Orchestra BioMed Holdings Inc

Previous wording

We are a biomedical innovation company accelerating high-impact technologies to patients through risk-reward sharing partnerships with leading medical device companies. Our partnership-enabled business model focuses on forging strategic collaborations with leading medical device companies to drive successful global commercialization of products we develop. We are led by a highly accomplished, multidisciplinary management team and a board of directors with extensive experience in all phases of therapeutic device development. Our business was formed in 2018 by assembling a pipeline of multiple late-stage clinical product candidates originally developed by our founding team. Our lead product candidate is BackBeat Cardiac Neuromodulation Therapy (“BackBeat CNT”), also known as Atrioventricular Interval Modulation Therapy (“AVIM therapy”), for the treatment of hypertension (“HTN”), the leading risk factor for death

Current wording

We are a biomedical innovation company accelerating high-impact technologies to patients through risk-reward sharing partnerships with leading medical device companies. Our partnership-enabled business model focuses on forging strategic collaborations with leading medical device companies to drive successful global commercialization of products we develop. We are led by a highly accomplished, multidisciplinary management team and a board of directors with extensive experience in all phases of therapeutic device development. Our business was formed in 2018 by assembling a pipeline of multiple late-stage clinical product candidates originally developed by our founding team. Our lead product candidate is atrioventricular interval modulation (“AVIM”) therapy (also known as BackBeat Cardiac Neuromodulation Therapy (“BackBeat CNT”)), for the treatment of hypertension (“HTN”), a significant risk factor for death worldwide.

Previous wording

worldwide. We have an exclusive license and collaboration agreement with Medtronic, Inc. for the development and commercialization of AVIM therapy for the treatment of HTN in patients indicated for a cardiac pacemaker. We are also developing the Virtue Sirolimus AngioInfusion Balloon (“Virtue SAB”) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide. We have a strategic collaboration with Terumo Medical Corporation (“Terumo”) for the development and commercialization of Virtue SAB for the treatment of coronary and peripheral artery disease.

Current wording

We have an exclusive license and collaboration agreement with Medtronic, Inc. for the development and commercialization of AVIM therapy for the treatment of HTN in patients indicated for a cardiac pacemaker. We are also developing the Virtue Sirolimus AngioInfusion Balloon (“Virtue SAB”) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide. We have a strategic collaboration with Terumo Medical Corporation (“Terumo”) for the development and commercialization of Virtue SAB for the treatment of coronary and peripheral artery disease.

Previous wording

Since Legacy Orchestra’s inception, we have devoted the substantial majority of our resources to performing research and development and clinical activities in support of our product development and collaboration efforts. We have funded our operations primarily through the issuance of convertible preferred stock and proceeds from the Business Combination, as well as through proceeds our distribution agreement with Terumo (the “Terumo Agreement”), borrowings under debt arrangements and, to a lesser extent, from product revenue from our subsidiary, FreeHold Surgical, LLC. (“FreeHold”). We have raised a cumulative $166.8 million in gross proceeds through the issuance of convertible preferred stock, $70.0 million in gross proceeds from the Business Combination, and have received $30.0 million from the Terumo Agreement through March 31, 2024. We have incurred net losses each year since inception. Our net losses were $13.5 million and $10.9 million for the three months ended March 31, 2024 and 2023, respectively. We expect to continue to incur significant losses for the foreseeable future. As of March 31, 2024, we had an accumulated deficit of $262.3 million.

Current wording

Since Legacy Orchestra’s inception, we have devoted the substantial majority of our resources to performing research and development and clinical activities in support of our product development and collaboration efforts. We have funded our operations primarily through the issuance of convertible preferred stock and proceeds from the Business Combination, as well as through proceeds from our distribution agreement with Terumo (the “Terumo Agreement”), borrowings under debt arrangements and, to a lesser extent, from product revenue from our subsidiary, FreeHold Surgical, LLC. (“FreeHold”). We have raised a cumulative $166.8 million in gross proceeds through the issuance of convertible preferred stock, $70.0 million in gross proceeds from the Business Combination, and have received $30.0 million from the Terumo Agreement through June 30, 2024. We have incurred net losses each year since inception. Our net losses were $29.4 million and $23.0 million for the six months ended June 30, 2024 and 2023, respectively. We expect to continue to incur significant losses for the foreseeable future. As of June 30, 2024, we had an accumulated deficit of $278.3 million.

Previous wording

Due to the significant number of redemptions of HSAC2’s ordinary shares in connection with the Business Combination, there was a significantly lower number of HSAC2 ordinary shares that converted into shares of Company Common Stock in connection with the Business Combination. Pursuant to the Amended and Restated Registration Rights Agreement we entered into in connection with the closing of the Business Combination and certain warrant agreements, the Company has filed a registration statement (the “Registration Statement”) that registers, among other things, the resale of an aggregate of 18,586,201 shares of Company Common Stock, which constitutes approximately 52% of the outstanding Company Common Stock as of May 1, 2024. Additionally, some of the shares of the Company Common Stock being registered for resale were originally purchased by selling stockholders pursuant to investments in Legacy Orchestra or HSAC2 at prices considerably below the current market price of the Company Common Stock. These selling stockholders may realize a positive rate of return on the sale of their shares of Company Common Stock covered by the Registration Statement and therefore will have an incentive to sell their shares. Public shareholders may not experience a similar rate of return on shares of Company Common Stock they purchased. This discrepancy in purchase prices may have an impact on the market perception of the Company Common Stock’s value and could increase the volatility of the market price of the Company Common Stock or result in a significant decline in the public trading price of the Company Common Stock. The registration of these shares of Company Common Stock for resale creates the possibility of a significant increase in the supply of the Company Common Stock in the market. The increased supply, coupled with the potential disparity in purchase prices, may lead to heightened selling pressure, which could negatively affect the public trading price of our Common Stock.

Current wording

Due to the significant number of redemptions of HSAC2’s ordinary shares in connection with the Business Combination, there was a significantly lower number of HSAC2 ordinary shares that converted into shares of Company Common Stock in connection with the Business Combination. Pursuant to the Amended and Restated Registration Rights Agreement we entered into in connection with the closing of the Business Combination and certain warrant agreements, we filed a registration statement (the “Registration Statement”), which was declared effective on May 9, 2024, that registers, among other things, the resale of an aggregate of 18,586,201 shares of Company Common Stock, which constitutes approximately 49% of the outstanding Company Common Stock as of August 7, 2024. Additionally, some of the shares of the Company Common Stock being registered for resale were originally purchased by selling stockholders pursuant to investments in Legacy Orchestra or HSAC2 at prices considerably below the current market price of the Company Common Stock. These selling stockholders may realize a positive rate of return on the sale of their shares of Company Common Stock covered by the Registration Statement and therefore will have an incentive to sell their shares. Public shareholders may not experience a similar rate of return on shares of Company Common Stock they purchased. This discrepancy in purchase prices may have an impact on the market perception of the Company Common Stock’s value and could increase the volatility of the market price of the Company Common Stock or result in a significant decline in the public trading price of the Company Common Stock. The registration of these shares of Company Common Stock for resale creates the possibility of a significant increase in the supply of the Company Common Stock in the market. The increased supply, coupled with the potential disparity in purchase prices, may lead to heightened selling pressure, which could negatively affect the public trading price of our Common Stock.

Previous wording

To date, our partnership revenues have related to the Terumo Agreement described below. In future periods, partnership revenues may also include revenues related to the Exclusive License and Collaboration Agreement, dated as of September 30, 2022, by and among, Legacy Orchestra, BackBeat Medical, LLC and Medtronic, Inc. (an affiliate of Medtronic plc) (the “Medtronic Agreement”), discussed in Note 5,Medtronic Agreement, to the Consolidated Financial Statements.

Current wording

To date, our partnership revenues have related to the Terumo Agreement described below. In future periods, partnership revenues may also include revenues related to the Exclusive License and Collaboration Agreement, dated as of September 30, 2022, by and among, Legacy Orchestra, BackBeat Medical, LLC and Medtronic, Inc. (an affiliate of Medtronic plc) (the “Medtronic Agreement”), discussed in Note 5 to the Consolidated Financial Statements.

Previous wording

We recorded the $30.0 million upfront payment received in 2019 from Terumo within deferred revenue and are recognizing the upfront payment over time based on a proportional performance model based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the development of the Coronary in ISR indication, for which we are primarily responsible. We have recognized $13.1 million in cumulative partnership revenues from 2019 through March 31, 2024. There were no other proceeds received pursuant to the Terumo Agreement from 2019 through March 31, 2024.

Current wording

We recorded the $30.0 million upfront payment received in 2019 from Terumo within deferred revenue and are recognizing the upfront payment over time based on a proportional performance model based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the development of the Coronary in ISR indication, for which we are primarily responsible. We have recognized $13.7 million in cumulative partnership revenues from 2019 through June 30, 2024. There were no other proceeds received pursuant to the Terumo Agreement from 2019 through June 30, 2024.

Previous wording

In June 2022, Legacy Orchestra entered into the Medtronic Agreement for the development and commercialization of AVIM therapy for the treatment of HTN in patients indicated for a cardiac pacemaker. We have determined that the arrangement is a collaboration within the scope ofASC 808, Collaborative Arrangements(“ASC 808”). In addition, we

Current wording

In June 2022, Legacy Orchestra entered into the Medtronic Agreement for the development and commercialization of AVIM therapy for the treatment of HTN in patients indicated for a cardiac pacemaker. We have determined that the arrangement is a collaboration within the scope of ASC 808,* Collaborative Arrangements*(“ASC 808”). In addition, we concluded that Medtronic, Inc., an affiliate of Medtronic plc (“Medtronic”), is a customer for a good or service that is a

Previous wording

concluded that Medtronic, Inc., an affiliate of Medtronic plc (“Medtronic”), is a customer for a good or service that is a distinct unit of account, and therefore, the transactions in the Medtronic Agreement should be accounted for under ASC 606. Through March 31, 2024, there have been no amounts recognized as revenue under the Medtronic Agreement.

Current wording

distinct unit of account, and therefore, the transactions in the Medtronic Agreement should be accounted for under ASC 606. Through June 30, 2024, there have been no amounts recognized as revenue under the Medtronic Agreement.

Previous wording

Cost of product revenue consists primarily of costs of finished goods components for use in FreeHold’s products and assembled, warehoused and inventoried by a third-party vendor. We expect cost of finished goods product revenue to increase in absolute terms as our revenue grows.

Current wording

Cost of product revenue consists primarily of costs of finished goods components for use in FreeHold’s products and assembled, warehoused and inventoried by a third-party vendor. We expect the cost of finished goods product revenue to increase in absolute terms as our revenue grows.

Previous wording

Our gross margin has been and will continue to be affected by a variety of factors, including finished goods manufactured component parts and the cost to assemble and warehouse the FreeHold product finished goods inventory.

Current wording

Our gross margin has been, and will continue to be, affected by a variety of factors, including finished goods manufactured component parts, as well as the cost to assemble and warehouse the FreeHold product finished goods inventory.

Previous wording

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits, bonus, travel and stock-based compensation. Other selling, general and administrative expenses include professional services fees, including legal, audit investor/public relations, and insurance costs, outside consultants costs, employee recruiting and training costs, and non-income taxes. Moreover, we incur and expect to continue to incur additional expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and U.S. Securities

Current wording

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits, bonus, travel and stock-based compensation. Other selling, general and administrative expenses include professional services fees, including legal, audit, investor/public relations, and insurance costs, outside consultants costs, employee recruiting and training costs, and non-income taxes. Moreover, we incur and expect to continue to incur additional expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and SEC

Previous wording

and Exchange Commission (“SEC”) compliance and investor relations. We expect quarterly selling, general and administrative expenses, excluding stock-based compensation expense, to continue to increase as a public company.

Current wording

compliance and investor relations. We expect quarterly selling, general and administrative expenses, excluding stock-based compensation expense, to continue to increase as a public company.

Previous wording

The (loss) gain on fair value of strategic investments represents a change in the fair value of our investment in Motus GI Holdings, Inc. (“Motus GI”), a publicly-held company and related party, and preferred shares and convertible notes of Vivasure Medical Limited (“Vivasure”), a privately-held company and related party. The shares held of Motus GI represent equity securities with a readily determinable fair value and are required to be measured at fair value at each reporting period using readily determinable pricing available on a securities exchange, in accordance with the provisions of ASU 2016-01,Recognition and Measurement of Financial Assets and Liabilities. The investments in Vivasure do not have readily determinable fair values and are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Current wording

The loss on fair value of strategic investments represents a change in the fair value of our investment in Motus GI Holdings, Inc. (“Motus GI”), a publicly-held company and related party, and preferred shares and convertible notes of Vivasure Medical Limited (“Vivasure”), a privately-held company and related party. The shares held of Motus GI represent equity securities with a readily determinable fair value and are required to be measured at fair value at each reporting period using readily determinable pricing available on a securities exchange, in accordance with the provisions of ASU 2016-01. The investments in Vivasure do not have readily determinable fair values and are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Previous wording

On September 12, 2023, Motus GI and the Company entered into an agreement, pursuant to which royalty certificates previously issued to the Company and other holders were amended to terminate the rights of royalty certificate holders to receive royalties in exchange for shares of Motus GI common stock. As a result of the agreement, we received 701,522 shares of Motus GI common stock in exchange for our royalty certificates, which had a de minimis carrying value.

Current wording

On September 12, 2023, we and Motus GI entered into an agreement, pursuant to which royalty certificates previously issued to us and other holders were amended to terminate the rights of royalty certificate holders to receive royalties in exchange for shares of Motus GI common stock. As a result of the agreement, we received 701,522 shares of Motus GI common stock in exchange for our royalty certificates, which had a de minimis carrying value.

Previous wording

Research and development expenses increased by $858,000, or approximately 10%, to $9.1 million for the three months ended March 31, 2024 from $8.3 million for the three months ended March 31, 2023. This is primarily due to an increase in support of ongoing work to advance the BACKBEAT pivotal study and to advance Virtue SAB into a planned pivotal study and included an increase in personnel related expenses of $82,000 due to increased headcount and associated expenses, along with increased stock-based compensation of $405,000, a decrease of $760,000 in non-clinical development costs, and an increase of $1.1 million in research and development program costs, supplies, and testing.

Current wording

Research and development expenses increased by $3.4 million, or approximately 21%, to $20.2 million for the six months ended June 30, 2024 from $16.8 million for the six months ended June 30, 2023. This is primarily due to an increase in support of ongoing work to advance the BACKBEAT pivotal study and to advance Virtue SAB into a planned pivotal study and included an increase in personnel related expenses of $753,000 due to increased headcount and associated expenses, along with increased stock-based compensation of $774,000, an increase of $1.5 million in non-clinical development costs, and an increase of $483,000 in research and development program costs, supplies, and testing.

Previous wording

Selling, general and administrative expenses increased by $1.5 million, or approximately 34%, to $5.9 million for the three months ended March 31, 2024, from $4.4 million of expense for the three months ended March 31, 2023. The increase primarily resulted from an increase in stock-based compensation of $694,000 and an increase of $536,000 of accounting, finance, legal, investor relations and public relations expenses incurred in connection with the overall growth of the business and being a public company.

Current wording

Selling, general and administrative expenses increased by $2.6 million, or approximately 27%, to $12.4 million for the six months ended June 30, 2024, from $9.7 million of expense for the six months ended June 30, 2023. The increase primarily resulted from an increase in stock-based compensation of $1.4 million and an increase of $1.1 million of accounting, finance, legal, investor relations and public relations expenses incurred in connection with the overall growth of the business and being a public company.

Previous wording

The loss on fair value adjustment of warrant liability was $294,000 for the three months ended March 31, 2023 and was the result of the final valuation of our outstanding warrants when they had become equity classified and no longer subject to market adjustment upon the close of the Business Combination. There were no additional charges for the adjustment of fair value for warrant liability after the three months ended March 31, 2023.

Current wording

The loss on fair value adjustment of warrant liability was $294,000 for the six months ended June 30, 2023 and was the result of the final valuation of our outstanding warrants when they had become equity classified and no longer subject to market adjustment upon the close of the Business Combination. There were no additional charges for the adjustment of fair value for warrant liability after the six months ended June 30, 2023.

Previous wording

The (loss) gain on fair value of strategic investments was a loss of $45,000 for the three months ended March 31, 2024, as compared to a gain of $14,000 for the three months ended March 31, 2023. The amounts recognized for the three months ended March 31, 2024 and 2023 related to the change in fair value in our common stock holdings of Motus GI.

Current wording

The loss on fair value of strategic investments was $68,000 for the six months ended June 30, 2024, as compared to a loss of $17,000 for the six months ended June 30, 2023. The amounts recognized for the six months ended June 30, 2024 and 2023 related to the change in fair value in our common stock holdings of Motus GI.

Previous wording

Partnership revenue decreased by $522,000, or approximately 51%, to $497,000 in the three months ended March 31, 2024 from $1.0 million for the three months ended March 31, 2023. Partnership revenue relates to the recognition of the combined performance obligation for the license granted to Terumo and the ongoing research and development services over the estimated performance period for the Virtue SAB Coronary ISR indication, using a proportional performance model, based on the costs incurred relative to the total estimated costs of the research and development services. As of each quarterly reporting date, we evaluate our estimates of the total costs expected to be incurred through the completion of the combined performance obligation and update our estimates as necessary.

Current wording

Partnership revenue decreased by $100,000, or approximately 14%, to $628,000 in the three months ended June 30, 2024 from $728,000 for the three months ended June 30, 2023. Partnership revenue relates to the recognition of the combined performance obligation for the license granted to Terumo and the ongoing research and development services over the estimated performance period for the Virtue SAB Coronary ISR indication, using a proportional performance model, based on the costs incurred relative to the total estimated costs of the research and development services. As of each quarterly reporting date, we evaluate our estimates of the total costs expected to be incurred through the completion of the combined performance obligation and update our estimates as necessary.

Previous wording

For the three months ended March 31, 2024 and 2023, the expenses incurred related to the Terumo Agreement were approximately $2.9 million and $3.8 million, respectively. The estimated total costs associated with the Terumo Agreement through completion increased by approximately 1.2% as of March 31, 2024 as compared to the estimates as of December 31, 2023, and decreased by approximately 0.7% as of March 31, 2023, as compared to the estimates as of December 31, 2022.

Current wording

For the three months ended June 30, 2024 and 2023, the expenses incurred related to the Terumo Agreement were approximately $4.0 million and $4.5 million, respectively. The estimated total costs associated with the Terumo Agreement through completion increased by approximately 1.6% as of June 30, 2024 as compared to the estimates as of March 31, 2024, and increased by approximately 3.2% as of June 30, 2023, as compared to the estimates as of March 31, 2023.

Previous wording

Cost of product revenue decreased by $10,000, or approximately 23%, to $34,000 in the three months ended March 31, 2024 from $44,000 for the three months ended March 31, 2023. The decrease was primarily due to decreased sales of FreeHold Duo and Trio intracorporeal organ retractors.

Current wording

Cost of product revenue decreased by $10,000, or approximately 19%, to $44,000 in the three months ended June 30, 2024 from $54,000 for the three months ended June 30, 2023. The decrease was primarily due to decreased sales of FreeHold Duo and Trio intracorporeal organ retractors.

Previous wording

The total research and development expenses summarized above include $2.8 million for the three months ended March 31, 2024 and $3.8 million for the three months ended March 31, 2023 related to the Terumo Agreement. The decrease of $1.0 million is due to decreased expense activity related to the Terumo Agreement during the 2024 period.

Current wording

The total research and development expenses summarized above include $4.0 million for the three months ended June 30, 2024 and $4.4 million for the three months ended June 30, 2023 related to the Terumo Agreement. The decrease of $453,000 is due to decreased expense activity related to the Terumo Agreement during the 2024 period.

Previous wording

Interest income, net, increased by $131,000 to $1.0 million of income for the three months ended March 31, 2024, from $885,000 of income for the three months ended March 31, 2023. The net interest income in the 2024 period consisted primarily of interest earned from marketable securities while the net interest income in the 2023 period consisted primarily of interest earned from marketable securities offset by monthly interest expense incurred resulting from the 2022 Loan and Security Agreement.

Current wording

Interest income, net, decreased by $39,000, or approximately 4%, to $902,000 of income for the three months ended June 30, 2024, from $941,000 of income for the three months ended June 30, 2023. The net interest income in the 2024 period consisted primarily of interest earned from marketable securities while the net interest income in the 2023 period consisted primarily of interest earned from marketable securities offset by monthly interest expense incurred resulting from the 2022 Loan and Security Agreement.

Previous wording

From inception through March 31, 2024, we have incurred significant operating losses and negative cash flows from our operations. Our net losses were $13.5 million and $10.9 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $262.3 million. We have funded our operations primarily through the issuance of convertible preferred stock and proceeds from the Business Combination, as well as through proceeds from the Terumo Agreement, borrowings under debt arrangements and, to a lesser extent, from FreeHold product revenue. We have raised a cumulative $166.8 million in gross proceeds through the issuance of convertible preferred stock, $70.0 million in gross proceeds from the Business Combination, and have received $30.0 million under the Terumo Agreement through March 31, 2024. We had $23.3 million in cash and cash equivalents at March 31, 2024, which consisted primarily of bank deposits and money market funds. We also had $51.7 million of short-term marketable securities at March 31, 2024, which consisted primarily of our investments in corporate and government debt securities.

Current wording

From inception through June 30, 2024, we have incurred significant operating losses and negative cash flows from our operations. Our net losses were $29.4 million and $23.0 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $278.3 million. We have funded our operations primarily through the issuance of convertible preferred stock and proceeds from the Business Combination, as well as through proceeds from the Terumo Agreement, borrowings under debt arrangements and, to a lesser extent, from FreeHold product revenue. We have raised a cumulative $166.8 million in gross proceeds through the issuance of convertible preferred stock, $70.0 million in gross proceeds from the Business Combination, and have received $30.0 million under the Terumo Agreement through June 30, 2024. We had $23.7 million in cash and cash equivalents at June 30, 2024, which consisted primarily of bank deposits and money market funds. We also had $41.5 million of short-term marketable securities at June 30, 2024, which consisted primarily of our investments in corporate and government debt securities.

Previous wording

We continue to prioritize planned spending on our BackBeat CNT (AVIM therapy) program and the execution of our BACKBEAT pivotal study, for which we announced the commencement of enrollment on January 8, 2024. As previously disclosed, we have also reduced our 2024 planned spending related to our Virtue SAB program and the execution of our Virtue ISR-US pivotal study, for which we announced conditional IDE approval from the FDA on August 8, 2023. With regard to our Virtue SAB program and our planned Virtue ISR-US pivotal study, we have delayed initiation of this study until such time as we (1) consider the clinical study design implications of the recent FDA approval of BSC’s AGENT paclitaxel DCB for the treatment of coronary ISR; and (2) restructure our partnership agreement with Terumo in a manner that provides us with a satisfactory amount of additional capital, whether from equity investment, milestone payments or other financial arrangements, which additional capital we may not receive. With regard to our AVIM therapy program and our planned BACKBEAT pivotal study, we currently expect operating expenses to increase to support clinical study costs as well as additional research and development expenses in support of future potential regulatory approval and commercialization of AVIM therapy-enabled Medtronic pacemakers.

Current wording

We continue to prioritize planned spending on our BackBeat CNT (AVIM therapy) program and the execution of our BACKBEAT pivotal study, for which we announced the commencement of enrollment on January 8, 2024. As previously disclosed, we have also reduced our 2024 planned spending related to our Virtue SAB program and the execution of our Virtue ISR-US pivotal study, for which we announced conditional IDE approval from the FDA on August 8, 2023. With regard to our Virtue SAB program and our planned Virtue ISR-US pivotal study, we have delayed initiation of this study until such time as we (1) consider the clinical study design implications of the recent FDA approval of BSC’s AGENT paclitaxel DCB for the treatment of coronary ISR; and (2) restructure our partnership agreement with Terumo in a manner that provides us with a satisfactory amount of additional capital, whether from equity investment, milestone payments or other financial arrangements, which additional capital we may not receive. With regard to our AVIM therapy program and

Previous wording

manufacturing efforts, as well as the potential receipt of revenues or other payments or investments under a restructured Terumo Agreement, the Medtronic Agreement and/or future collaborations, and the realization of cash from the sale of some or all of our strategic holdings, most notably, Vivasure Medical. There are no assurances that any of these factors will be favorable to us, and we may need to seek additional sources of liquidity to meet our funding requirements earlier than current estimates, including further potential cost cutting associated with our Virtue SAB program, the issuance of new equity, drawdowns on new loan facilities, and/or other financing structures.

Current wording

Based on internally prepared budget estimates that reflect our operating priorities, we anticipate that our cash, cash equivalents, marketable securities, and potential future proceeds described below are sufficient to fund our operations into the second half of 2026. The amount and timing of our future funding requirements may change from this current estimate and are dependent on many factors, including the cost and pace of execution of clinical studies and research and development activities, the strength of results from clinical studies and other research, development and manufacturing efforts, as well as the potential receipt of revenues or other payments or investments under a restructured Terumo Agreement, the Medtronic Agreement and/or future collaborations, and the realization of cash from the sale of some or all of our strategic holdings, most notably, Vivasure Medical. There are no assurances that any of these factors will be favorable to us, and we may need to seek additional sources of liquidity to meet our funding requirements earlier than current estimates, including further potential cost cutting associated with our Virtue SAB program, the issuance of new equity, drawdowns on new loan facilities, and/or other financing structures. In this regard, as of the date of this Quarterly Report on Form 10-Q, we may sell from time to time, up to approximately $84.5 million of additional ATM Shares under the Sale Agreement.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $13.1 million and primarily consisted of our net loss of $13.5 million and changes in net operating assets and liabilities of $1.8 million, which was offset by non-cash charges of $2.2 million. Our non-cash charges primarily consisted of stock-based compensation of $2.6 million, offset by $589,000 related to accretion and interest of marketable securities. The net change in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $1.3 million, an increase in prepaid expenses and other assets of $60,000, and a decrease in deferred revenue of $497,000.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $23.3 million and primarily consisted of our net loss of $29.4 million and changes in net operating assets and liabilities of $1.2 million, which was partially offset by non-cash charges of $4.9 million. Our non-cash charges primarily consisted of stock-based compensation of $5.3 million, partially offset by $914,000 related to accretion and interest of marketable securities. The net change in operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $2.4 million and a decrease in deferred revenue of $1.1 million.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023, was $14.4 million and primarily consisted of our net loss of $10.9 million, and changes in net operating assets and liabilities of $4.4 million, which was offset by non-cash charges of $975,000. Our non-cash charges primarily consisted of a loss on fair value adjustment of warrant liability of $294,000 and stock-based compensation of $1.5 million, offset by $1.0 million related to accretion and interest of marketable securities. The net change in operating assets and liabilities were primarily due to a decrease in accounts payable and accrued expenses of $1.8 million, an increase in prepaid expenses and other assets of $1.5 million, and a decrease in deferred revenue of $1.0 million and various other immaterial changes.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023, was $24.9 million and primarily consisted of our net loss of $23.0 million, and changes in net operating assets and liabilities of $3.8 million, which was partially offset by non-cash charges of $1.9 million. Our non-cash charges primarily consisted of a loss on fair value adjustment of warrant liability of $294,000 and stock-based compensation of $3.2 million, partially offset by $2.1 million related to accretion and interest of marketable securities. The net change in operating assets and liabilities were primarily due to a decrease in accounts payable and accrued expenses of $1.0 million, an increase in prepaid expenses and other assets of $723,000, and a decrease in deferred revenue of $1.7 million and various other immaterial changes.

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2024 was $5.9 million, which primarily consisted of marketable securities purchases of $23.7 million offset by the maturities of marketable securities of $29.6 million.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2024 was $16.3 million, which primarily consisted of marketable securities purchases of $42.4 million offset by the maturities of marketable securities of $58.8 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2023 was $43.5 million, which consisted of the purchase of $43.5 million of marketable securities, and $35,000 of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2023 was $35.4 million, which primarily consisted of the purchase of $99.5 million of marketable securities, offset by the sale of $64.2 million of marketable securities.

Previous wording

Net cash provided by financing activities of $18,000 for the three months ended March 31, 2024 was primarily attributable to exercises of stock options.

Current wording

Net cash provided by financing activities of $189,000 for the six months ended June 30, 2024 was primarily attributable to exercises of stock options.

Previous wording

Net cash provided by financing activities of $56.8 million for the three months ended March 31, 2023 was attributable to net proceeds from the Business Combination. For additional information, see Note 3 to the Consolidated Financial Statements.

Current wording

Net cash provided by financing activities of $56.9 million for the six months ended June 30, 2023 was primarily attributable to net proceeds from the Business Combination. For additional information, see Note 3 to the Consolidated Financial Statements.

Previous wording

Our revenues are currently comprised of product revenue from the sale of FreeHold’s intracorporeal organ retractors and partnership revenues under the Terumo Agreement related to the development and commercialization of Virtue SAB.

Current wording

Our revenues are currently comprised of partnership revenues under the Terumo Agreement related to the development and commercialization of Virtue SAB, and product revenue from the sale of FreeHold’s intracorporeal organ retractors.

Previous wording

of measuring progress for purposes of recognizing revenues relates to a proportional performance model that measures the proportional performance based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the performance obligation. We evaluate the measure of progress at each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Current wording

We have determined that intellectual property licensed to Terumo and the research and development services to be provided to support the premarket approval by the FDA for the ISR indication represent a combined performance obligation that is satisfied over time, which is currently estimated to be completed in 2029, and that the appropriate method of measuring progress for purposes of recognizing revenues relates to a proportional performance model that measures the proportional performance based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the performance obligation. We evaluate the measure of progress at each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Previous wording

In the three months ended March 31, 2024, we updated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation. The impact of the changes in estimates resulted in a reduction in partnership revenues of $153,000, which resulted in an immaterial effect on net loss per share, basic and diluted. In the three months ended March 31, 2023, the impact of the changes in estimates resulted in an increase of partnership revenues of $81,000, which resulted an immaterial effect on net loss per share, basic and diluted.

Current wording

In the six months ended June 30, 2024, we updated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation. The impact of the changes in estimates resulted in a reduction in partnership revenues of $382,000, which resulted in a $0.01 effect on net loss per share, basic and diluted. In the six months ended June 30, 2023, the impact of the changes in estimates resulted in a reduction of partnership revenues of $303,000, which resulted in a $0.01 effect on net loss per share, basic and diluted.

Previous wording

During the three months ended March 31, 2024 and 2023, stock-based compensation was $2.6 million and $1.5 million, respectively. As of March 31, 2024, we had approximately $16.6 million of total unrecognized stock-based compensation, which we expect to recognize over a weighted-average period of approximately 2.0 years.

Current wording

During the three months ended June 30, 2024 and 2023, stock-based compensation was $2.8 million and $1.7 million, respectively. During the six months ended June 30, 2024 and 2023, stock-based compensation was $5.3 million and $3.2 million, respectively. As of June 30, 2024, we had approximately $20.8 million of total unrecognized stock-based compensation, which we expect to recognize over a weighted-average period of approximately 2.4 years.

Previous wording

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Current wording

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding