EBR Systems, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1 - Business and organization

Business overview

EBR Systems, Inc. and subsidiaries (collectively, “EBR”, “we”, “our” or the “Company”) is a United States based medical device company that is developing the WiSE CRT System, an implantable cardiac device able to provide stimulation to endocardial heart tissue for the correction of heart rhythm conditions without requiring the use of leads. This implantable device delivers left-ventricle endocardial pacing for cardiac resynchronization therapy (“CRT”), without the use of wires or leads going into the heart. On April 11, 2025, the Company received notification that the Food and Drug Administration (“FDA”) has completed its review of the premarket approval application (“PMA”) and approved the WiSE CRT System for commercial distribution in the United States.

The Company completed its initial public offering of CDIs (“CHESS Depositary Interests”) and began trading on the Australian Securities Exchange (“ASX”) on November 24, 2021, under the symbol “EBR”.

The Company operates wholly owned foreign subsidiary entities in Australia, EBR Systems (AUST) Pty Ltd (“EBR-AU”), and the United Kingdom, EBR Systems (UK) Limited (“EBR-UK”), which establish clinical trials in Australia and the United Kingdom, respectively, and work on intellectual property development. EBR-AU was incorporated on February 23, 2017, and EBR-UK was incorporated on July 31, 2015.

Note 2 - Going concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of its cash needs and comparing those needs to the current cash, cash equivalents and marketable securities balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by its plans or when its plans alleviate substantial doubt about its ability to continue as a going concern.

For the three months ended March 31, 2025 and 2024, the Company incurred a net loss of $10,554,271 and $9,150,003, respectively. During the three months ended March 31, 2025 and 2024, the Company had negative cash flows from operations of $13,563,695 and $10,059,772, respectively. As of March 31, 2025, the Company had working capital of $46,751,043 and accumulated deficit of $364,011,951.

Based on the Company’s cash, cash equivalents, and marketable securities as of March 31, 2025, and its expectation to generate operating losses and negative operating cash flows in the foreseeable future, as well as potential for liquidity to become less than the $2.5 million required under its existing debt covenants during the next twelve months, there exists substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these condensed consolidated financial statements. The Company was in compliance with its debt covenant as of March 31, 2025. Upon the occurrence of a breach of debt covenants, Runway Growth Finance Corp may, at its option, declare all obligations immediately due and payable. In an effort to alleviate these conditions, the Company will need to raise capital through the issuance of additional common stock or borrowings from financial institutions. The Company’s ability to obtain additional capital in the equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance, and investor sentiment with respect to the Company and its industry. The condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

Note 3 - Summary of significant accounting policies

Basis of presentation

These unaudited condensed consolidated financial statements as of March 31, 2025, and for the three months ended March 31, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2024.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of our unaudited condensed consolidated financial position as of March 31, 2025, unaudited condensed consolidated results of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, and unaudited condensed consolidated cash flows for the three months ended March 31, 2025 and 2024. The unaudited condensed consolidated results of operations for the three months ended March 31, 2025, are not necessarily indicative of the consolidated results of operations that may be expected for the year ending December 31, 2025.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant estimates and assumptions made by management include the fair value of stock-based awards issued, capitalized pre-launch inventory, and the valuation allowance on deferred taxes.

Fair Value Measurements

The Company measures certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The fair value measurement guidance establishes a fair value hierarchy which requires the Company to maximize the use of observable inputs when measuring fair value. The following levels of inputs may be used to measure fair value:

Foreign currency translation

The functional currencies of our foreign subsidiaries are their local currencies. Accordingly, the Company translates the foreign currency financial statements into US Dollars using the reporting period-end or average exchange rates. Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet dates. Expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive income within stockholders’ equity. Gains and losses arising from the settlement and remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency are included in “loss on foreign currency” in the period in which they occur.

Employee benefits

Employees that satisfy certain eligibility requirements, including requirements related to age and length of service, are eligible to participate in the EBR Systems, Inc. 401(k) Plan (“Plan”). The Plan is intended to qualify as a tax-qualified 401(k) plan so that contributions to the Plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the Plan. Under the Plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan’s trustee as directed by participants. Effective January 1, 2025, the Company began a matching contribution under the Plan. The Company matches 100% of employee contributions to the Plan up to 3% of eligible compensation, with a maximum annual match of $5,000 per employee. Matching contributions vest 25% after one year of service and are fully vested after two years of service. For the three months ended March 31, 2025 and 2024, the Company match expense was $138,330 and $0, respectively.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash. Cash equivalents are reported at fair value.

Restricted cash

The restricted cash, noncurrent balance of $2,603,568 as of March 31, 2025, relates to cash deposits restricted under letters of credit issued on behalf of the Company in support of indebtedness to creditors incurred in the ordinary course of business. There was no restricted cash as of December 31, 2024.

Marketable securities

Marketable securities, all of which are available-for-sale, consist of U.S. treasury bonds, U.S. government notes, and corporate debt securities. Marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive income.

On a quarterly basis, the Company reviews its available-for-sale debt securities for credit-related impairment. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. For available-for-sale debt securities in an unrealized loss position, the Company evaluates at the individual security level whether the decline in fair value has resulted from credit losses or other factors. In making this assessment the Company considers the issuer of the securities and their creditworthiness, any changes to the rating of the security and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance for credit losses is recorded with an offsetting entry to earnings. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The Company typically invests in highly-rated securities and generally limits the amount of credit exposure to any one issuer. Additionally, the Company does not intend to sell the impaired securities, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases. Unrealized losses during the three months ended March 31, 2025 and 2024, were primarily the result of market conditions, such as increasing interest rate movements, unusual market volatility, or industry-related events. Since the fluctuation in fair value is due to changes in market conditions and not credit quality, and because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, the Company concluded that an allowance for credit losses was not required as of March 31, 2025.

Interest and dividends on available-for-sale securities are included in other income and expense. See Note 4, “Cash, cash equivalents, restricted cash, and marketable securities” for additional disclosure on marketable securities.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash and cash equivalents are primarily held at U.S. financial institutions that management believes are of high credit quality. Such deposits exceed federally insured limits.

Non-trade receivables and unbilled reimbursements

Non-trade receivables are recorded for amounts due to the Company related to reimbursements of clinical trials expenses based upon contracted terms, and the sale of materials to contract manufacturers. Unbilled reimbursements represent amounts for services that have been rendered but for which reimbursements have not been billed. See Note 6, “Condensed consolidated balance sheet components” for additional information on non-trade receivables and unbilled reimbursements.

Pre-launch inventory

Inventory costs associated with products that have not yet received regulatory approval are capitalized if there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such pre-launch inventory begins when the Company determines that (i) positive clinical trial results have been obtained in order to support regulatory approval is probable; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit, in excess of capitalized costs. On April 11, 2025, the Company received notification that the FDA has approved the WiSE CRT System for commercial distribution. At that time, the Company reclassified pre-launch inventory as inventory.

As of March 31, 2025 and December 31, 2024, the Company capitalized $4,718,416 and $2,842,540 of pre-launch inventory costs, respectively. At March 31, 2025, the Company had $3,232,330 and $1,486,086 of capitalized pre-launch inventory recorded in current and noncurrent assets, respectively. At December 31, 2024, the Company had $1,391,008 and $1,451,532 of capitalized pre-launch inventory recorded in current and noncurrent assets, respectively. The Company based the classification of pre-launch inventory on the Company’s forecasted utilization within one year from the balance sheet date. Pre-launch inventory, consisting of raw materials, work-in-progress and finished goods, is recorded at the lower of cost (determined using the first-in, first-out method) or net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business.

Property and equipment

Property and equipment is carried at acquisition cost less accumulated depreciation. The cost of normal, recurring, or periodic repairs and maintenance activities related to property and equipment are expensed as incurred.

Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. The estimated useful lives by asset classification are generally as follows:

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for potential impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that carrying value exceeds fair value. Fair value is determined using various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, depending on the nature of the asset. For the three months ended March 31, 2025 and 2024, the Company did not recognize any impairment charges associated with long-lived assets.

***Leases ***

At the inception of a contract, the Company determines whether the contract is or contains a lease based on all relevant facts and circumstances. Leases with a term greater than 12 months are recognized on the balance sheet date as right of use (“ROU”) assets and current and noncurrent lease liabilities, as applicable. The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. The Company includes lease option extensions in the assessment of the lease arrangement when it is reasonably certain the option will be exercised.

Lease liabilities and the corresponding right of use assets are recorded based on the present value of lease payments to be made over the lease term. The discount rate used to calculate the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate. The Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right of use asset may be required for items such as initial direct costs or incentives received. Lease payments on operating leases are recognized on a straight-line basis over the expected term of the lease. Lease payments on financing leases are recognized using the effective interest method. See Note 7, “Leases” for additional disclosure on leases.

For all asset classes of its leases, the Company has elected to account for the lease and non-lease components together for existing classes of underlying assets.

Research and development

Research and development costs are expensed when incurred. Research and development costs include operating expenses for the Company’s engineering and product management functions supporting research, new development, and related product enhancement. Additionally, costs incurred in connection with preclinical development, clinical testing, as well as costs associated with the regulatory and FDA approval process are also included as a component of research and development expense.

***General and administrative ***

General and administrative includes operating expenses incurred in our executive, finance, legal, marketing, commercialization, and other administrative functions.

Stock-based compensation

The Company recognizes stock-based compensation expense related to employees over the requisite service period based on the grant-date fair value of the awards. The fair value of options granted is estimated using the Black-Scholes option valuation model. The Company recognizes the grant-date fair value of an award as compensation expense on a straight-line basis over the requisite service period, which typically corresponds to the vesting period for the award. The Company elects to account for forfeitures as they occur and, upon forfeiture of an award prior to vesting, the Company reverses any previously recognized compensation expense related to that award. See Note 12, “Stock-based compensation” for additional details.

Other Income

The Company periodically receives reimbursements of clinical trial expenses, which are recorded as other income in the accompanying unaudited condensed consolidated statements of operations. During the three months ended March 31, 2025 and 2024, the Company recorded reimbursements of $0 and $8,843, respectively.

Income taxes

The asset and liability approach is used for the financial reporting for income taxes. Deferred income balances reflect the effects of temporary differences between the financial reporting and income tax bases of the Company’s assets and liabilities and are measured using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses, or NOLs, and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items that are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgement including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, and additional information becomes known, or as the tax environment changes.

Earnings per share

Basic income or loss per share is determined by dividing net income or loss by the weighted-average common shares outstanding during the period. Diluted income or loss per share is determined by dividing net income by diluted weighted-average shares outstanding during the period. Diluted weighted-average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock are included in the calculation of diluted income or loss per share based on the treasury stock method. Potential common shares are excluded from the calculation of dilutive weighted-average shares outstanding if their effect would be anti-dilutive at the balance sheet date based on a treasury stock method or due to a net loss.

Recently issued accounting pronouncements

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”. The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 is effective for public filers for fiscal years beginning after December 15, 2024. The adoption of ASU 2023-09 will be reflected in the Company’s annual financial statements for the year ending December 31, 2025 and is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures

In November 2023, the FASB issued ASU 2023-07,*Improvements to Reportable Segment Disclosures.*This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the ASU enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and other disclosure requirements. The Company adopted ASU 2023-07 in the year ended December 31, 2024. Refer to Note 15 for enhanced disclosures associated with the adoption of this ASU.

In November 2024, the FASB issued ASU 2024-03,Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. In January 2025, the FASB issued an update 2025-01 “*Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”,*which revises the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its disclosures.

Note 4 - Cash, cash equivalents, and marketable securities

Cash, cash equivalents, and marketable securities consisted of the following at March 31, 2025 and December 31, 2024:

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our condensed consolidated balance sheets as of March 31, 2025 and March 31, 2024, to the total of such amounts as presented in the condensed consolidated statements of cash flows:

During the three-month period ended March 31, 2025, marketable securities were sold or matured for proceeds of $17,966,613 with a realized gain of $8,265. During the three-month period ended March 31, 2024, marketable securities were sold or matured for proceeds of $11,985,474 withno gain or loss realized. See Note 5, “Fair value measurements” for additional information regarding the fair value of cash equivalents and marketable securities.

The following tables summarizes the unrealized gains and losses related to the Company’s available-for-sale marketable securities, by major security type, as of March 31, 2025 and December 31, 2024:

The following table shows the unrealized losses and fair values for those marketable securities that were in an unrealized loss position as of March 31, 2025 and December 31, 2024, aggregated by major security type and the length of time the marketable securities have been in a continuous loss position:

The contractual maturities of the Company’s marketable securities as of March 31, 2025, were as follows:

Note 5 - Fair value measurement

Management’s assessment of the significance of a particular input to the fair value measurement requires judgement and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy, as discussed in Note 3, “Summary of significant accounting policies”. At March 31, 2025 and December 31, 2024, the fair value measurement of the Company’s financial assets measured on a recurring basis were as follows:

In the Company’s unaudited condensed consolidated balance sheets, the carrying values of non-trade receivables, other assets, accounts payable and accrued expenses approximated their fair values due to the nature and relatively short maturities. The fair value of debt approximates its carrying value as it is variable rate debt or has relatively short maturities.

Note 6 -Condensed consolidated balance sheet components

Non-trade receivables and unbilled reimbursements, net

Non-trade receivables and unbilled reimbursements include sales of materials to contract manufacturers, reimbursements of clinical trial expenses incurred, and various other reimbursements. Non-trade receivables and unbilled reimbursements were as follows as of March 31, 2025 and December 31, 2024:

As of March 31, 2025, the Company had an outstanding receivable of $29,276 from Host-Plus, a beneficial owner of more than 5% of our common stock, which consisted of certain legal fees that were paid on behalf of Host-Plus by the Company. No related party receivable was outstanding as of December 31, 2024. During the three months ended March 31, 2025 and 2024, there wasno change in the provision for credit losses.

Pre-launch inventory

Pre-launch inventory consisted of the following as of March 31, 2025 and December 31, 2024:

Property and equipment, net

Property and equipment consisted of the following as of March 31, 2025 and December 31, 2024:

Depreciation and amortization expense for the three months ended March 31, 2025 and 2024, was $78,863 and $213,091, respectively. There wereno impairments recorded during the three months ended March 31, 2025 and 2024.

Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following at March 31, 2025 and December 31, 2024:

See Note 16, “Commitments and contingencies” for additional disclosure on accrued warranty reserves.

Note 7 – Leases

The Company has an operating lease for its corporate headquarters and laboratory space, located in Sunnyvale, California. The initial lease expired June 30, 2024, with an option to extend the lease an additional sixty-months, which was used in the calculation of the right of use operating lease asset and operating lease liability. The Company held no other lease agreements at December 31, 2024. In January 2024, the Company signed an addendum to the operating lease, extending the expiration of the lease through June 30, 2025, and adjusting the monthly rent from $35,606 per month to $50,000 per month. The January 2024 lease remeasurement resulted in a $1,169,822 reduction in the right of use operating lease asset and corresponding reduction to operating lease liability. In March 2024, the Company signed an additional addendum to the operating lease, extending the expiration of the lease through December 31, 2025. The March 2024 lease remeasurement resulted in a $261,012 increase in the right of use operating lease asset and corresponding increase in operating lease liability. In July 2024, the Company signed an additional addendum to the operating lease, extending the expiration of the lease through December 31, 2026. The July 2024 lease remeasurement resulted in a $498,013 increase in the right of use operating lease asset and corresponding increase in operating lease liability. In April 2025, the Company signed an additional addendum to lease office space on a short-term basis in an adjacent office space.

In January 2025, the Company executed an operating lease for its new corporate headquarters, laboratory and manufacturing facility in Santa Clara, California. The term of the lease commenced on January 17, 2025, the date on which the landlord made the property available to the Company for the purpose of constructing leasehold improvements that will remain the property of the Company during lease term. As a result of entering into this lease agreement, the Company recorded a right-of-use asset and corresponding lease liability of $12,837,535, net of the tenant improvement allowance of $4,090,880 on the commencement date. The lease payments begin on the later of: (i) June 1, 2025; or (ii) the date the tenant improvements are deemed complete, which is expected to be January 2026. The monthly base rent payment is $52,000 in year one; $80,340 in year two; $110,334 in year three; $145,282 in year four; and increasing 3% annually thereafter. The lease provides for a term of 132 months and includes an option to extend the lease for an additional five years, which was used in the calculation of the right of use asset and lease liability, as the Company is reasonably certain that the option will be exercised. The Company determined the probability of the exercise of a lease extension option based on its long-term strategic business outlook, significant leasehold improvements that are expected to have significant economic value to the Company, and costs relating to signing a new lease, among other factors.

Amounts reported in the unaudited condensed consolidated balance sheets for operating leases in which the Company is the lessee as of March 31, 2025 and December 31, 2024, were as follows:

The following table presents the components of lease costs in our statements of operations for three months ended March 31, 2025 and 2024:

Future lease payments for non-cancellable operating leases, net of the tenant improvement allowance as of March 31, 2025, were as follows:

**Note 8 - Notes payable **

At March 31, 2025 and December 31, 2024, notes payable consisted of the following:

The following table presents information regarding the Company’s notes payable principal repayment obligations as of March 31, 2025:

Runway Growth Finance Corp

On June 30, 2022, the Company entered into a loan and security agreement with Runway Growth Finance Corp. The debt is secured against substantially all assets of the Company, except for the Company’s intellectual property but includes all proceeds from the sale of intellectual property. The loan agreement provides three term loan tranches. The Company received the initial draw of $20,000,000 in June 2022. The Company received positive interim analysis data, sufficient to proceed with the clinical trial and premarket approval submission to the U.S. Food and Drug Administration, which allowed the Company to draw the second tranche of $20,000,000 in June 2023. The final tranche provided $10,000,000 and the draw period was scheduled to commence on the date the Company received approval from the FDA for the WiSE CRT System and ended June 30, 2024. The Company did not receive FDA approval by June 30, 2024, and therefore did not meet the draw requirements of the third and final tranche. As of March 31, 2025 and December 31, 2024, the outstanding principal balance was $41,800,000.

Interest on the term loan accrues on the principal amount outstanding at a floating per annum rate equal to the greater of the rate of interest noted in The Wall Street Journal Money Rates section, as the “Prime Rate” or 4.00% plus a margin of 4.9% and is payable monthly in arrears and shall be computed on the basis of a 360-day year for the actual number of days elapsed. The Company is required to make interest only payments from July 2022 to May 2027. The note payable has a maturity date of June 15, 2027, at which time any unpaid interest, outstanding principal balance, and a final payment of 4.5% of the original principal amount borrowed shall be due in full. If the Company repays the loan prior to maturity, the Company will be required to pay a prepayment fee of 0.5% - 1% of the outstanding principal balance. The Company is also required to pay a 3% success fee of the funded principal amount of the term loan at the time of a liquidity event, as defined in the loan and security agreement. The success fee is enforceable within 10 years from the execution date of the agreement.

The Company has accounted for the final payment of $1,800,000 as a discount of the note that will be amortized over the life of the loan using the effective interest method. Amortization of the discount was $100,644 and $100,475 for the three-month period ended March 31, 2025 and 2024, respectively. This amount was recorded as additional interest expense in the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2025 and December 31, 2024, the note has been shown net of unamortized discounts of $912,460 and $1,013,104, respectively.

The Company incurred loan costs of $998,393, which are being amortized over the life of the loan using the effective interest method. Amortization of loan costs was $52,265 and $52,431 for the three-month period ended March 31, 2025 and 2024, respectively. As of March 31, 2025 and December 31, 2024, the note has been shown net of unamortized loan costs of $471,026 and $523,291, respectively.

The Company is subject to customary financial and reporting covenants under the loan and security agreement. As of March 31, 2025 and December 31, 2024, the Company was in compliance with all debt covenants.

Bank of America Leasing & Capital, LLC

In March 2024, the Company entered into an equipment purchase agreement for the purchase of software totaling $82,029. The purchase agreement requires 11 equal payments of $7,457 beginning July 1, 2024, through May 1, 2025. As of March 31, 2025 and December 31, 2024, the outstanding principal balance was $14,914 and $37,286, respectively, and was included in the current portion of notes payable in the unaudited condensed consolidated balance sheets.

**Note 9 -Convertible preferred stock **

As of March 31, 2025 and December 31, 2024,10,000,000 shares of convertible preferred stock were authorized, of whichno shares were issued or outstanding.

**Note 10 -Common stock **

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors. As of March 31, 2025 and December 31, 2024, no dividends have been declared.

As of March 31, 2025 and December 31, 2024,600,000,000 shares were authorized, of which 372,896,324 shares and 371,076,200 shares, respectively, were outstanding including shares underlying all CDIs.

The Company completed its initial public offering and began trading on the Australian Securities Exchange (“ASX”) on November 24, 2021, under the symbol “EBR”. The ASX uses an electronic system called CHESS for the clearance and settlement of trades on the ASX. The State of Delaware does not recognize the CHESS system of holding securities or electronic transfers of legal title to shares. To enable companies to have their securities cleared and settled electronically through CHESS, CHESS depository instruments called CDIs are issued. CDIs are units of beneficial ownership in shares and are traded in a manner similar to shares of Australian companies listed on the ASX. The legal title to the shares are held by a depository, CDN, which is a wholly owned subsidiary of the ASX, and is an approved general participant of ASX Settlement.

Additionally, the Company has reserved the following shares of common stock for issuance as of March 31, 2025:

Note 11 - Warrants

Equity classified common stock warrants

The Company has issued warrants to purchase shares of its common stock, which are exercisable any time at the option of the holder until their expiration date. As of March 31, 2025, the weighted-average exercise price of outstanding warrants was $0.57 with a weighted-average remaining contractual life of 5.03 years.

The following warrants were outstanding as of March 31, 2025 and December 31, 2024:

Note 12 - Stock-based compensation

The Company and its stockholders adopted an equity incentive plan (the “2013 Plan”) in 2013, which reserved shares of the Company’s common stock for the granting of incentive and nonqualified stock options to employees, directors, and consultants. On October 14, 2021, the Company replaced the 2013 Plan with the 2021 Plan in connection with its initial public offering. Under the 2021 Plan,37,504,358 shares of common stock are reserved. The Company may grant options to purchase common stock, stock appreciation rights, restricted stock awards and other forms of stock-based compensation. Stock options generally vest over four years and expire no later than 10 years from the date of grant. The Board of Directors has the authority to select the employees to whom options are granted and determine the terms of each option, including: i) the number of shares of common stock subject to the option; ii) when the option becomes exercisable; iii) the option exercise price, which must be at least 100% of the fair market value of the common stock as of the date of grant; and iv) the duration of the option, which may not exceed 10 years.

As of March 31, 2025, options to purchase a total of 22,377,618 shares of common stock remained outstanding and 15,126,740 shares remain available for grant under the 2021 Plan and 709,633 remained outstanding outside of the 2021 Plan. As of March 31, 2025, options to purchase a total of 17,278,905 shares of common stock remained outstanding under the 2013 Plan. As of March 31, 2025, no shares of common stock remain available for grant under the 2013 Plan.

Stock option activity for the three-month period ended March 31, 2025, was as follows:

The fair value of the options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, an assumed risk-free interest rate and expected dividends. The Company uses the simplified calculation of expected life and volatility is based on an average of the historical volatilities of the common stock of several publicly traded entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses the straight-line method for expense attribution. The weighted-average grant-date fair values of stock options granted during the three months ended March 31, 2025 and 2024, was $0.64 per share and $0.37 per share, respectively.

The following assumptions were used to calculate the grant-date fair value of employee stock options granted during the three months ended March 31, 2025 and 2024:

The following table presents classification of stock-based compensation expense within theaccompanying unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024:

At March 31, 2025, there was $5,573,573 of unamortized stock-based compensation cost, related to unvested stock options which is expected to be recognized over a weighted-average period of 2.94 years.

Note 13 -Income taxes

During the three months ended March 31, 2025 and 2024, the Company doesnot have an income tax benefit or expense. The Company has historically incurred net operating losses and maintains a full valuation allowance against its net deferred tax assets. Valuation allowances are recorded when the expected realization of the deferred tax assets does not meet a “more likely than not” criterion. Realization of the Company’s deferred tax assets are dependent upon the generation of future taxable income, the amount and timing of which are uncertain.

The Company’s effective tax rate was 0% for the three months ended March 31, 2025 and 2024. The difference between the effective tax rate and the federal statutory rate of 21% was primarily due to the full valuation allowance recorded on the Company’s net deferred tax assets, state and foreign tax benefits, research and development tax credits, and other non-deductible expenses.

During the three-month period ended March 31, 2025, there wereno material changes to the Company’s uncertain tax positions.

Note 14 - Net loss per share

The following tables sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2025 and 2024:

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive at March 31, 2025 and 2024:

Note 15 -Segment information

An operating segment is defined as a component of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company is currently in the pre-revenue development stage and its primary activity is the development of its leadless cardiac pacing system, WiSE CRT. Thus, the total Company’s consolidated results represent only the results of the WiSE CRT Segment. The Company currently conducts its operations primarily in the U.S. Operations in countries outside of the U.S. are limited to Australia and Europe and are not significant. Business activity conducted in the U.S and in our international locations are similar in nature and economic characteristics and are consolidated for reporting purposes. As such, management has determined that the Company operates as one operating and reportable segment that is currently focused exclusively on the advancement of the Company’s WiSE CRT System.

The Company’s operating expenses and net loss are the primary measures of the segment’s performance used by the Company’s CODM. The segment is in the pre-revenue operating stage, and therefore the CODM primarily focuses on research and development expenses, general and administrative expenses, and the net loss as the primary measure of the segment’s performance used by the Company’s CODM. In addition to the segment’s expenses that are presented on the consolidated statement of operations, the information about the segment’s expenses is disaggregated into significant expenses, which are not separately presented on the Company’s consolidated statement of operations, as included below.

The table below reports information about the segment loss for the three months ended March 31, 2025 and 2024.

Note 16 -Commitments and contingencies

Purchase commitments

The Company purchases raw materials, manufacturing equipment, and various services from a variety of vendors. During the normal course of business, in order to manage manufacturing lead times and help ensure an adequate supply of certain items, we enter into agreements with suppliers that either allow us to procure goods and services when we choose or that establish purchase requirements over the term of the agreement. In certain instances, our purchase agreements allow us to cancel, reschedule, or adjust our purchase requirements based on our business needs prior to firm orders being placed. Consequently, only a portion of our purchase commitments are firm and noncancelable. As of March 31, 2025, the Company’s obligations under such arrangements were approximately $16,200,000.

Contingencies

The Company is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain, and it is not possible to definitively predict the ultimate disposition of any of these proceedings. The Company does not believe that there are any pending legal proceedings or other loss contingencies that will, either individually or in the aggregate, have a material adverse impact on the Company’s unaudited condensed consolidated financial statements.

Accrued warranty reserves

The Company accrues for the estimated cost of product warranties based on historical experience at the time a patient enrolls in the clinical trial. Adjustments to initial obligations for warranties are made as changes to the obligations become reasonably estimable. Accrued warranty reserves are included in accrued expenses and other liabilities in the accompanying unaudited condensed consolidated balance sheets.

Changes in accrued warranty reserves were as follows for the three months ended March 31, 2025 and 2024: