ESTABLISHMENT LABS HOLDINGS INC

Previous wording

We have devoted a majority of our resources since inception to developing our Motiva Implants, which we began selling in October 2010. We have incurred net losses in each year since inception, and we have financed our operations primarily through equity financings and debt financings. We are currently seeking FDA approval to sell Motiva Implants in the United States. We obtained an investigational device exemption, or IDE, from the FDA in March 2018 to conduct a clinical trial for the Motiva Implants and, in February 2023, we submitted the last of the four required modules to the FDA. In October 2023, the FDA granted 510(k) clearance for the Motiva Flora SmoothSilk Tissue Expander. In April 2024, the FDA scheduled a preapproval inspection of our manufacturing facility in Costa Rica for Motiva Implants, scheduled to occur in the second quarter of 2024.

Current wording

We have devoted a majority of our resources since inception to developing our Motiva Implants, which we began selling in October 2010. We have incurred net losses in each year since inception, and we have financed our operations primarily through equity financings and debt financings. We are currently seeking FDA approval to sell Motiva Implants in the United States. We obtained an investigational device exemption, or IDE, from the FDA in March 2018 to conduct a clinical trial for the Motiva Implants and, in February 2023, we submitted the last of the four required modules to the FDA. At the end of July 2024, the FDA completed its PMA preapproval inspection of our manufacturing facility for Motiva Implants in Costa Rica.

Previous wording

In April 2023, we presented three-year patient follow-up data for the primary augmentation cohort of the IDE clinical trial at The Aesthetic Meeting. The preliminary results for the primary augmentation cohort's four-year patient follow-up data, which we released in May 2024, indicated that our rates of capsular contracture and rupture have remained unchanged for the past two years. At year four, there are still only two patients with capsular contracture, which equates to one in 200 women, and only one patient with a suspected rupture.

Current wording

In April 2023, we presented three-year patient follow-up data for the primary augmentation cohort of the IDE clinical trial at The Aesthetic Meeting. The preliminary results for the primary augmentation cohort's four-year patient follow-up data, which we released in May 2024, indicated that our rates of capsular contracture and rupture have remained unchanged for the past two years. These preliminary results indicated that, at year four, there are still only two patients with capsular contracture, which equates to one in 200 women, and only one patient with a suspected rupture.

Previous wording

Our revenue for the three months ended March 31, 2024 and 2023 was $37.2 million and $46.5 million, respectively, a decrease of $9.3 million, or 20.0%. Net losses were $16.2 million for the three months ended March 31, 2024 as compared to $11.9 million for the three months ended March 31, 2023. As of March 31, 2024 we had an accumulated deficit of $376.3 million.

Current wording

Our revenue for the six months ended June 30, 2024 and 2023 was $81.3 million and $95.1 million, respectively, a decrease of $13.8 million, or 14.5%. Net losses were $33.4 million for the six months ended June 30, 2024 as compared to $28.7 million for the six months ended June 30, 2023. As of June 30, 2024 we had an accumulated deficit of $393.5 million.

Previous wording

Our cash balance as of March 31, 2024 was $73.0 million.

Current wording

Our cash balance as of June 30, 2024 was $54.6 million.

Previous wording

We are in the process of expanding our manufacturing facilities and corporate offices in the Coyol Free Zone, or CFZ, in Costa Rica, which includes approximately 100,000 square feet of facility space intended to increase our manufacturing capacity by approximately 730,000 units per year. We estimate a total of $55.5 million in costs for this initial phase of our expansion project, of which the majority has been incurred to date. Additional phases of the project may be executed, at our option, to further expand manufacturing capacity at the new facility. We expect to commence manufacturing from the new facility in the second half of 2024. See Note 3 “Balance Sheet Accounts” for additional information.

Current wording

In June 2024, we finalized the construction of our manufacturing and corporate offices in the Coyol Free Zone, or CFZ, in Costa Rica, which includes approximately 100,000 square feet of facility space intended to increase our manufacturing capacity by approximately 730,000 units per year. The facility obtained necessary regulatory approvals to commence manufacturing. We incurred approximately $56.0 million in costs for this phase of the project. Additional phases of the project may be executed, at our option, to further expand manufacturing capacity at the new facility.

Previous wording

In addition, in October 2023, we completed and announced the results of the two-year 100-patient clinical study for Mia Femtech, our patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia. The single-center, Institutional Review Board approved study began in December 2020 and involved participation of fifteen board-certified plastic surgeons from Costa Rica, Sweden, England, Brazil, Austria, Italy, Belgium, and the United States. We have launched Mia Femtech globally through partnerships with clinics in Japan, Spain, Switzerland, Sweden, Germany, France, Costa Rica, Turkey and the Middle East. In October 2023, we also launched, in select geographies, Zen - the newest generation of our passive RFID technology that is now non-ferromagnetic. Zen is available with Motiva Ergonomix2 Round implants in the Joy program.

Current wording

In addition, in October 2023, we completed and announced the results of the two-year 100-patient clinical study for Mia Femtech, our patented technologies that can increase breast shape by 1 to 2 cups in a 15-minute procedure without the need for general anesthesia. The single-center, Institutional Review Board approved study began in December 2020 and involved participation of fifteen board-certified plastic surgeons from Costa Rica, Sweden, England, Brazil, Austria, Italy, Belgium, and the United States. We have launched Mia Femtech globally through partnerships with clinics in a number of countries including Japan, Spain, Switzerland, Sweden, Germany, France, Costa Rica, Turkey and the Middle East. In October 2023, we also launched, in select geographies, Zen - the newest generation of our passive RFID technology that is now non-ferromagnetic. Zen is available with Motiva Ergonomix2 Round implants in the Joy program.

Previous wording

In January 2024, we entered into a securities purchase agreement with select institutional accredited investors to sell 1,101,565 common shares and pre-funded warrants to purchase 898,435 common shares. The pre-funded warrants are exercisable immediately, at a price of $0.001 per share, until exercised in full. Net proceeds to us form the offering, after deducting offering expenses, were approximately $49.7 million. See Note 7 “Shareholders’ Equity” for additional information.

Current wording

In January 2024, we entered into a securities purchase agreement with select institutional accredited investors to sell 1,101,565 common shares and pre-funded warrants to purchase 898,435 common shares. The pre-funded warrants are exercisable immediately, at a price of $0.001 per share, until exercised in full. Net proceeds to us from the offering, after deducting offering expenses, were approximately $49.7 million. See Note 7 “Shareholders’ Equity” for additional information.

Previous wording

We commenced sales of our Motiva Implants in October 2010, which have historically accounted for the majority of our revenues. Sales of our Motiva Implants accounted for over 96% of our revenues for the three months ended March 31, 2024, and we expect our revenues to continue to be driven primarily by sales of these products. We primarily derive revenue from sales of our Motiva Implants to two types of customers: (1) medical distributors and (2) direct sales to physicians, hospitals, and clinics.

Current wording

We commenced sales of our Motiva Implants in October 2010, which have historically accounted for the majority of our revenues. Sales of our Motiva Implants accounted for over 99% of our revenues for the six months ended June 30, 2024, and we expect our revenues to continue to be driven primarily by sales of these products. We primarily derive revenue from sales of our Motiva Implants to two types of customers: (1) medical distributors and (2) direct sales to physicians, hospitals, and clinics.

Previous wording

We expect our revenue to increase as we enter new markets, expand awareness of our products in existing markets, and grow our distributor network and direct sales force. We also expect our revenue to fluctuate from quarter to quarter due to a variety of factors, including seasonal fluctuations in demand for Motiva Implants. We are also affected by foreign currency fluctuations.

Current wording

We expect our revenue to increase as we enter new markets, launch Motiva Implants in the United States, if approved, expand awareness of our products in existing markets, and grow our distributor network and direct sales force. We also expect our revenue to fluctuate from quarter to quarter due to a variety of factors, including seasonal fluctuations in demand for Motiva Implants. We are also affected by foreign currency fluctuations.

Previous wording

Our implants are manufactured at our two facilities in Costa Rica. A third facility in Costa Rica is under construction and is currently expected to commence manufacturing in the second half of fiscal 2024. Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses. Cost of revenue also includes depreciation expense for production equipment, and amortization of certain intangible assets.

Current wording

Our implants are manufactured at our two facilities in Costa Rica. Construction of our third facility in Costa Rica was completed in June 2024. Cost of revenue is primarily the cost of silicone but also includes other raw materials, packaging, components, quality assurance, labor costs, as well as manufacturing and overhead expenses. Cost of revenue also includes depreciation expense for production equipment, and amortization of certain intangible assets.

Previous wording

We expect our SG&A expenses to remain significant in absolute dollars as our business grows and we continue to invest in our sales, marketing, medical education, training and general administration resources to build our corporate infrastructure. However, we expect our SG&A expenses to decrease as a percentage of our revenue over the long term, although our SG&A expenses may fluctuate from period to period due to the timing of expenses related to our sales and marketing campaigns.

Current wording

We expect our SG&A expenses to remain significant in absolute dollars as our business grows and we continue to invest in our sales, marketing, medical education, training and general administration resources to build our corporate infrastructure. However, we expect our SG&A expenses to decrease as a percentage of our revenue over the long term, although our SG&A expenses may fluctuate from period to period due to the timing of expenses related to our sales and marketing campaigns, as well as expansion into new markets and geographies.

Previous wording

We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies. We received an approval of an IDE from the FDA in March 2018 to initiate a clinical trial and enrolled the first patient in April 2018. In August 2019, we completed all patient surgeries for the IDE aesthetic cohorts, which include primary augmentation and revision augmentation, and have now completed the three-year study subject follow-up for the aesthetic cohort. In June 2022, full enrollment of the IDE clinical trial was complete, and all surgeries in the primary reconstruction cohort were performed. As of September 30, 2022, we also completed the three-year study subject follow-up for the aesthetic cohort. In the fourth quarter of 2021, we initiated a modular PMA submission process with the FDA and submitted the first of four modules. The second, third and fourth modules were submitted to the FDA in May 2022, August 2022 and February 2023, respectively. In May 2024, we released preliminary results of the four-year patient follow-up data for the primary augmentation cohort our IDE clinical trial. The IDE clinical trial is expected to cost between $30.0 million and $40.0 million over ten years. As of March 31, 2024, approximately $31 million has been spent on the trial to date. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.

Current wording

We expect our R&D expenses to remain elevated for the foreseeable future as we continue to advance our products under development, as well as initiate and prepare for additional clinical studies. We received an approval of an IDE from the FDA in March 2018 to initiate a clinical trial and enrolled the first patient in April 2018. The IDE clinical trial is expected to cost between $30.0 million and $40.0 million over ten years. As of June 30, 2024, approximately $31.5 million has been spent on the trial to date. We also have other products under development for which we may be required to conduct clinical trials in future periods in order to receive regulatory approval to market these products.

Previous wording

Interest expense consists primarily of cash and non-cash interest related to outstanding debt and amortization of debt discounts. As of March 31, 2024, we had $195.5 million in outstanding principal under our term loan, including interest accrued into the principal balance. See Note 5 “Debt” for additional information.

Current wording

Interest expense consists primarily of cash and non-cash interest related to outstanding debt and amortization of debt discounts. As of June 30, 2024, we had $196.4 million in outstanding principal under our term loan, including interest accrued into the principal balance. See Note 5 “Debt” for additional information.

Previous wording

•Outlook: Demand for our products is dependent on the relative strength of the global and regional medical device markets, which are sensitive to general macroeconomic conditions. The current global macroeconomic environment remains complex, with elevated inflation and interest rates contributing to fear of potential recessionary conditions thus driving limitations on available discretionary spending in the markets we operate. These macroeconomic challenges, combined with geopolitical upheaval, have led to ongoing volatility within global markets. This negatively impacted demand for our products during the first quarter of 2024 and we expect this to continue in fiscal 2024.

Current wording

•Outlook: Demand for our products is dependent on the relative strength of the global and regional medical device markets, which are sensitive to general macroeconomic conditions. The current global macroeconomic environment remains complex, with elevated inflation and interest rates driving reductions in discretionary spending in the markets we operate. These macroeconomic challenges, combined with geopolitical upheaval, have led to ongoing volatility within global markets. The Latin American market especially is experiencing a slower pace of stabilization compared to the rest of the world, and we hold the belief that the macroeconomic conditions in this region will pose challenges for aesthetics in general.

Previous wording

Cost of revenue decreased $3.6 million, or 22.0%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in cost of revenue is in line with the decrease in revenue except as described below.

Current wording

Cost of revenue decreased $3.1 million, or 16.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease in cost of revenue is in line with the decrease in revenue except as described below.

Previous wording

Gross margin increased to 65.6% for the three months ended March 31, 2024 as compared to 64.7% for the three months ended March 31, 2023, primarily due to the benefit of geographic mix and slight increases in average global selling prices in fiscal 2024, partially offset by a higher cost of labor and overhead, due, in part, to the revaluation of the Costa Rica colon.

Current wording

Gross margin increased to 65.6% for the three months ended June 30, 2024 as compared to 62.3% for the three months ended June 30, 2023, primarily due to the benefit of geographic mix and slight increases in average global selling prices in fiscal 2024, partially offset by a higher cost of labor and overhead, due, in part, to the revaluation of the Costa Rica colon.

Previous wording

SG&A expense decreased $2.8 million, or 8.8%, to $28.9 million for the three months ended March 31, 2024, compared to $31.7 million for the three months ended March 31, 2023. The decrease in SG&A was primarily due to a $0.9 million decrease in sales and marketing expenses, a $0.9 million decrease in freight associated with lower sales, a $0.9 million decrease in commissions, a $0.3 million decrease in facilities costs, and a $0.2 million decrease in personnel and related costs from decreased headcount, partially offset by a $0.2 million increase in depreciation and amortization expenses, a $0.2 million increase in insurance expenses, and a $0.1 increase in software implementation costs. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.

Current wording

SG&A expense decreased $4.2 million, or 11.4%, to $32.8 million for the three months ended June 30, 2024, compared to $37.0 million for the three months ended June 30, 2023. The decrease in SG&A was primarily due to a $2.1 million decrease in consulting fees, a $1.8 million decrease in freight associated with lower sales, a $1.3 million decrease in personnel and related costs from decreased headcount, and a $0.6 million decrease in sales commissions, partially offset by a $0.5 million increase in depreciation and amortization expenses, a $0.5 million increase in insurance expenses and a $0.5 million increase in software implementation costs. In the fourth quarter of 2023, we implemented measures targeting a decrease in operating expenses, including headcount reduction to lower global personnel costs.

Previous wording

R&D expense decreased $2.2 million, or 33.8%, to $4.3 million for the three months ended March 31, 2024, compared to $6.5 million for the three months ended March 31, 2023 primarily due to a $1.4 million decrease in personnel costs from decreased headcount and a $0.9 million decrease in expenditures related to our IDE clinical trial in the United States.

Current wording

R&D expense decreased $1.4 million, or 20.3%, to $5.5 million for the three months ended June 30, 2024, compared to $6.9 million for the three months ended June 30, 2023 primarily due to a $1.8 million decrease in personnel costs from decreased headcount, partially offset by a $0.3 million increase in stock compensation costs.

Previous wording

Interest expense for the three months ended March 31, 2024 was $4.4 million as compared to $3.8 million for the three months ended March 31, 2023. The increase was primarily due to an increase in debt principal.

Current wording

Interest expense for the three months ended June 30, 2024 was $5.2 million as compared to $3.6 million for the three months ended June 30, 2023. The increase was primarily due to an increase in debt principal.

Previous wording

Provision for income taxes decreased $0.4 million, or 50.0%, to $0.4 million for the three months ended March 31, 2024, compared to $0.8 million for the three months ended March 31, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain U.S. and foreign jurisdictions.

Current wording

Provision for income taxes decreased $0.5 million, or 55.6%, to $0.4 million for the three months ended June 30, 2024, compared to $0.9 million for the three months ended June 30, 2023. The change in the provision for income taxes is primarily due to the decrease in pre-tax income in certain U.S. and foreign jurisdictions.

Previous wording

Other income (expense), net, decreased $3.7 million, or 528.6%, to a loss of $3.0 million for the three months ended March 31, 2024, compared to a gain of $0.7 million for the three months ended March 31, 2023. The decrease was primarily due to foreign currency fluctuations of the euro and the Brazilian real as compared to the U.S. dollar in the first quarter of 2024 compared to the first quarter of 2023, resulting in a foreign currency transaction loss of $3.0 million for the three months ended March 31, 2024, compared to a $0.9 million gain for the three months ended March 31, 2023.

Current wording

Other income (expense), net, decreased $4.1 million to a loss of $2.8 million for the three months ended June 30, 2024, compared to a gain of $1.3 million for the three months ended June 30, 2023. The decrease was primarily due to foreign currency fluctuations of the euro and the Brazilian real as compared to the U.S. dollar in the second quarter of 2024 compared to the second quarter of 2023, resulting in a foreign currency transaction loss of $2.8 million, the majority of which remains unrealized, for the three months ended June 30, 2024, compared to a $1.5 million gain for the three months ended June 30, 2023.

Previous wording

As of March 31, 2024, we had an accumulated deficit of $376.3 million. Since our inception, we have generated losses and expect to continue to generate losses in the near term. We have financed our operations through a combination of equity financings and debt financings, and from cash generated from operations, primarily from the collection of accounts receivable resulting from sales. Our historical cash outflows have primarily been associated with cash used for operating activities such as expansion of our sales and marketing and distributor infrastructure, investing in inventory, R&D activities, asset acquisitions, capital improvements, including our new manufacturing facility, and other working capital needs. As of March 31, 2024 and December 31, 2023, we had cash of $73.0 million and $40.0 million, respectively.

Current wording

As of June 30, 2024, we had an accumulated deficit of $393.5 million. Since our inception, we have generated losses and expect to continue to generate losses in the near term. We have financed our operations through a combination of equity financings and debt financings, and from cash generated from operations, primarily from the collection of accounts receivable resulting from sales. Our historical cash outflows have primarily been associated with cash used for operating activities such as expansion of our sales and marketing and distributor infrastructure, investing in inventory, R&D activities, asset acquisitions, capital improvements, including our new manufacturing facility, and other working capital needs. As of June 30, 2024 and December 31, 2023, we had cash of $54.6 million and $40.0 million, respectively.

Previous wording

Net cash used in operating activities of $11.2 million for the three months ended March 31, 2024 was primarily comprised of a net loss of $16.2 million, changes in operating assets and liabilities of $5.7 million and $0.5 million of interest capitalized for construction in progress, partially offset by $3.4 million of non-cash interest expense due to accretion of debt discounts, $3.4 million of share-based compensation expense, $2.0 million of unrealized foreign currency loss, $1.3 million of non-cash depreciation and amortization expense, a $0.6 million change in provision for inventory obsolescence, and a $0.3 million change in allowance for credit losses.

Current wording

Net cash used in operating activities of $25.3 million for the six months ended June 30, 2024 was primarily comprised of a net loss of $33.4 million, changes in operating assets and liabilities of $12.1 million and $0.6 million of interest capitalized for construction in progress, partially offset by $7.2 million of share-based compensation expense, $5.0 million of non-cash interest expense due to accretion of debt discounts, $4.4 million of unrealized foreign currency loss, $2.7 million of non-cash depreciation and amortization expense, a $0.5 million change in provision for inventory obsolescence, a $0.4 million change in allowance for credit losses and $0.3 million of right-to-use asset amortization.

Previous wording

Net cash used in operating activities of $20.6 million for the three months ended March 31, 2023 was primarily comprised of a net loss of $11.9 million, changes in operating assets and liabilities of $13.6 million, $1.7 million of unrealized foreign currency gain and $0.8 million of interest capitalized for construction in progress, partially offset by $3.3 million of share-based compensation expense, $3.2 million of non-cash interest expense due to accretion of debt discounts, and a $0.9 million of non-cash depreciation expense.

Current wording

Net cash used in operating activities of $48.9 million for the six months ended June 30, 2023 was primarily comprised of a net loss of $28.7 million, changes in operating assets and liabilities of $31.3 million, $3.8 million of unrealized foreign currency gain and $1.9 million of interest capitalized for construction in progress, partially offset by $6.9 million of share-based compensation expense, $6.5 million of non-cash interest expense due to accretion of debt discounts, and a $1.9 million of non-cash depreciation and amortization expense.

Previous wording

Net cash used in investing activities of $6.6 million for the three months ended March 31, 2024 primarily reflected $3.3 million in purchases of property and equipment primarily related to the new manufacturing facility, $1.9 million in purchases of intangibles primarily driven by the development of an enterprise resource planning system for our U.S. launch, and $1.4 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the CFZ in Costa Rica.

Current wording

Net cash used in investing activities of $11.0 million for the six months ended June 30, 2024 primarily reflected $4.8 million in costs incurred for intangible assets primarily driven by the development of an enterprise resource planning system for the anticipated U.S. launch of Motiva Implants, $4.1 million in purchases of property and equipment primarily related to the new manufacturing facility, and $2.2 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in the CFZ in Costa Rica.

Previous wording

Net cash used in investing activities of $4.3 million for the three months ended March 31, 2023 primarily consisted of $3.8 million of cash paid for capital expenditures on construction in progress related primarily to our new manufacturing facility in the CFZ in Costa Rica and $0.4 million in purchases of property and equipment.

Current wording

Net cash used in investing activities of $13.3 million for the six months ended June 30, 2023 primarily consisted of $9.7 million of cash paid for capital expenditures on construction in progress related to our new manufacturing facility in Costa Rica and $3.5 million in purchases of property and equipment.

Previous wording

Net cash provided by financing activities of $51.0 million for the three months ended March 31, 2024 primarily reflected $49.7 million of proceeds received for the issuance of common shares and pre-funded warrants, net of offering expenses, from our private placement offering in January 2024 and $1.4 million in proceeds received for stock option exercises partially offset by $0.1 million paid to satisfy tax withholding obligations upon the vesting of restricted stock

Current wording

Net cash provided by financing activities of $51.4 million for the six months ended June 30, 2024 primarily reflected $49.7 million of proceeds received for the issuance of common shares and pre-funded warrants, net of offering expenses, from our private placement offering in January 2024 and $2.0 million in proceeds received for stock option exercises partially offset by $0.3 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.

Previous wording

Net cash provided by financing activities of $1.2 million for the three months ended March 31, 2023 primarily reflected $1.3 million in proceeds received for stock option exercises which was partially offset by $62,000 paid to satisfy tax withholding obligations upon the vesting of restricted stock and $26,000 in repayments on finance leases.

Current wording

Net cash provided by financing activities of $85.7 million for the six months ended June 30, 2023 primarily $84.5 million of proceeds received for the issuance of common shares, net of underwriters’ discount and issuance costs, from our public offering in April 2023 and $1.5 million in proceeds received for stock option exercises, partially offset by $0.3 million paid to satisfy tax withholding obligations upon the vesting of restricted stock.

Previous wording

On April 26, 2022, or the Closing Date, we entered into the Credit Agreement, pursuant to which the Lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million, which we collectively refer to as the Term Loans, with the first tranche of $150 million advanced on the Closing Date. Part of the first tranche was used to repay the outstanding principal and interest under the Madryn Credit Agreement in full, including the early repayment penalty of $6.5 million. In December 2022, we qualified to borrow and received an advance of $25 million under the second tranche. The Term Loans will mature on the 5-year anniversary of the Closing Date and accrue interest at a rate equal to 9% per annum. As of March 31, 2024, $195.5 million was outstanding under the Credit Agreement, representing the initial principal of $150 million for the Tranche A Term Loan, $25 million for the Tranche B Term Loan and $20.5 million of interest accrued into the principal balance.

Current wording

On April 26, 2022, or the Closing Date, we entered into the Credit Agreement, pursuant to which the Lenders agreed to make term loans to the Company in an aggregate principal amount of up to $225 million, which we collectively refer to as the Term Loans, with the first tranche of $150 million advanced on the Closing Date. Part of the first tranche was used to repay the outstanding principal and interest under the Madryn Credit Agreement in full, including the early repayment penalty of $6.5 million. In December 2022, we qualified to borrow and received an advance of $25 million under the second tranche. The Term Loans will mature on the 5-year anniversary of the Closing Date and accrue interest at a rate equal to 9% per annum. As of June 30, 2024, $196.4 million was outstanding under the Credit Agreement, representing the initial principal of $150 million for the Tranche A Term Loan, $25 million for the Tranche B Term Loan and $21.4 million of interest accrued into the principal balance.