Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40545

CVRx, Inc.

(Exact name of registrant as specified in its charter)

Delaware

41-1983744

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9201 West Broadway Avenue

Suite 650

Minneapolis, MN 55445

(Address of Principal Executive Offices)

(763) 416-2840

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock,

par value $0.01 per share

CVRX

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 25, 2024, there were 24,263,663 shares of the registrant’s common stock, par value $0.01 per share outstanding.

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TABLE OF CONTENTS


`
		Page

Part I	Financial Information

Item 1.	Financial Statements	5

	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (Unaudited)	5

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II	Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

Exhibit Index

Signatures

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CVRx, Inc.

Quarterly Report on Form 10-Q

For the quarterly period ended September 30, 2024

Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding our future results of operations and financial position, business strategy, clinical trial results, prospective products, product approvals, research and development costs, timing and likelihood of success, and the plans and objectives of management for future operations.

In some cases, you can identify forward-looking statements by terms such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expect,’’ ‘‘plan,’’ ‘‘anticipate,’’ ‘‘could,’’ ‘‘intend,’’ ‘‘target,’’ ‘‘project,’’ ‘‘contemplate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘predict,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including, but not limited to, the important factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which are summarized below, as updated in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as updated in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include, but are not limited to, the following:

●

we have a history of significant losses, which we expect to continue, and we may not be able to achieve or sustain profitability;

●

our principal stockholders, management, and directors (two of whom are affiliated with our principal stockholders) own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval;

●

we have a limited history operating as a commercial company and are highly dependent on a single product, Barostim, and the failure to increase market acceptance in the U.S. for Barostim would negatively impact our business, liquidity and results of operations;

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●

we have limited commercial sales experience marketing and selling Barostim, and if we are unable to continue to maintain and grow sales and marketing capabilities, we will be unable to generate sustained and increasing product revenue;

●

we must continue to demonstrate to physicians and patients the merits of Barostim;

●

if third-party payers do not provide adequate coverage and reimbursement for the use of Barostim, our revenue will be negatively impacted;

●

our industry is highly competitive; if our competitors, many of which are large, well-established companies with substantially greater resources than us and have a long history of competing in the heart failure market, are better able to develop and market products that are safer, more effective, less costly, easier to use or otherwise more attractive than Barostim, our business will be adversely impacted;

●

if we fail to receive access to hospitals, our sales may decrease;

●

we are dependent upon third-party manufacturers and suppliers, and in some cases a limited number of suppliers, making us vulnerable to supply shortages, loss or degradation in performance of the suppliers, price fluctuations and ongoing supply chain disruptions, which could harm our business;

●

manufacturing risks may adversely affect our ability to manufacture our product and could reduce our gross margin and profitability;

●

a pandemic, epidemic or outbreak of an infectious disease in the U.S. or worldwide could adversely affect our business;

●

we may face product liability claims that could be costly, divert management’s attention and harm our reputation;

●

we may in the future become involved in lawsuits to protect or enforce our intellectual property or defend ourselves against intellectual property disputes, which could be expensive, time consuming and ultimately unsuccessful, and could result in the diversion of significant resources, thereby hindering our ability to effectively commercialize our existing or future products;

●

if we fail to retain our key executives or recruit and hire new employees, our operations and financial results may be adversely affected while we attract other highly qualified personnel; and

●

we will continue to obtain long-term clinical data regarding the safety and effectiveness of our products, which could impact future adoption and regulatory approvals.

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

CVRx, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)


	September 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	100,161	$	90,569
Accounts receivable, net of allowances of $522 and $508, respectively		9,033		7,551
Inventory		11,892		10,983
Prepaid expenses and other current assets		2,786		2,987
Total current assets		123,872		112,090
Property and equipment, net		2,631		1,763
Operating lease right-of-use asset		1,144		1,349
Other non-current assets		26		27
Total assets	$	127,673	$	115,229
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,276	$	1,884
Accrued expenses		7,671		5,980
Total current liabilities		10,947		7,864
Long-term debt		49,214		29,222
Operating lease liability, non-current portion		951		1,160
Other long-term liabilities		1,378		1,036
Total liabilities		62,490		39,282
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 authorized as of September 30, 2024 and December 31, 2023; 24,203,658 and 20,879,199 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		242		209
Additional paid-in capital		591,844		553,326
Accumulated deficit		(526,695)		(477,381)
Accumulated other comprehensive loss		(208)		(207)
Total stockholders’ equity		65,183		75,947
Total liabilities and stockholders’ equity	$	127,673	$	115,229

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

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CVRx, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenue	$	13,373	$	10,511	$	35,950	$	27,990
Cost of goods sold		2,248		1,691		5,763		4,536
Gross profit		11,125		8,820		30,187		23,454
Operating expenses:
Research and development		2,504		2,696		8,326		9,392
Selling, general and administrative		21,632		15,652		71,077		47,504
Total operating expenses		24,136		18,348		79,403		56,896
Loss from operations		(13,011)		(9,528)		(49,216)		(33,442)
Interest expense		(958)		(499)		(2,877)		(1,220)
Other income, net		917		1,056		2,905		2,734
Loss before income taxes		(13,052)		(8,971)		(49,188)		(31,928)
Provision for income taxes		(47)		(40)		(126)		(108)
Net loss		(13,099)		(9,011)		(49,314)		(32,036)
Cumulative translation adjustment		2		(21)		(1)		(1)
Comprehensive loss	$	(13,097)	$	(9,032)	$	(49,315)	$	(32,037)
Net loss per share, basic and diluted	$	(0.57)	$	(0.43)	$	(2.25)	$	(1.55)
Weighted-average common shares used to compute net loss per share, basic and diluted		22,783,337		20,801,350		21,884,588		20,730,024

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

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CVRx, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)


								Accumulated
				Additional				other		Total
	Common stock			paid-in		Accumulated		comprehensive		stockholders’
	Shares		Amount	capital		deficit		loss		equity
Balances as of June 30, 2024	21,712,357	$	217	$	568,837	$	(513,596)	$	(210)	$	55,248
Exercise of stock options	132,526		1		727		—		—		728
Employee stock compensation	—		—		2,680		—		—		2,680
Issuance of common stock	2,358,775		24		19,600		—		—		19,624
Net loss for the three months ended September 30, 2024	—		—		—		(13,099)		—		(13,099)
Cumulative translation adjustment	—		—		—		—		2		2
Balances as of September 30, 2024	24,203,658	$	242	$	591,844	$	(526,695)	$	(208)	$	65,183

Balances as of June 30, 2023	20,750,910	$	208	$	549,150	$	(459,207)	$	(187)	$	89,964
Exercise of stock options	62,702		—		363		—		—		363
Employee stock compensation	—		—		1,532		—		—		1,532
Net loss for the three months ended September 30, 2023	—		—		—		(9,011)		—		(9,011)
Cumulative translation adjustment	—		—		—		—		(21)		(21)
Balances as of September 30, 2023	20,813,612	$	208	$	551,045	$	(468,218)	$	(208)	$	82,827


								Accumulated
				Additional				other		Total
	Common stock			paid-in		Accumulated		comprehensive		stockholders’
	Shares		Amount	capital		deficit		loss		equity
Balances as of December 31, 2023	20,879,199	$	209	$	553,326	$	(477,381)	$	(207)	$	75,947
Exercise of stock options	298,513		3		1,607		—		—		1,610
Proceeds from Employee Stock Purchase Plan	39,807		—		406		—		—		406
Employee stock compensation	—		—		16,365		—		—		16,365
Issuance of common stock	2,382,139		24		20,146		—		—		20,170
Issuance of common stock upon net exercise of common warrants	604,000		6		(6)		—		—		—
Net loss for the nine months ended September 30, 2024	—		—		—		(49,314)		—		(49,314)
Cumulative translation adjustment	—		—		—		—		(1)		(1)
Balances as of September 30, 2024	24,203,658	$	242	$	591,844	$	(526,695)	$	(208)	$	65,183

Balances as of December 31, 2022	20,663,736	$	207	$	545,362	$	(436,182)	$	(207)	$	109,180
Exercise of stock options	115,455		1		518		—		—		519
Proceeds from Employee Stock Purchase Plan	34,421		—		452		—		—		452
Employee stock compensation	—		—		4,713		—		—		4,713
Net loss for the nine months ended September 30, 2023	—		—		—		(32,036)		—		(32,036)
Cumulative translation adjustment	—		—		—		—		(1)		(1)
Balances as of September 30, 2023	20,813,612	$	208	$	551,045	$	(468,218)	$	(208)	$	82,827

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

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CVRx, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine months ended
	September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(49,314)	$	(32,036)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		16,365		4,713
Depreciation of property and equipment		441		393
Loss on disposal of equipment		—		4
Amortization of deferred financing costs and loan discount		142		114
Changes in operating assets and liabilities:
Accounts receivable		(1,482)		(868)
Inventory		(909)		(3,930)
Prepaid expenses and other current assets		242		902
Accounts payable		1,392		(586)
Accrued expenses		1,987		112
Net cash used in operating activities		(31,136)		(31,182)
Cash flows from investing activities:
Purchase of property and equipment		(1,309)		(422)
Net cash used in investing activities		(1,309)		(422)
Cash flows from financing activities:
Proceeds from the exercise of common stock options		1,610		519
Proceeds from Employee Stock Purchase Plan		406		452
Proceeds from the issuance of common stock		20,170		—
Proceeds from debt financing		20,000		7,500
Debt financing costs		(150)		(67)
Net cash provided by financing activities		42,036		8,404
Effect of currency exchange on cash and cash equivalents		1		(1)
Net change in cash and cash equivalents		9,592		(23,201)
Cash and cash equivalents at beginning of period		90,569		106,194
Cash and cash equivalents at end of period	$	100,161	$	82,993
Supplemental Information:
Cash paid for interest	$	2,456	$	979
Cash paid for income taxes	$	—	$	4

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

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CVRx, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Business organization

CVRx, Inc. (the “Company”) was incorporated in Delaware and is headquartered in Minneapolis, Minnesota. The Company has developed and is marketing a medical device, Barostim, for heart failure (“HF”) and resistant hypertension. The Company is focused on the sale of its product in the U.S. and Europe.

Management expects that operating losses and negative cash flows from operations could continue in the foreseeable future. There is no assurance that the Company will generate sufficient product sales to produce positive earnings or cash flows.

2.	Summary of significant accounting policies

Statement presentation and basis of consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial statements. In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the Company’s statements of financial position, results of operations, and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole or any other future period.

The condensed consolidated financial statements include the accounts of CVRx, Inc., its wholly owned subsidiary, CVRx Switzerland LLC, and its sales branch in Italy, which was closed during 2023. All intercompany balances and transactions have been eliminated in consolidation.

JOBS Act accounting election

We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

Use of estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. As of September 30, 2024 and December 31, 2023, cash equivalents consisted of money market funds, which are stated at cost and approximate fair value. Additionally, as of September 30, 2024 and December 31, 2023, a majority of our cash and cash equivalents were maintained with two financial institutions in the U.S., and our current deposits are likely in excess of insured limits.

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Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Customer credit terms are established prior to shipment with the standard generally being net 30 days. We evaluate the collectability of our accounts receivable based on known collection risks and historical experience. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us, we record a specific allowance for bad debts against amounts due to reduce the carrying amount of accounts receivable to the amount we reasonably believe will be collected.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We regularly review inventory quantities in consideration of actual loss experiences, projected future demand and remaining shelf life to record a provision for excess and obsolete inventory when appropriate.

Leases

Operating leases are included in operating lease right-of-use (“ROU”) asset, accrued expenses, and operating lease liability – non-current portion in our balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We used the incremental borrowing rate based on information readily available at the time of recognition to determine the present value of the lease payments. The determination of our incremental borrowing rate requires management judgement based on information available at lease commencement.

Revenue recognition

We sell our products primarily through a direct sales force and to a lesser extent through a combination of sales agents and independent distributors. Our revenue consists primarily of the sale of our Barostim, which consists of two implantable components: a pulse generator and a stimulation lead.

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services it transfers to the customer. We recognize net revenue on product sales, adjusted for any applicable estimates of variable consideration, when the customer obtains control of our product, which generally occurs at a point in time upon delivery based on the contractual shipping terms of a contract. Our contracts have a single performance obligation, and our payment terms with customers are generally between 30 and 90 days. Variable consideration related to certain customer rebates is estimated based on the amounts expected to be paid under the agreement with the customer.

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Stock-Based Compensation

We recognize equity-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all equity-based compensation awards to employees and non-employee directors, including grants of restricted shares and stock options, to be recognized as expense in the statements of operations and comprehensive loss based on their grant date fair values. We estimate the grant date fair value of stock options using the Black-Scholes option pricing model. We account for forfeitures as they occur. We expense the fair value of our equity-based compensation awards granted to employees on a straight-line basis over the associated service period, which is generally the period in which the related services are received.

Recent accounting pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public companies to disclose for each reportable segment the significant expense categories and amounts for such expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. This ASU will be effective for our annual period ended December 31, 2024. We are currently evaluating the effect of this new guidance on our condensed consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2023. This ASU will be effective for our annual period ended December 31, 2024. We are evaluating the impact of this new guidance on our income tax disclosures.

3.	Selected balance sheet information

Inventory consists of the following at:


	September 30,		December 31,
(in thousands)	2024		2023
Raw material	$	6,531	$	4,714
Work-in-process		280		654
Finished goods		5,081		5,615
	$	11,892	$	10,983

Property and equipment, net consists of the following at:


	September 30,		December 31,
(in thousands)	2024		2023
Office furniture and equipment	$	489	$	402
Lab equipment		2,835		2,721
Computer equipment and software		972		776
Leasehold improvements		543		98
Capital equipment in process		1,021		554
		5,860		4,551
Less: Accumulated depreciation and amortization		3,229		2,788
	$	2,631	$	1,763

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Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Depreciation expense was $169,000 and $137,000 for the three months ended September 30, 2024 and 2023, respectively, and $441,000 and $393,000 for the nine months ended September 30, 2024 and 2023, respectively.

Accrued expenses consist of the following at:


	September 30,		December 31,
(in thousands)	2024		2023
Bonuses	$	2,982	$	3,335
Paid time off		931		770
401(k) match		876		—
Customer rebates		633		411
Accrued interest payable		276		220
Operating lease liability, current portion		275		231
Employee stock purchase plan		274		—
Clinical trial and other professional fees		205		277
Taxes		167		125
Other		1,052		611
	$	7,671	$	5,980

4. Debt

Innovatus Loan Agreement

On October 31, 2022, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Innovatus Life Sciences Fund I, LP, as the collateral agent and a lender, allowing us to borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of term loans. On the closing date, we borrowed the minimum amount of $7.5 million under the Loan Agreement. On March 10, 2023, we borrowed the $7.5 million remaining under the first tranche of the Loan Agreement. On December 15, 2023, we borrowed an additional $15.0 million under the second tranche of the Loan Agreement. On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement. The Loan Agreement initially requires interest only payments through November 2027, followed by three monthly principal and interest payments. A final payment of $2.3 million, equal to 4.5% of the original borrowed principal, is due in January 2028. The term loans advanced pursuant to the Loan Agreement (collectively, the “Term Loans”) bear interest at a floating rate per annum equal to the sum of (a) the greater of (i) the prime rate and (ii) 5.50% plus (b) 2.65%. The Term Loans are secured by substantially all of our personal property. A performance covenant took effect upon the third tranche funding, requiring that we achieve 50% of the trailing twelve months revenue target set in the Board-approved revenue plan in effect for such period. The Loan Agreement requires the payment of certain penalties if the Term Loans are paid off prior to maturity for any reason, including pursuant to an acceleration clause, and includes various restrictive covenants, including a restriction on the payment of dividends or making other distributions or payments on our capital stock, subject to limited exceptions. We were in compliance with these covenants as of September 30, 2024.

In connection with the Loan Agreement, we recorded $1.1 million of debt issuance costs and discounts as a reduction of long-term debt.

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The annual principal maturities of debt under the Loan Agreement are as follows:


	September 30,
(in thousands)	2024
2024	$	—
2025		—
2026		—
2027		33,333
2028		16,667
		50,000
Less: Unamortized debt costs and discounts		(786)
Long-term debt	$	49,214

5. Leases

We lease 31,505 square feet of office space in Minneapolis, Minnesota, which houses our principal executive offices and our manufacturing facility. We lease this space under an operating lease agreement that commenced December 1, 2008, and was scheduled to expire August 31, 2024. On April 21, 2023, we extended the operating lease for our office space in Minneapolis, Minnesota for an additional 49 consecutive months through August 31, 2028. On November 7, 2023, we expanded our existing office space with the addition of 7,615 square feet of property adjacent to our principal executive offices and our manufacturing facility. The term on this expanded property is for 57 consecutive months that will run concurrently with the term on the existing lease. We intend to add new facilities as we grow, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations. Our operating lease agreement includes an option to renew for one additional period of three years. The exercise of the lease renewal option is at our sole discretion and was not included in the lease term for the calculation of the ROU asset and lease liability, as it is not reasonably certain of exercise.

In addition to base rent, we also pay our proportionate share of operating expenses, as defined in the lease. These payments are made monthly and are adjusted annually to reflect actual charges incurred for operating expenses, such as common area maintenance, taxes and insurance.

The following table presents the lease balances within the condensed consolidated balance sheets:


	September 30,		December 31,
(in thousands)	2024		2023
Right-of-use assets:
Operating lease right-of-use asset	$	1,144	$	1,349
Operating lease liabilities:
Accrued expenses		275		231
Operating lease liability, non-current portion		951		1,160
Total operating lease liabilities	$	1,226	$	1,391

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Maturities of our lease liability for our operating lease are as follows as of September 30, 2024:


	September 30,
(in thousands)	2024
2024	$	86
2025		350
2026		362
2027		374
2028		223
Total undiscounted lease payments		1,395
Less: imputed interest		(169)
Present value of lease liability	$	1,226

As of September 30, 2024, the remaining lease term was 3.9 years and the weighted average discount rate was 6.7%. The operating cash outflows from our operating lease were $0.4 million and $0.3 million for the nine months ended September 30, 2024 and 2023, respectively.

6.	Stockholders’ equity

Common Stock Warrants

We had common stock warrants exercisable for 103,349 shares of common stock upon conversion at a weighted average exercise price of $12.92 per share and 716,131 shares of common stock upon conversion at a weighted average exercise price of $2.39 per share outstanding at September 30, 2024 and December 31, 2023, respectively. Johnson & Johnson Innovation – JJDC, Inc. had common stock warrants exercisable for 607,725 shares of our common stock with an exercise price of $0.16 per share that were all exercised through a net exercise transaction for 604,000 shares of common stock during the nine months ended September 30, 2024.

At-the-Market (“ATM”) Offering

In January 2024, we commenced an ATM offering, which allows us to issue and sell shares of our common stock having an aggregate offering price of up to $50.0 million. We issued 2,382,139 shares of common stock for gross proceeds of $21.0 million under the ATM offering during the nine months ended September 30, 2024. We have remaining capacity to issue and sell up to approximately $29.0 million of additional shares of common stock under this ATM offering.

7.	Stock-based compensation

Summary of plans and activity

In June 2001, our Board of Directors and stockholders established the 2001 Stock Incentive Award Plan (“2001 Plan”). Under the 2001 Plan, as amended, 2,674,749 shares of common stock had been reserved for the issuance of incentive stock options granted to employees, non-employee directors, consultants, or independent contractors. Options granted under the 2001 Plan have vesting terms that range from the date of grant to four years and expire within a maximum term of 10 years from the grant date.

In 2021, our Board of Directors and stockholders established the 2021 Equity Incentive Plan (“2021 Plan”). The number of shares of common stock initially reserved for issuance under the 2021 Plan was 1,854,490 newly reserved shares in addition to the 600,737 shares that remained available for issuance under the 2001 Plan. The shares available for issuance under the 2021 Plan automatically increase on the first day of each year, commencing January 1, 2022, and ending on (and including) January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors. The annual increase resulted in an additional 1,043,959 shares being reserved for

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issuance under the 2021 Plan as of January 1, 2024. The 2021 Plan provides for the issuance of stock options, stock appreciation rights, restricted stock awards, stock unit awards and other stock-based awards and cash incentive awards to employees, consultants and non-employee directors of the Company and its subsidiaries. Awards granted under the 2021 Plan will have such vesting schedules and other terms as determined by the Compensation Committee and stock options and stock appreciation rights have a maximum term of 10 years from the grant date. No further awards can be made under the 2001 Plan following the adoption of the 2021 Plan. As of September 30, 2024, there were 1,059,116 shares available for future issuance under the 2021 Plan.

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

During the years 2008 through the initial public offering (the “IPO”), the Board of Directors authorized the grant of stock options for the purchase of shares of common stock to the employers of certain non-employee directors. The options were not granted under the 2001 Plan or the 2021 Plan, but terms are substantially the same as our standard form of option agreement for non-employee directors as they have an exercise price not less than the fair market value on the grant date and vest over 48 months from the date of grant.

The following is a summary of stock option activity:


		Weighted
	Number	Average		Aggregate
	of	Exercise		Intrinsic
	Options	Price		Value
				(in thousands)
Balance as of December 31, 2023	4,488,845	$	9.77	$	97,266
Granted	3,170,198		12.75
Cancelled / Forfeited	(1,514,153)		9.57
Exercised	(298,513)		5.39
Balance as of September 30, 2024	5,846,377	$	11.66	$	7,857
Options exercisable as of September 30, 2024	2,947,395	$	8.90	$	6,927

As of September 30, 2024, stock options outstanding included 4,520 options that were not granted under the 2001 Plan or the 2021 Plan. For options outstanding as of September 30, 2024, the weighted average remaining contractual life was 6.9 years. For options exercisable as of September 30, 2024, the weighted average remaining contractual life was 5.2 years.

Our Board of Directors and stockholders also established an Employee Stock Purchase Plan (the “ESPP”). The number of shares of common stock initially reserved for issuance under the ESPP was 278,170. The shares available for issuance under the ESPP automatically increase on the first day of each year, commencing January 1, 2022, and ending on (and including) January 1, 2031, in an amount equal to 1% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of each automatic increase, or such lesser number of shares as determined by the Board of Directors. The annual increase resulted in an additional 208,791 shares being reserved for issuance under the ESPP as of January 1, 2024. The ESPP permits certain of our U.S. employees to purchase shares of our common stock at a price per share not less than 85% of the lower of (i) the closing market price per share of our common stock on the first day of the applicable purchase period or (ii) the closing market price per share of our common stock on the purchase date at the end of the applicable six-month purchase period. For the nine months ended September 30, 2024, 39,807 shares of common stock were purchased under the ESPP for $0.4 million of employee contributions. As of September 30, 2024, there were 672,618 shares available for issuance under the ESPP.

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Stock-based compensation expense

We use the Black-Scholes option pricing model to determine the fair value of stock options and ESPP purchase rights on the grant date. We measure stock-based compensation expense based on the grant date fair value of the award and recognize compensation expense over the requisite service period, which is generally the vesting period for stock options and the offering period for ESPP purchase rights. The amount of stock-based compensation expense recognized for stock option awards during a period is based on the portion of the awards that are ultimately expected to vest. The amount of stock-based compensation expense recognized for ESPP purchase rights during a period is based on the estimated purchase rights as of the grant date. We account for forfeitures as they occur.

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes option pricing model for the nine months ended September 30, 2024 and 2023:


	September 30,
		2024			2023
Weighted average fair value of options granted	$	10.31		$	10.59
Expected term (in years) — non-officer employees		5.0 to 6.1			5.5 to 6.1
Expected term (in years) — officer employees		2.5 to 6.1			2.5 to 6.1
Expected volatility		87.7% to 98.9	%		77.2% to 79.6	%
Expected dividend yield		—	%		—	%
Risk-free interest rate		3.67% to 4.71	%		3.40% to 4.61	%

The following table provides the weighted average fair value of ESPP purchase rights and the related assumptions used in the Black-Scholes option pricing model for the nine months ended September 30, 2024 and 2023:


	September 30,
		2024			2023
Weighted average fair value per ESPP purchase right	$	7.60		$	9.01
Expected term (in years)		0.5			0.5
Expected volatility		74.0% to 96.9	%		76.2% to 84.6	%
Expected dividend yield		—	%		—	%
Risk-free interest rate		5.24% to 5.37	%		4.77% to 5.53	%

We review these assumptions on a periodic basis and adjust them, as necessary. We utilize the simplified method to develop the estimate of the expected term for stock option awards and ESPP purchase rights. The expected volatility is based upon observed volatility of comparable public companies. The expected dividend yield is assumed to be zero, as we have never paid dividends and have no current plans to do so. The risk-free interest rate is based on the yield on U.S. Treasury securities for a period approximating the expected term of the options being valued.

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


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2024		2023		2024		2023
Stock options	$	2,550	$	1,419	$	16,063	$	4,403
Employee Stock Purchase Plan		130		113		302		310
Total stock-based compensation expense	$	2,680	$	1,532	$	16,365	$	4,713

Selling, general & administrative	$	2,379	$	1,290	$	15,412	$	3,728
Research & development		267		221		855		927
Cost of goods sold		34		21		98		58
	$	2,680	$	1,532	$	16,365	$	4,713

As of September 30, 2024, unrecognized compensation expense related to unvested stock-based compensation arrangements was $24.1 million. As of September 30, 2024, the related weighted average period over which the expense is expected to be recognized is approximately 2.8 years.

On January 30, 2024, we amended the terms and conditions of certain stock option award agreements granted under the 2001 Plan and 2021 Plan between us and our former CEO in connection with his retirement, which occurred on February 11, 2024. The option agreements were amended to provide that, if not already vested at the time of termination of his employment due to retirement, the options will continue to vest on the previously scheduled vesting dates following his retirement, subject to his compliance with certain covenants. Additionally, the option agreements were modified so that the options may be exercised, to the extent vested, by our former CEO until the earlier of (a)

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