value of the reporting unit as of March 31, 2023 and June 30, 2023.

We utilized a combination of an income and market approach to assess the fair value of the reporting unit during 2023.

The income approach considered the discounted cash flow model, considering projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions while the guideline public company market approach considered marketplace earnings multiples from within a peer public company group.

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

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

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

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

We recorded the impairment charge of $0.0 million and $60.9 million for the three and nine months ended September 30, 2023 within loss on impairment of goodwill in the consolidated statement of operations.

There was no remaining goodwill balance as of December 31, 2023.

Change in Fair Value of Royalties Payable

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

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

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

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

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

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

At September 30, 2024, the discount rate was 20.0%.

The change in fair value of the royalties payable for the three and nine months ended September 30, 2024 as compared to the corresponding periods in the prior year was a decrease of $1.9 million and $8.2 million, respectively.

The change between the three and nine months ended September 30, 2024 and 2023 is driven by the change in fair value of the royalties payable.

Other Income, Net

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

The decrease in other income (expense), net of approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2024, respectively, as compared to the corresponding periods in the prior year was primarily due to a decrease in investment income.

Liquidity and Capital Resources

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

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

As of September 30, 2024, we had cash and cash equivalents of approximately $1.3 million and an accumulated deficit of approximately $286.7 million.

For the nine months ended September 30, 2024, net cash used from operating activities was approximately $6.4 million.

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

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

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

We received a total of $1.5 million of loans in Q2 and Q3 2024 that will become due and payable on January 31, 2026.

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

1 unchanged sentence

Following the Merger with Old Catheter, we further reduced staff and other costs while assuming the operating costs of Old Catheter.

Since the first quarter of 2024, we’ve begun to rejuvenate our sales force and hired a CCO.

We will continue to monitor our operating costs and seek to reduce our current liabilities.

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

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

We believe that our current cash on hand of $4.4 million as of November 1, 2024 will not be sufficient to fund our operations through the end of November 2025, including without limitation, to repay our outstanding short-term notes that will become due and payable on January 31, 2026.

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

2 unchanged sentences

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

As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the unaudited condensed consolidated financial statements for the quarter ended June 30, 2024 are issued.

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

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

For the Six Months Ended June 30,

Cash Flows for the Nine Months Ended September 30, 2024 ($ in thousands)

For the Nine Months Ended September 30,

Net cash provided by (used in):

4 unchanged sentences

Net Cash Used in Operating Activities

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

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

During the nine months ended September 30, 2024, net cash used in operating activities of $6.4 million primarily consisted of a net loss of $11.0 million, partially offset by depreciation and amortization of $1.6 million, a change in fair value of royalties payable of $2.8 million, and an increase in non-cash changes in operating assets and liabilities of $0.2 million.

During the nine months ended September 30, 2023, net cash used in operating activities of $18.7 million primarily consisted of a net loss of $69.9 million, a decrease in non-cash changes in operating assets and liabilities of $7.2 million, partially offset by non-cash expenses of $58.5 million, consisting primarily of a loss on impairment of goodwill of $60.9 million, non-cash stock-based compensation of $1.2 million, depreciation and amortization of $1.6 million, offset by a change in fair value of royalties payable of 5.3 million.

Net Cash Used in Investing Activities

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

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

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

During the nine months ended September 30, 2023, net cash used in investing activities of $43 thousand consisted of purchases of property and equipment of approximately $58 thousand, offset by proceeds from cash acquired as part of the Merger of approximately $15 thousand.

Net Cash Provided by Financing Activities

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

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

During the nine months ended September 30, 2024, net cash provided by financing activities of $4.2 million primarily consisting of proceeds from issuance of common stock and warrants of $2.6 million, proceeds from notes payable from related parties of $1.5 million, proceeds from notes payable of $0.3 million, partially offset by payments on notes payable of $0.2 million.

The Recent Developments section describes our material financing activities that have occurred subsequent to September 30, 2024.

During the nine months ended September 30, 2023, net cash provided by financing activities of $8.5 million, consisted of cash proceeds from the private placement of $8.0 million, proceeds from issuance of common stock and warrants of $0.2 million and proceeds from the exercise of warrants of $1.3 million, offset by the payment of offering costs of $0.6 million, the payment of costs related to the warrant repricing of $0.2 million and the payment of convertible promissory notes of $0.3 million.

Off-Balance Sheet Arrangements

6 unchanged sentences

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

We regularly evaluate estimates and assumptions related to business combinations, including the determination of the purchase price and related allocations to the fair value of assets acquired and liabilities assumed, provisions for legal contingencies, income taxes, deferred income tax, asset valuation allowances, valuation of warrant liabilities, share based compensation and revenues.

We regularly evaluate estimates and assumptions related to business combinations, including the determination of the purchase price and related allocations to the fair value of assets acquired and liabilities assumed, provisions for legal contingencies, income taxes, deferred income tax asset valuation allowances, valuation of warranties liabilities, royalties payable, share based compensation and revenues.

Our estimates are based on current facts, historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

43 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis