Pulse Biosciences Inc

1. Description of the Business

Pulse Biosciences, Inc. is a novel bioelectric medicine company committed to health innovation using its patented Nano-pulse Stimulation (“NPS”) technology, a revolutionary energy modality that delivers nanosecond-duration pulses of electrical energy, each less than a millionth of asecond long, to non-thermally clear targeted cells while sparing adjacent noncellular tissue. NPS technology, also referred to as a Nanosecond Pulsed-Field Ablation (“nsPFA”) technology when used to ablate cellular tissue, can be used to treat a variety of medical conditions for which an optimal solution remains unfulfilled. The Company developed its proprietary CellFX System, a novel nsPFA delivery platform, and commercialized the initial application of its nsPFA technology to treat benign lesions of the skin. In parallel, the Company has designed a variety of applicators to explore the potential use of the CellFX platform to treat disorders in other medical specialties, such as cardiology, gastroenterology, gynecology, and ear nose and throat. These applicators include devices for open surgical procedures, endoscopic or minimally invasive procedures, and endoluminal catheters, and each has been used in preclinical studies. Based on our preclinical experience and the potential to significantly improve outcomes for patients in a large and growing market, the Company decided in2022 to focus its efforts on the use of nsPFA and the CellFX platform in the treatment of atrial fibrillation (“AF”)

The Company was incorporated in Nevada on* May 19, 2014.On June 18, 2018,*the Company reincorporated from the State of Nevada to the State of Delaware. The Company is located in Hayward, California.

The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company doesnot currently have any material cash flows from operations. It has minimal revenue and will need to raise additional capital to finance its operations. However, there can beno assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its operating requirements.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities Exchange Commission (the “SEC”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates that affect the amounts reported in the financial statements and accompanying notes to the financial statements. Estimates include, but arenot limited to, the valuation and recognition of stock-based compensation, inventory valuation, warranty obligations, income taxes, and the useful lives assigned to long-lived assets. The Company evaluates its estimates and assumptions based on historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from these estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and investments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with anyone financial institution or issuer. Deposits held with banks* mayexceed the amount of insurance provided on such deposits. The Company hasnot* experienced any losses since inception.

Fair Value of Financial Instruments

The Company believes the carrying amounts of its financial instruments, including cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of such instruments.

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Cash and Cash Equivalents

The Company invests its cash primarily in money market funds. The Company considers all highly liquid investments purchased with an original maturity ofthree months or less to be cash equivalents.

Property and Equipment

Property and Equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from three tofive years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. Upon the sale or retirement of property and equipment, the costs and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operating expenses. Maintenance and repairs are charged to operations as incurred.

Valuation of Inventory

Inventory is stated at lower of cost or net realizable value. The Company establishes the inventory basis by determining the cost based on standard costs approximating the purchase costs on afirst-in,first-out basis. Net realizable value is the estimated selling price in the ordinary course of the Company’s business, less reasonably predictable costs of completion, disposal, and transportation. The cost basis of the Company’s inventory will be reduced for any products that are considered excessive or obsolete based upon assumptions about future demand and market conditions. At* December 31, 2022,the inventory balance was fully written off due to excessive and obsolete inventory and the Company doesnot* plan to capitalize further inventory in relation to the dermatology market.

Intangible Assets

The Company’s intangible assets consist of acquired patents and licenses, which are amortized over their estimated useful lives oftwelve years.

Long-Lived Assets

The Company reviews long-lived assets, consisting of property and equipment and intangible assets, for impairment during each fiscal year or when events or changes in circumstances indicate the carrying value of these assets* may*exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. No impairment losses were incurred during the periods presented.

Goodwill

The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. The Company reviews goodwill for impairment at the reporting unit level at least annually or whenever changes in circumstances indicate that the carrying value of the goodwill* may**not* be recoverable. To date, there has beenno impairment of goodwill.

Revenue from Contracts with Customers

The Company recognized revenue at a point in time when it satisfied performance obligations by transferring control of promised goods to its customers. The amount of revenue recognized was equal to the consideration which the Company was entitled to in exchange for the promised goods, excluding any amounts assessed by government authorities for taxes which might have been collected from a customer. Sales contracts often involved the sale and delivery of multiple products, each of which typically represented a separate performance obligation in the contract. While the Company has sold these products on a stand-alone basis at their respective stand-alone selling prices (“SSP”), initial customer contracts primarily involved the bundling of products which were delivered concurrently to the customer. In such instances, the full consideration of the contract was recognized upon shipment of the products. The Company generally required receipt of full payment prior to shipment, however, from time to time, payment terms were extended to customers upon which the Company performed a necessary credit evaluation to ensure future collectability of the outstanding balance. The accounts receivable balance at* December 31, 2023iszero* and the Company has thereforenot recorded an allowance against the accounts receivable balance. Refer to Note9 for further details.

Product Warranty

The Company provides a standard warranty on eligible products which provides the customer assurances that the products comply with the agreed-upon specifications. The standard warranty doesnot provide any services in addition to those assurances. The Company accrued a warranty reserve for products sold based upon the best estimate of the nature, frequency, and costs of future claims. These estimates are inherently uncertain given the short history of sales, and changes to the historical or projected warranty experience* maycause material changes to the warranty reserve in the future. During the year ended December**31,* 2023, the Company reduced the accrued warranty liability to zero. Based upon the Company's shift in focus, there are a limited number of consoles currently covered under the standard warranty. All inventory has been fully written off, therefore the only incremental costs to fulfill a warranty claim would be shipping costs, which will be immaterial in nature.

Warranty accrual activity consisted of the following (in thousands):

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Stock-Based Compensation

The Company's stock-based compensation programs include stock options and an employee stock purchase program.

The Company periodically issues stock options to officers, directors, employees, and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date. Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values, which are estimated using the Black-Scholes option-pricing model. Stock-based compensation expense is charged to operations on a straight-line basis over the vesting period. The Company has granted stock options with both time-based as well as performance-based vesting conditions. For stock awards with performance-based vesting conditions, the Company doesnot recognize compensation expense until it is probable that the performance-based vesting condition will be achieved. The analysis to determine such probability involves estimates and judgements from management and the estimate of expense* may*be revised periodically.

The Company has also issued certain stock options with market-based vesting conditions. These vesting conditions relate to the achievement of certain market capitalization targets of the Company. The grant date fair value for these stock options was determined using a Monte Carlo simulation. The expense is recognized over the requisite service period for each tranche of the awards. The requisite service period is the service period derived from the Monte Carlo simulation model. If the market capitalization targets are met sooner than the derived service period, the Company will accelerate the recognition of stock-based compensation expense to reflect the cumulative expense associated with the vested shares. The Monte Carlo simulation requires the Company to make assumptions and judgements about the variables used in the calculation including the expected term, volatility of the Company's common stock, an assumed risk-free interest rate, and cost of equity. The assumptions used in the option-pricing model represent management’s best estimates. If factors change and different assumptions are used, the Company's stock-based compensation expense could be materially different in the future.

See Note6 for a detailed discussion of the Company’s stock plans and stock-based compensation expense.

Research and Development Costs

Research and development costs consist primarily of compensation costs, fees paid to consultants and outside service providers and organizations (including university research institutes), costs associated with clinical trials, development prototypes and other expenses relating to the acquisition, design, development and testing of the Company’s product candidates, and certain facilities related costs. Research and development costs incurred by the Company are expensed as incurred, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate.

Patent Costs

The Company is the owner of numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development ofone or more commercially viable products based on the Company’s research efforts and any related patent applications, patent costsnot related to acquired patents, including patent-related legal fees, filing fees and other costs, including internally generated costs, are expensed as incurred. During both of the years ended* December 31, 2023and2022*, patent costs totaled $0.5 million, respectively. Patent costs are included in general and administrative costs in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more-likely-than-not to be realized. In the event the Company determines that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it wouldnot be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.

The Company is subject to U.S. federal income taxes and state income taxes in various states. As the Company’s net operating losses have yet to be utilized, previous tax years remain open to examination by federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company isnot currently under examination by any tax authority.

The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by U.S. GAAP. The tax effects of a position are recognized only if it is more-likely-than-not to be sustained by the taxing authority as of the reporting date. If the tax position isnot considered more-likely-than-not to be sustained, thenno benefits of the position are recognized. At* December 31, 2023and2022*, the Company hadnot recorded any liability for uncertain tax positions. The Company includes interest and penalties related to uncertain tax positions as a component of income tax expense.

Comprehensive Loss

The Company displays comprehensive loss, and if applicable its components, as part of the consolidated statements of operations and comprehensive loss. There wereno adjustments to comprehensive loss during both of the years ended* December 31, 2023and2022*.

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Net Loss per Share

The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding during the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net loss per share.

The following outstanding stock options, warrants, and RSUs to purchase common stock were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

Segment and Geographical Information

The Company operates inone segment and reports segment information in accordance with ASC280**, Segment Reporting. Management usesone measurement of profitability and doesnot segregate its business for internal reporting, however in making certain operating decisions and assessing performance, management will additionally review the disaggregated revenue results by product and geography. The Company’s Chief Executive Officer acts as the chief operating decision makers (“CODM”) of the Company. As of* December 31, 2023and2022**,* 100% of long-lived assets were in the United States. Revenue is attributed to a geographic region based on the location of the end customer.

See Note10 for details of revenue by product and geography.

Recent Accounting PronouncementsNot Yet Adopted**

In* October 2023,the FASB issued ASU2023*-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This guidance affects a wide variety of topics in the Codification. The effective date for each amendment will be the date on which the removal of the respective related disclosures from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited and the amendments in this ASU should be applied prospectively. The Company doesnot expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.

In* November 2023,the FASB issued ASU2023*-07,* Segment Reporting* (Topic280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the CODM, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic280. This ASU is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024,with early adoption permitted. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures, and doesnot* expect the standard will have a material impact on the Company’s consolidated financial statements and related disclosures.

In* December 2023,the FASB issued ASUNo.* 2023-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures*.This ASU requires greater disaggregation of information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024,*with early adoption permitted. This ASU should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.

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3. Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value intothree levels:

Level1 – Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level1 inputs include money market funds.

Level2 – Inputs, other than quoted prices included within Level1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. The Company didnot classify any of its investments within Level2 of the fair value hierarchy.

Level3 – Unobservable inputs in which there is little orno market data for the asset or liability which requires the reporting entity to develop its own assumptions. The Company didnot classify any of its investments within Level3 of the fair value hierarchy.

The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

During the years ended* December 31, 2023and2022*, the Company didnot record impairment charges related to its cash equivalents. During the years ended* December 31, 2023and2022*, the Company didnot have any transfers between Level1, Level2 or Level3 of the fair value hierarchy. Additionally, the Company didnot have any financial assets and liabilities measured at fair value on a non-recurring basis as of* December 31, 2023* or2022.

4. Balance Sheet Components

Property and Equipment, net

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

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Depreciation expense for the years ended* December 31, 2023and2022*, was $0.5 million and $0.7 million, respectively.

Intangible Assets, net

Intangible assets primarily consist of a license to utilize certain patents, know-how and technology relating to the Company’s NPS for biomedical applications acquired from Old Dominion University Research Foundation (ODURF), Eastern Virginia Medical School (EVMS), and the University of Southern California. In addition, the Company entered into a sponsored research agreement (“SRA”) with Old Dominion University’s Frank Reidy Research Center for Bioelectrics, a leading research organization in the field, which includes certain intellectual property rights arising from the research. The Company is amortizing the intangible assets over an estimated useful life of 12 years.

Intangible assets, net consisted of the following (in thousands):

A schedule of the amortization of intangible assets is as follows (in thousands):

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

5. Goodwill

In2014, the Company acquired three companies (the acquisitions) for aggregate consideration of $5.5 million. In accordance with ASC Topic805, Business Combinations, the Company recorded goodwill of $2.8 million in connection with the acquisitions, which represents the excess of consideration paid over the fair value of net tangible and intangible assets acquired.

The Company reviews goodwill for impairment annually or whenever changes in circumstances indicate that the carrying amount of goodwill* may**not* be recoverable. Based on the Company’s annual review as of* December 31, 2023*, the Company determined that its goodwill wasnot impaired.

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6. Stockholders’** Equity and Stock-Based Compensation**

Preferred Stock

The Company has authorized a total of 50,000,000 shares of preferred stock, par value $0.001 per share, none of which were outstanding at* December 31, 2023and2022*. The Company’s Board of Directors (the “Board”) has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights, without any further vote or action by the Company’s stockholders.

Common Stock

The Company has authorized a total of 500,000,000 shares of common stock, par value $0.001 per share.

Private Placement Securities Purchase Agreement

On* April 30, 2023,the Company entered into a Securities Purchase Agreement with Robert W. Duggan, the Company’s majority stockholder and Executive Chairman, pursuant to which the Company agreed to issue and sell to Mr. Duggan 10,022,937 shares of the Company’s common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. The parties completed the Private Placement on May 9, 2023,after satisfying all pre-closing conditions, and the Company issued the full number of shares to Mr. Duggan. The shares were paid for through the cancellation of the principal sum of $65.0 million borrowed by the Company pursuant to the2022* Loan Agreement (See Note13), together with all accrued and unpaid interest outstanding owed at the time of closing.

Rights Offering

On* June**9,* 2022, the Company completed a rights offering (the*“2022* Rights Offering") resulting in the sale of 7,317,072 units (the “Units”), at a price of $2.05 per Unit, with each Unit consisting ofone share of the Company’s common stock, par value $0.001 per share, andone warrant (the*“2022* Rights Offering Warrants”) to purchaseone share of common stock at a price of $2.05 per share. The common stock and warrants comprising the Units separated upon the closing of the2022 Rights Offering and were issued individually.7,317,072 shares of common stock and warrants to acquire up to an additional 7,317,072 shares of common stock were issued in the2022 Rights Offering. The Company received aggregate gross proceeds from the2022 Rights Offering of $15 million. In* May 2023,the Company delivered an irrevocable notice of redemption to warrant holders and, on June 16, 2023,it redeemed the last of the outstanding2022* Rights Offering Warrants at a price of $0.01 per warrant share. See theCommon Stock Warrantssection below for further details. Robert W. Duggan, the Company’s majority stockholder and Executive Chairman, purchased approximately 56% of the shares offered through the2022 Rights Offering.

Common Stock Warrants

In connection with the2022 Rights Offering, the Company issued2022 Rights Offering Warrants to purchase a total of 7,317,072 shares of its common stock at an exercise price of $2.05. The2022 Rights Offering Warrants were subject to redemption by the Company for $0.01 per underlying share of common stock, onnot less than 30 days written notice, if the volume weighted average price of the Company’s common stock equals or exceeds 200% of the exercise price for the warrants, subject to adjustment, per share, for 20 consecutive trading days, provided that the Company* may**not* redeem the warrants prior to the date that isthree months after the issuance date. On* May 10, 2023,the Company issued a press release announcing that on May 9, 2023the terms for warrant redemption had been met. Pursuant to the redemption, the Company redeemed 66,175 warrants on the redemption date, June 16, 2023.Prior to the redemption date, warrants to purchase 7,250,897 shares were exercised, generating approximately $14.9 million of total gross proceeds to the Company. As of December 31, 2023*, there wereno 2022 Rights Offering Warrants outstanding.

A summary of total warrants activity for the year ended* December 31, 2023* is presented below:

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Equity Plans* *

2017 Equity Incentive Plan and2017 Inducement Equity Incentive Plan**

The Board of Directors of the Company (the "Board") previously adopted, and the Company’s stockholders approved, the Company’s2017 Equity Incentive Plan (the*“2017* Plan”).

The2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board* maydetermine. Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the2017* Plan. In addition, shares remaining available under the Company’s2015 Equity Incentive Plan, as amended (the*“2015* Plan”), and shares reserved butnot issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the2017 Plan. The2017 Plan is administered by the Board’s Compensation Committee. Effective* January 1, 2023and2022,* the number of shares of common stock available under the2017 Plan increased by 1,200,000 and 1,188,657 shares, respectively, pursuant to the evergreen provision of the2017 Plan. Under the evergreen provision of the2017 Plan, the share increase is determined based on the least of (i)1,200,000 shares, (ii)4% of the Company’s common stock outstanding at* December 31of the immediately preceding year, or (iii) such number of shares as determined by the Board. Additionally, in December 2023,the number of shares of common stock available under the2017* Plan increased by 1,375,000 shares as a result of a stockholder vote held at a special meeting of stockholders. As of* December 31, 2023*,231,763 shares of common stock remained available for issuance under the2017 Plan.

During* November 2017,the Board of the Company adopted the2017* Inducement Equity Incentive Plan (the “Inducement Plan”) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval.

The Inducement Plan has a 10-year term and provides for the grant of equity-based awards, including non-statutory stock options, RSUs, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan* mayhave a term up toten years and have variable vesting provisions. New hire grants generally vest 25% per year starting upon thefirst anniversary of the grant. Equity-based awards issued under the Inducement Plan are only issuable to individualsnot* previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’s adoption date. In* May 2021,the Board approved an amendment to the Inducement Plan to reserve an additional 1,000,000 shares of the Company’s common stock for issuance pursuant to the Inducement Plan. And, in March 2024,the Board approved asecond* amendment to the Inducement Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance pursuant to the Inducement Plan. As of* December 31, 2023*,1,249,126 shares of common stock were available for issuance under the Inducement Plan.

A summary of stock option activity under the2015 Plan,2017 Plan and Inducement Plan for the year ended* December 31, 2023* is presented below:

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Time-based Options

The Company awards time-based options which vest and become exercisable, subject to the individual’s continued employment or service through the applicable vesting date. Time-based options can have various vesting schedules, most commonly new hire grants which generally vest 25% per year starting upon thefirst anniversary of the grant.

A summary of the time-based stock option activity under the2015 Plan,2017 Plan and Inducement Plan for the year ended* December 31, 2023* is presented below:

The intrinsic value of time-based options exercised during the years ended* December 31, 2023and2022* was $0.9 million and zero, respectively.

The fair value of the time-based options granted to employees and directors during the years ended* December 31, 2023and2022* was $9.0 million and $2.3 million, respectively.

Performance Options

Certain stock options awarded to the Company’s executives and other employees contain performance conditions related to certain financial measures and achievements of strategic and operational milestones. The options will vest and become exercisable once the specific performance condition is fulfilled.

A summary of the performance option activity under the2017 Plan and Inducement Plan for the year ended* December 31, 2023* is presented below:

The fair value of the performance options granted to employees during the years ended* December 31, 2023and2022* was $2.0 million and $0.8 million, respectively.

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Market-based Options

Certain stock options awarded by the Company contain market conditions related to achievement of certain market capitalization targets. The options will vest and become exercisable once the specific market capitalization target is fulfilled.

A summary of the market-based option activity under the2017 Plan for the year ended* December 31, 2023* is presented below:

The fair value of the market-based options granted to employees during the year ended* December 31, 2023* was $10.5 million. There wereno market-based options granted during the year ended* December 31, 2022*.

The Company estimates the fair value of time-based and performance-based stock options on the grant date using the Black-Scholes option pricing model. The estimated fair value of these employee stock options is amortized on a straight-line basis over the requisite service period of the awards. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The fair value of time-based and performance-based stock options was estimated using the following weighted-average assumptions:

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The Company estimates the fair value of market-based stock options on the grant date using a Monte Carlo simulation model. The estimated fair value of these employee stock options is amortized over the requisite service period for each tranche of the awards. The requisite service period is the service period derived from the Monte Carlo simulation model. If the market capitalization targets are met sooner than the derived service period, the Company will accelerate the recognition of stock-based compensation expense to reflect the cumulative expense associated with the vested shares. The fair value of market-based stock options was estimated using the following weighted-average assumptions:

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s2017 Employee Stock Purchase Plan (the*“2017* ESPP”).

The2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the2017 ESPP. Pursuant to the2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i)450,000 shares, (ii)1.5% of the Company’s common stock outstanding at* December 31of the immediately preceding year, or (iii) such number of shares as determined by the Board. The Board waived the evergreen provision for2022* and2023 andno additional shares were reserved under the2017 ESPP. During the years ended* December 31, 2023and2022*, the Company issued 347,681 and 188,097 shares of common stock under the2017 ESPP, respectively. As of* December 31, 2023*,113,318 shares of common stock remained available for issuance under the2017 ESPP.

The Company estimates the fair value of ESPP grants on their grant date using the Black-Scholes option pricing model. The estimated fair value of ESPP grants is amortized on a straight-line basis over the requisite service period of the grants. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of ESPP grants. The fair value of ESPP grants was estimated using the following weighted-average assumptions:

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Stock-based Compensation

Total stock-based compensation expense recorded in the consolidated statements of operations and comprehensive loss was as follows (in thousands):

As of* December 31, 2023*,not all of the performance conditions of the performance options are probable to be achieved. Compensation expense has only been recognized for those conditions that are assumed to be probable.

Total stock-based compensation expense by award type was as follows (in thousands):

At* December 31, 2023*, there was $9.7 million of unrecognized compensation cost related to unvested stock-based compensation arrangements, which is expected to be recognized over a weighted average period of 4.19 years.

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7. Research Grants and Agreements

Sponsored Research Agreement

The Company entered into a SRA with ODURF during2014 pursuant to which the Company sponsors research activities performed by ODURF’s Frank Reidy Center. ODURF is compensated by the Company for its conduct of each study in accordance with the budget and payment terms set forth in the applicable task order. In* March 2021,the Company agreed to sponsor a task order for research in the amount of $0.3 million and in May 2021sponsored an additional task order for $0.3 million each to be performed during their respective subsequent12*-month periods. These sponsored researches are funded through monthly payments made upon ODURF certifying, to the Company's reasonable satisfaction, that ODURF has met its obligations pursuant to the specified task order and statement of work. The principal investigator* maytransfer funds within the budget as needed with our approval so long as the obligations of ODURF under the task order and statement of work remain unchanged and unimpaired. During the years ended December 31, 2023and2022*, the Company incurred costs relating to the SRA equal tozero and $0.2 million, respectively. As of* December 31, 2023*, there areno unbilled SRAs left under the task orders.

8. Controlled Launch

In* February 2021,the Company received510*(k) clearance from the FDA for its proprietary CellFX System for dermatologic procedures requiring ablation and resurfacing of the skin. In* January 2021,the Company received CE marking approval for the CellFX System, which allows for marketing of the system in the EU for treatment of general dermatologic conditions, including SH, SK, and cutaneous non-genital warts. Additionally, in June 2021the Company received Health Canada approval for the CellFX System, which allows for marketing of the system in Canada for use in dermatological procedures requiring ablation and resurfacing of the skin for the reduction, removal, and/or clearance of cellular-based benign lesions. In February 2021,the Company commenced a controlled launch of the CellFX System in the United States and European Union via its CellFX Expectations Excelled Program (the “Controlled Launch”). Subsequent to receiving Health Canada approval in June 2021,*the Company also commenced its Controlled Launch in Canada.

As part of the Controlled Launch, the Company selected 70 physicians and their practices to be thefirst physician consultants to launch the CellFX System and the associated CellFX commercial procedures into their respective markets and geographies. In the Controlled Launch program, the Company provided and set up a CellFX System at each physician site and provided the physician with the necessary related products and components, free of charge, to complete the requirements of the Controlled Launch program. Each CellFX System and any unused component products remained the property of the Company throughout the Controlled Launch program. Under the Controlled Launch program, each physician was to identify and recruit up to 40 or 50 patients, depending on the contract, for participation in the Controlled Launch, performing a CellFX procedure on each of the appropriately selected patients. The physician and their patients completed evaluation surveys about their experiences with the CellFX System and provided other information helpful to the Company. Upon completion of the procedures and the survey feedback, the physician earned credits to be used towards the future purchase of the CellFX System or, in some jurisdictions, fair payment for their time and effort completing the paperwork required under the Controlled Launch program. Credits earned and, if applicable, any other payments earned were limited to a maximum amount dependent on the number of surveys received by the Company. Upon completion of the Controlled Launch program requirements, each physician could choose to enter into a purchase agreement with the Company, under which the physician could use the credits earned (or other payments earned, as applicable) towards the purchase of the already-delivered CellFX System, or the physician could return the CellFX System to the Company.

As patient procedures and surveys were completed under the Controlled Launch program, the Company accrued the value of the credits earned, which were recorded in accrued expenses, with a corresponding charge to sales and marketing expense. The Company didnot record any sales and marketing expense in relation to the Controlled Launch program for the year ended* December 31, 2023*. The Company recorded an expense of $0.6 million for the year ended* December 31, 2022*. This expense was partially offset by $0.5 million of expense reversal for the return of certain CellFX Systems, resulting in a $0.1 million net sales and marketing expense in relation to the Controlled Launch.

In* September 2022,the Company concluded the Controlled Launch program and notified all remaining program participants. In accordance with the Controlled Launch program, physicians having completed the program requirements could elect to purchase their already delivered CellFX System, applying credits earned, or return the CellFX System to the Company. The Company concluded these efforts in thefourth* quarter of2022 and has discontinued sales of the CellFX System, although the Company continues to offer its disposable treatment tips to dermatologists who have chosen to retain their existing CellFX consoles.

During the year ended* December 31, 2023*, the Company didnot recognize any revenue in relation to the Controlled Launch program. During the year ended* December 31, 2022*, certain consultants completed the Controlled Launch program and entered into purchase agreements with the Company, whereby they used their credits or other earned payments towards the purchase of a CellFX System. Accordingly, approximately $0.4 million of the accrued liability related to the Controlled Launch program was relieved and recognized as revenue on a non-cash basis as a result of these purchases during the year ended* December 31, 2022*. See Note9 for additional detail of revenue transactions.

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9. Revenue

In connection with its Controlled Launch program in dermatology, the Company recognized revenue at a point in time when it satisfied performance obligations by transferring control of promised goods to its customers. The amount of revenue recognized was equal to the consideration which the Company was entitled to in exchange for the promised goods, excluding any amounts assessed by government authorities for taxes which might be collected from a customer. This consideration* mayinclude non-cash services performed, as was the case with revenue recognized in connection with the Controlled Launch program. On September 20, 2022,the Company announced its shift in focus to advance its core NPS technology outside of dermatology and concluded its Controlled Launch program. The Company hasnot recognized any revenue during the year ended December 31, 2023*. Total revenue recognized for the year ended* December 31, 2022*, was $0.7 million of which approximately $0.4 million was driven by the redemption of non-cash credits earned as part of the Controlled Launch, with the balances driven by cash purchases of cycle units (“CUs”) and CellFX commercial consoles sold.

Dermatology sales contracts often involved the sale and delivery of multiple performance obligations in the contract.

Performance Obligations

In the Controlled Launch, systems consisted of the CellFX console and its embedded software, handpieces, and disposable tips. The console was a physical piece of hardware used by the dermatology customer to perform patient procedures. Individually the console and software werenot distinct, therefore the Company combined the console and embedded software to formone distinct system performance obligation. Payment for systems was generally due prior to shipment, and the system performance obligation was satisfied upon shipment of the system to the customer.

Handpieces were attached to the console and used in conjunction with tips to perform patient procedures. Generally, in the Controlled Launch, upon initial sale of a system to a customer, the Company includedtwo handpieces. The handpiece had a shorter expected useful life than the console, and a customer could purchase additional handpieces when needed, as they were available for sale on a stand-alone basis. Payment for handpieces was generally due prior to shipment, and handpieces represented a distinct performance obligation which was satisfied either upon shipment, or upon delivery of the handpiece to the customer, depending on the specific contract.

Tips are single-patient multiple-use products that come in different sizes, each of which are to be used for specific procedures. Tips are attached to the handpiece for use in patient procedures and, upon detachment from the handpiece, a tip cannot be reused, and it must be disposed of. Tips represent a distinct performance obligation which is satisfied either upon shipment, or upon delivery of the tips to the customer, depending on the specific contract.

CUs, which are also still available for existing customers, are credits that authorize the customer to perform a procedure, or cycle. Each procedure requires a specific number of CUs, dependent upon type of tip used and procedure level selected. As the procedure is performed, the applicable number of CUs are decremented. During part of the Controlled Launch, customers purchased CUs; when the customer’s balance of CUs on a specific system was depleted, the system wouldno longer function until the customer purchased additional CUs. At that time, customers could purchase additional CUs via the Company’s CellFX Marketplace which was an online marketplace accessible directly from the CellFX System. Payment for CUs was due upon order placement and the CUs were immediately available for download to the console via CellFX CloudConnect. At that time, CUs represented a distinct performance obligation which was satisfied when CUs were made available for customers to download from the Company’s CellFX CloudConnect, as customers could use purchased CUs at any time at their discretion, and the Company didnot provide any ongoing service or other forms of involvement after the sale occurred.

Shipping and handling activities arenot considered to be a separate performance obligation. The Company’s standard commercial agreements generally include FOB shipping point terms. The Company has made an accounting policy election to account for shipping and handling costs as fulfillment costs because the shipping and handling activities occur after the customer obtains control of the product.

Transaction Price

In the Controlled Launch, the transaction price was the consideration to which the Company expected to be entitled to in exchange for providing the promised goods to customers. Customer orders placed for cash contemplated a fixed amount of consideration. Customer orders placed by physicians participating in the Controlled Launch when they elected to purchase the CellFX System were paid for via conversion of accumulated earned credits for prior services provided by the physicians under the terms of their participation in the Controlled Launch. For these transactions, the transaction price included noncash consideration. The services rendered by the physicians in the Controlled Launch were accounted for separately from the subsequent sales of the CellFX Systems because they were distinct from the system sales. They were distinct because they provided the Company with treatment data that could also be procured, and historically had been procured by the Company, without the corresponding system sales. This data was used by the Company to enhance marketing and promotion of its products.

The Company evaluated the possible impact of variable consideration in determining the transaction price, in particular the possibility of future returns or credits. Still outstanding sales agreements allow for a right of return only if the product doesnot conform to the agreed upon quality standards or if the product was shipped due to Company error. The Company anticipates such returns will be minimal and has madeno adjustments to the transaction price for any estimated returns. The transaction price is determined at the time of the initial revenue recognition and updated each quarter for any changes in circumstances (e.g., changes in estimated return or credit rates).

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes which are imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

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When there are multiple performance obligations present, the total transaction price shall be allocated to each of the performance obligations based upon the relative SSPs of those performance obligations. The Company establishes SSPs based on multiple factors including, prices charged by the Company for similar offerings, product-specific business objectives, and the estimated cost to provide the performance obligation. However, upon the sale of a new CellFX System, all performance obligations are delivered concurrently and therefore there isno impact to revenue recognition timing, and the Company has determined allocations arenot necessary. Should the customer purchase additional CUs, handpieces, or tips at a later time, those purchases will be made under separate purchase agreements, with all promised goods generally transferred at the same time, thereforeno price allocation is necessary in that scenario either.

Controlled Launch Agreements

In* August 2021,the Company began to recognize revenue in relation to the conversion of Controlled Launch Program participants into sales agreements (Note8*). These customers were already in possession of the system, handpiece, and tips. As such, upon execution of these purchase agreements, the Company recognized revenue on the agreements because control of all performance obligations were transferred at that time. These customers separately purchased CUs in order to operate the CellFX System and the revenue for these CUs was recognized upon delivery of the CUs to CellFX CloudConnect.

10. Segment Reporting

The Company operates and manages the business asone reportable and operating segment. The Company’s Chief Executive Officer acts as the CODM of the Company. The CODM reviews the results of the Company on a consolidated basis. In prior year, when making certain operating decisions and assessing performance, the CODM has additionally reviewed the disaggregated revenue results by product and geography. All of the Company’s long-lived assets are based in the United States.

Revenue by product consisted of the following (in thousands):

Revenue by geography consisted of the following (in thousands):

11. Income Taxes

Income (loss) before income taxes (in thousands):

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The components of the provision for income taxes are as follows (in thousands):

State income taxes are immaterial in amount and therefore havenot been recorded in the Consolidated Statements of Operations and Comprehensive Loss for the years ended* December 31, 2023and2022*.

The provision for income taxes differs from the amount estimated by applying the statutory federal income tax rate to income (loss) before taxes as follows:

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Deferred income taxes reflect the impact of carryforwards and temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The carryforwards and temporary differences, which give rise to a significant portion of the Company’s deferred tax asset (liability) as of* December 31, 2023and2022*, are as follows (in thousands):

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The Company’s unrecognized tax benefits as of* December 31, 2023and2022* were $10.2 million and $8.9 million, respectively. If recognized, none of the unrecognized tax benefits would impact income tax expense to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets.

A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands):

The Company’s policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. The Company didnot accrue interest and penalties related to unrecognized tax benefits as of* December 31, 2023* and doesnot anticipate any significant change withintwelve months of this reporting date.

The Company’s valuation allowance increased by $8.1 million in the year ended* December 31, 2023* and increased by $10.8 million in the year ended* December 31, 2022*.

As of* December 31, 2023*, the Company had federal and state net operating loss (“NOL”) carryforwards of $222.0 million and $204.4 million, respectively, which begin to expire in2034. Of the total federal NOL carryforward of $222.0 million, approximately $196.4 million is carried forward indefinitely but is limited to80% of the taxable income.

As of* December 31, 2023*, the Company had approximately $8.6 million and $8.1 million of U.S. federal and California research and development (“R&D”) credits, respectively. The federal R&D credits begin to expire in2035 and the California R&D credits have an indefinite carryforward period.

The Company is subject to taxation in the United States for Federal and for State, within various states in which the Company operates. All jurisdictions and tax years currently remain open for IRS and state taxing authorities’ examination. As of* December 31, 2023*, the Company wasnot under examination by the Internal Revenue Service or any state tax jurisdiction.

Internal Revenue Code Section382 ownership change generally occurs ifone or more stockholders or groups of stockholders who own at least5% of our stock increase their ownership by more than50 percentage points over their lowest ownership percentage within a rollingthree-year period. Similar rules* mayapply under state tax laws. The Company isnot* aware of any ownership changes in this financial period ending on* December 31, 2023*.

12. Related Party Transactions

In* May 2022,the Company determinednot* to renew its annual director and officer liability insurance policy due to disproportionately high premiums quoted by insurance companies. Instead, on* May 31, 2022,the Company and Robert W. Duggan, majority stockholder and Executive Chairman, entered into a letter agreement (the “Letter Agreement”) pursuant to which Mr. Duggan agreed with the Company to personally provide indemnity coverage for aone-year period, and he agreed to deposit cash and/or marketable securities into athird*-party escrow, as security for these obligations, if requested by the Company. On* May 31, 2023,the last day of theone*-year period, the Company paid Mr. Duggan a fee of $1.0 million in consideration of the obligations set forth in the Letter Agreement. As of* December 31, 2023*, there wereno additional amounts owed to Mr. Duggan under the Letter Agreement.

On* June**9,* 2022, the Company completed the2022 Rights Offering resulting in the sale of 7,317,072 Units, at a price of $2.05 per Unit, with each Unit consisting ofone share of the Company’s common stock, par value $0.001 per share, andone 2022 Rights Offering Warrant to purchaseone share of common stock at a price of$2.05 per share. Robert W. Duggan, the Company’s majority stockholder and Executive Chairman, purchased approximately 56% of the shares offered through the2022 Rights Offering.

On* September**20,* 2022, the Company and Robert W. Duggan, the Company's majority stockholder and Executive Chairman, entered into the2022 Loan Agreement in connection with Mr. Duggan lending the principal sum of $65.0 million to the Company. On* April 30, 2023,the Company entered into a Securities Purchase Agreement with Mr. Duggan, pursuant to which the Company agreed to issue and sell to Mr. Duggan 10,022,937 shares of the Company’s common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. These shares were paid for through the cancellation of the amounts then owed by the Company under the2022* Loan Agreement, the principal sum of $65.0 million and all accrued and unpaid interest outstanding, which totaled approximately $0.2 million as of* April 30, 2023.Upon closing of the Private Placement and satisfaction of the outstanding debt, the2022* Loan Agreement terminated, without early termination fees or penalties being owed by the Company.No additional amounts are owed to Mr. Duggan under the2022 Loan Agreement. See Note13 for further details.

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13. Commitments and Contingencies

2022 Loan Agreement

On* September20,* 2022, the Company and Robert W. Duggan, the Company's majority stockholder and Executive Chairman, entered into a Loan Agreement (“2022 Loan Agreement”) in connection with Mr. Duggan lending the principal sum of $65.0 million to the Company. The2022 Loan Agreement bore interest at a rate per annum equal to 5.0%, payable quarterly commencing on* January1,* 2023, with the principal sum payable on* March 20, 2024.On March 17, 2023,the Company and Mr. Duggan amended certain terms of the2022* Loan Agreement. There wereno changes to the interest rate, but the principal sum repayment date was changed to* September 30, 2024.During the year ended December 31, 2023*, the Company made cash payments of $1.7 million for accrued interest on the loan, and recorded an additional $1.1 million of interest expense in relation to the2022 Loan Agreement. On* April 30, 2023,the Company entered into a Securities Purchase Agreement with Mr. Duggan, pursuant to which the Company agreed to issue and sell to Mr. Duggan 10,022,937 shares of the Company’s common stock, par value $0.001 per share, in a Private Placement, at a price per share of $6.51. These shares were paid for through the cancellation of the amounts then owed by the Company under the2022* Loan Agreement, the principal sum of $65.0 million and all accrued and unpaid interest outstanding, which totaled approximately $0.2 million as of* April 30, 2023.The parties completed the Private Placement on May 9, 2023and, upon closing and satisfaction of the outstanding debt, the2022* Loan Agreement terminated, without early termination fees or penalties being owed by the Company.No additional amounts are owed to Mr. Duggan under the2022 Loan Agreement.

Operating Leases

In* January 2017,the Company entered into afive-year lease (the “Existing Lease”) for approximately 15,700 square feet for its corporate headquarters located in Hayward, California. The lease commenced during July 2017.*

In* May 2019,the Company entered into Lease Amendment1* (the “Lease Amendment”) in relation to the Existing Lease and added the lease of new premises of approximately 13,300 square feet and 21,300 square feet, (“Expansion Premises1” and “Expansion Premises2,” respectively). Additionally, the term of the Existing Lease was extended to* October 2029to be coterminous with Expansion Premises1* and Expansion Premises2.

The Company evaluated the lease amendment under the provisions of ASC842. It concluded that the Lease Amendment would be accounted for as a single contract with the Existing Lease because the additional lease payments due to the Lease Amendment wasnot commensurate with the right-of-use asset granted to the Company. Though the Lease Amendment was accounted for as a single contract, the Existing Premises, Expansion Premises1 (occupied in* November 2019)and Expansion Premises2* (occupied in* May 2020)*are accounted for as separate lease components. Accordingly, the Company measured and allocated consideration to each lease component as of the modification date.

During the years ended* December 31, 2023and2022*, rent expense, including common area maintenance charges, was $2.3 million and $2.1 million, respectively.

Supplemental balance sheet information related to leases (in thousands):

Total cash paid for operating lease liabilities (in thousands):

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Maturities of operating lease liabilities were as follows (in thousands):

Weighted-average remaining lease term and discount rate, as of* December**31,* 2023, were as follows:

Legal Proceedings

From time to time, we* maybe involved in a variety of claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, patent infringement, contract disputes, and other matters relating to various claims that arise in the normal course of our business, including the matter described below. The outcome of any legal proceedings is unpredictable but, regardless of outcome, they can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity, reputational harm, and other factors. We maintain insurance that may*provide coverage for such matters, including customary employment practices liability insurance.

In* November 2022,the employment of our former Chief Financial Officer, Sandra Gardiner, terminated. Ms. Gardiner’s departure wasnot* the result of any disagreement with the Company on any matter relating to its operations, accounting policies or practices, although the Company determined that she wasnot eligible to receive any severance benefits under the terms and conditions of her then existing employment agreement. In* March 2023,Ms. Gardiner filed an arbitration demand with JAMS seeking severance benefits and other remedies, alleging breach of contract and unlawful termination in violation of public policy, among other things. We believe that Ms. Gardiner’s claims are without merit and we intend to vigorously defend ourselves against them. Because of the difficulty in predicting the outcome of any legal proceeding, particularlyone* that is in its early stages, the Company isnot able to conclude that a liability is probable and cannot predict what the final outcome of Ms. Gardiner’s arbitration proceeding will likely be or provide a reasonable estimate for the range of ultimate possible loss, if any. However, at this time, we believe that the final resolution of this matter willnot adversely affect our consolidated position, results of operations, or cash flows and that a liability isnot probable at this time.

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14. Restructuring Charges

On* March 31, 2022,the Company initiated a plan to reduce its operating expenses, preserve financial resources, and focus its sales and marketing efforts on increasing utilization of CellFX Systems. The Company’s Board of Directors approved changes to the Company’s commercial leadership, restructuring of its commercial field organization and reductions in other personnel and expenses across the Company. The Company announced a reduction in force effective as of March 31, 2022.The affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance. The Company incurred a discrete restructuring related charge of $0.7 million which was fully recorded in March 2022and the related expenses are included within total cost and expenses on the consolidated statement of operations for the year ended December 31, 2022.This charge represents the total amount to be incurred in connection with the activity. During the year ended December 31, 2022,*the Company paid the entire $0.7 million.

On* September 20, 2022,the Company initiated an additional reduction in force to align its workforce with its shift in strategic direction to advance its core NPS technology outside of dermatology. The reduction primarily impacted dermatological sales, marketing and other related support personnel. The affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance. The Company incurred a discrete restructuring related charge of $0.2 million which was fully recorded in September 2022and the related expenses are included within total cost and expenses on the consolidated statement of operations for the year ended December 31, 2022.During the year ended December 31, 2022,*the Company paid the entire $0.2 million.

In* February 2023,the Company eliminated an additional seven positions and incurred a discrete restructuring related charge of $0.1 million which was fully recorded in February 2023and the related expenses are included within total cost and expenses on the consolidated statement of operations for the year ended December 31, 2023.*This charge represents the total amount incurred in connection with the activity.

15. Employee Benefit Plans

The Company sponsors a defined contribution plan under which it* maymake discretionary contributions. The Company didnot make any employer matching contributions to this plan during the years ended December 31, 2023and2022*.

16. Supplementary Financial Information

There areno retrospective changes to the statements of comprehensive income for any of the quarters within thetwo most recent fiscal years that individually or in the aggregate are material.

17. Subsequent Events

In* March 2024,the Company received FDA510*(k) clearance for its CellFX nsPFA Percutaneous Electrode System for use in the ablation of soft tissue in percutaneous and intraoperative surgical procedures. Having secured regulatory approval to market and sell the CellFX nsPFA Percutaneous Electrode System in the United States, we have initiated a limited market release, targeting a handful of select accounts.

In* March 2024,the Board approved asecond* amendment to the Company’s Inducement Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance pursuant to the Inducement Plan.