UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM
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EBR SYSTEMS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2025
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EBR SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, 2025 | December 31, 2024 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Marketable securities | ||||||||
Non-trade receivables and unbilled reimbursements, net | ||||||||
Pre-launch inventory | ||||||||
Prepaid expenses | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Restricted cash, noncurrent | ||||||||
Property and equipment, net | ||||||||
Right of use operating lease asset | ||||||||
Marketable securities | ||||||||
Pre-launch inventory, noncurrent | ||||||||
Other assets | ||||||||
TOTAL ASSETS | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses and other liabilities | ||||||||
Interest payable | ||||||||
Operating lease liability | ||||||||
Current portion of notes payable | ||||||||
Total current liabilities | ||||||||
Other liabilities | ||||||||
Operating lease liability | ||||||||
Notes payable, net | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 16) | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, $ | par value; shares authorized, and shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive income | ||||||||
Total stockholders' equity | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ |
These financial statements should be read in connection with the notes to unaudited condensed consolidated financial statements.
3 |
EBR SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Operating expenses | ||||||||
Research and development | $ | $ | ||||||
General and administrative | ||||||||
Total operating expenses | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other (expense) income | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Interest income | ||||||||
Other income | ||||||||
Loss on foreign currency | ( | ) | ( | ) | ||||
Total other (expense), net | ( | ) | ( | ) | ||||
Loss before income tax | ( | ) | ( | ) | ||||
Income tax benefit (expense) | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Net loss per share attributable to common stockholders: | ||||||||
Basic and diluted | $ | ) | $ | ) | ||||
Weighted-average number of common shares outstanding: | ||||||||
Basic and diluted |
These financial statements should be read in connection with the notes to unaudited condensed consolidated financial statements.
4 |
EBR SYSTEMS, INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss | ||||||||
Change in unrealized loss on marketable securities | ( | ) | ( | ) | ||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||
Total other comprehensive loss income | ( | ) | ( | ) | ||||
Comprehensive loss | $ | ( | ) | $ | ( | ) |
These financial statements should be read in connection with the notes to unaudited condensed consolidated financial statements
5 |
EBR SYSTEMS, INC.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
Total | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common Stock | Additional | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
Shares | Par Value | Paid-in Capital | Deficit | Income | Equity | |||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Exercise of stock options | ||||||||||||||||||||||||
Stock-based compensation | - | |||||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ |
Total | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common Stock | Additional | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
Shares | Par Value | Paid-in Capital | Deficit | Income | Equity | |||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Exercise of stock options | ||||||||||||||||||||||||
Stock-based compensation | - | |||||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | $ |
These financial statements should be read in connection with the notes to unaudited condensed consolidated financial statements.
6 |
EBR SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
Depreciation and amortization | ||||||||
Amortization of deferred loan costs and discount on notes payable | ||||||||
Lease amortization | ||||||||
Stock-based compensation | ||||||||
Accretion of discount on marketable securities | ( | ) | ( | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Non-trade receivables and unbilled reimbursements | ( | ) | ||||||
Pre-launch inventory | ( | ) | ||||||
Prepaid expenses | ||||||||
Other assets | ||||||||
Accounts payable | ( | ) | ( | ) | ||||
Accrued expenses and other liabilities | ( | ) | ( | ) | ||||
Interest payable | ( | ) | ( | ) | ||||
Operating lease liability | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | ( | ) | ( | ) | ||||
Purchase of marketable securities | ( | ) | ||||||
Maturities of marketable securities | ||||||||
Sales of marketable securities | ||||||||
Net cash provided by investing activities | ||||||||
Cash flows from financing activities: | ||||||||
Repayment of notes payable | ( | ) | ||||||
Proceeds from notes payable | ||||||||
Proceeds from exercise of stock options | ||||||||
Net cash provided by financing activities | ||||||||
Effect of exchange rate change on cash | ( | ) | ||||||
Net change in cash, cash equivalents, and restricted cash | ( | ) | ||||||
Cash, cash equivalents, and restricted cash, beginning of the period | ||||||||
Cash, cash equivalents, and restricted cash, end of the period | $ | $ | ||||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest expense | $ | $ | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Remeasurement of lease liabilities | $ | $ | ||||||
Purchases of property and equipment not yet paid | $ | $ | ||||||
Initial recognition of right of use asset and operating lease liability | $ | $ |
These financial statements should be read in connection with the notes to unaudited condensed consolidated financial statements.
7 |
EBR SYSTEMS, INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
Note 1 - Business and organization
Business overview
EBR Systems, Inc. and subsidiaries (collectively, “EBR”, “we”, “our” or the “Company”) is a United States based medical device company that is developing the WiSE CRT System, an implantable cardiac device able to provide stimulation to endocardial heart tissue for the correction of heart rhythm conditions without requiring the use of leads. This implantable device delivers left-ventricle endocardial pacing for cardiac resynchronization therapy (“CRT”), without the use of wires or leads going into the heart. On April 11, 2025, the Company received notification that the Food and Drug Administration (“FDA”) has completed its review of the premarket approval application (“PMA”) and approved the WiSE CRT System for commercial distribution in the United States.
The Company completed its initial public offering of CDIs (“CHESS Depositary Interests”) and began trading on the Australian Securities Exchange (“ASX”) on November 24, 2021, under the symbol “EBR”.
The Company operates wholly owned foreign subsidiary entities in Australia, EBR Systems (AUST) Pty Ltd (“EBR-AU”), and the United Kingdom, EBR Systems (UK) Limited (“EBR-UK”), which establish clinical trials in Australia and the United Kingdom, respectively, and work on intellectual property development. EBR-AU was incorporated on February 23, 2017, and EBR-UK was incorporated on July 31, 2015.
Note 2 - Going concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of its cash needs and comparing those needs to the current cash, cash equivalents and marketable securities balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by its plans or when its plans alleviate substantial doubt about its ability to continue as a going concern.
For
the three months ended March 31, 2025 and 2024, the Company incurred a net loss of $
Based on the Company’s cash, cash equivalents, and marketable securities as of March 31, 2025, and its expectation to generate operating losses and negative operating cash flows in the foreseeable future, as well as potential for liquidity to become less than the $2.5 million required under its existing debt covenants during the next twelve months, there exists substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these condensed consolidated financial statements. The Company was in compliance with its debt covenant as of March 31, 2025. Upon the occurrence of a breach of debt covenants, Runway Growth Finance Corp may, at its option, declare all obligations immediately due and payable. In an effort to alleviate these conditions, the Company will need to raise capital through the issuance of additional common stock or borrowings from financial institutions. The Company’s ability to obtain additional capital in the equity capital markets is subject to several factors, including market and economic conditions, the Company’s performance, and investor sentiment with respect to the Company and its industry. The condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
8 |
Note 3 - Summary of significant accounting policies
Basis of presentation
These unaudited condensed consolidated financial statements as of March 31, 2025, and for the three months ended March 31, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2024.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of our unaudited condensed consolidated financial position as of March 31, 2025, unaudited condensed consolidated results of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, and unaudited condensed consolidated cash flows for the three months ended March 31, 2025 and 2024. The unaudited condensed consolidated results of operations for the three months ended March 31, 2025, are not necessarily indicative of the consolidated results of operations that may be expected for the year ending December 31, 2025.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant estimates and assumptions made by management include the fair value of stock-based awards issued, capitalized pre-launch inventory, and the valuation allowance on deferred taxes.
Fair Value Measurements
The Company measures certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The fair value measurement guidance establishes a fair value hierarchy which requires the Company to maximize the use of observable inputs when measuring fair value. The following levels of inputs may be used to measure fair value:
· | Level 1: Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. |
· | Level 2: Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs are observable in active markets are Level 2 valuation techniques. |
· | Level 3: Valuation techniques in which one or more significant inputs are unobservable. Such inputs reflect our estimate of assumptions that market participants would use to price an asset or liability. |
Foreign currency translation
The functional currencies of our foreign subsidiaries are their local currencies. Accordingly, the Company translates the foreign currency financial statements into US Dollars using the reporting period-end or average exchange rates. Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet dates. Expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive income within stockholders’ equity. Gains and losses arising from the settlement and remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency are included in “loss on foreign currency” in the period in which they occur.
9 |
Employee benefits
Employees that satisfy certain eligibility requirements,
including requirements related to age and length of service, are eligible to participate in the EBR Systems, Inc. 401(k) Plan (“Plan”).
The Plan is intended to qualify as a tax-qualified 401(k) plan so that contributions to the Plan, and income earned on such contributions,
are not taxable to participants until withdrawn or distributed from the Plan. Under the Plan, each employee is fully vested in his or
her deferred salary contributions. Employee contributions are held and invested by the plan’s trustee as directed by participants.
Effective January 1, 2025, the Company began a matching contribution under the Plan. The Company matches 100% of employee contributions
to the Plan up to 3% of eligible compensation, with a maximum annual match of $5,000 per employee. Matching contributions vest 25% after
one year of service and are fully vested after two years of service. For the three
months ended March 31, 2025 and 2024, the Company match expense was $
Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash. Cash equivalents are reported at fair value.
Restricted cash
The
restricted cash, noncurrent balance of $
Marketable securities
Marketable securities, all of which are available-for-sale, consist of U.S. treasury bonds, U.S. government notes, and corporate debt securities. Marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive income.
On a quarterly basis, the Company reviews its available-for-sale debt securities for credit-related impairment. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. For available-for-sale debt securities in an unrealized loss position, the Company evaluates at the individual security level whether the decline in fair value has resulted from credit losses or other factors. In making this assessment the Company considers the issuer of the securities and their creditworthiness, any changes to the rating of the security and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance for credit losses is recorded with an offsetting entry to earnings. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
The Company typically invests in highly-rated securities and generally limits the amount of credit exposure to any one issuer. Additionally, the Company does not intend to sell the impaired securities, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases. Unrealized losses during the three months ended March 31, 2025 and 2024, were primarily the result of market conditions, such as increasing interest rate movements, unusual market volatility, or industry-related events. Since the fluctuation in fair value is due to changes in market conditions and not credit quality, and because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, the Company concluded that an allowance for credit losses was not required as of March 31, 2025.
Interest and dividends on available-for-sale securities are included in other income and expense. See Note 4, “Cash, cash equivalents, restricted cash, and marketable securities” for additional disclosure on marketable securities.
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash and cash equivalents are primarily held at U.S. financial institutions that management believes are of high credit quality. Such deposits exceed federally insured limits.
Non-trade receivables and unbilled reimbursements
Non-trade receivables are recorded for amounts due to the Company related to reimbursements of clinical trials expenses based upon contracted terms, and the sale of materials to contract manufacturers. Unbilled reimbursements represent amounts for services that have been rendered but for which reimbursements have not been billed. See Note 6, “Condensed consolidated balance sheet components” for additional information on non-trade receivables and unbilled reimbursements.
10 |
Pre-launch inventory
Inventory costs associated with products that have not yet received regulatory approval are capitalized if there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such pre-launch inventory begins when the Company determines that (i) positive clinical trial results have been obtained in order to support regulatory approval is probable; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit, in excess of capitalized costs. On April 11, 2025, the Company received notification that the FDA has approved the WiSE CRT System for commercial distribution. At that time, the Company reclassified pre-launch inventory as inventory.
As
of March 31, 2025 and December 31, 2024, the Company capitalized $
Property and equipment
Property and equipment is carried at acquisition cost less accumulated depreciation. The cost of normal, recurring, or periodic repairs and maintenance activities related to property and equipment are expensed as incurred.
Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. The estimated useful lives by asset classification are generally as follows:
Equipment | ||
Computer software | ||
Leasehold improvements |
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for potential impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that carrying value exceeds fair value. Fair value is determined using various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, depending on the nature of the asset. For the three months ended March 31, 2025 and 2024, the Company did not recognize any impairment charges associated with long-lived assets.
Leases
At the inception of a contract, the Company determines whether the contract is or contains a lease based on all relevant facts and circumstances. Leases with a term greater than 12 months are recognized on the balance sheet date as right of use (“ROU”) assets and current and noncurrent lease liabilities, as applicable. The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. The Company includes lease option extensions in the assessment of the lease arrangement when it is reasonably certain the option will be exercised.
Lease liabilities and the corresponding right of use assets are recorded based on the present value of lease payments to be made over the lease term. The discount rate used to calculate the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate. The Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right of use asset may be required for items such as initial direct costs or incentives received. Lease payments on operating leases are recognized on a straight-line basis over the expected term of the lease. Lease payments on financing leases are recognized using the effective interest method. See Note 7, “Leases” for additional disclosure on leases.
For all asset classes of its leases, the Company has elected to account for the lease and non-lease components together for existing classes of underlying assets.
11 |
Research and development
Research and development costs are expensed when incurred. Research and development costs include operating expenses for the Company’s engineering and product management functions supporting research, new development, and related product enhancement. Additionally, costs incurred in connection with preclinical development, clinical testing, as well as costs associated with the regulatory and FDA approval process are also included as a component of research and development expense.
General and administrative
General and administrative includes operating expenses incurred in our executive, finance, legal, marketing, commercialization, and other administrative functions.
The Company recognizes stock-based compensation expense related to employees over the requisite service period based on the grant-date fair value of the awards. The fair value of options granted is estimated using the Black-Scholes option valuation model. The Company recognizes the grant-date fair value of an award as compensation expense on a straight-line basis over the requisite service period, which typically corresponds to the vesting period for the award. The Company elects to account for forfeitures as they occur and, upon forfeiture of an award prior to vesting, the Company reverses any previously recognized compensation expense related to that award. See Note 12, “Stock-based compensation” for additional details.
Other Income
The Company periodically receives reimbursements of
clinical trial expenses, which are recorded as other income in the accompanying unaudited condensed consolidated statements of operations.
During the three months ended March 31, 2025 and 2024, the Company recorded reimbursements of $
Income taxes
The asset and liability approach is used for the financial reporting for income taxes. Deferred income balances reflect the effects of temporary differences between the financial reporting and income tax bases of the Company’s assets and liabilities and are measured using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses, or NOLs, and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse.
Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items that are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgement including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, and additional information becomes known, or as the tax environment changes.
Basic income or loss per share is determined by dividing net income or loss by the weighted-average common shares outstanding during the period. Diluted income or loss per share is determined by dividing net income by diluted weighted-average shares outstanding during the period. Diluted weighted-average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock are included in the calculation of diluted income or loss per share based on the treasury stock method. Potential common shares are excluded from the calculation of dilutive weighted-average shares outstanding if their effect would be anti-dilutive at the balance sheet date based on a treasury stock method or due to a net loss.
Recently issued accounting pronouncements
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”. The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 is effective for public filers for fiscal years beginning after December 15, 2024. The adoption of ASU 2023-09 will be reflected in the Company’s annual financial statements for the year ending December 31, 2025 and is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures
12 |
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the ASU enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and other disclosure requirements. The Company adopted ASU 2023-07 in the year ended December 31, 2024. Refer to Note 15 for enhanced disclosures associated with the adoption of this ASU.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. In January 2025, the FASB issued an update 2025-01 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which revises the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its disclosures.
Note 4 - Cash, cash equivalents, and marketable securities
Cash, cash equivalents, and marketable securities consisted of the following at March 31, 2025 and December 31, 2024:
March 31, 2025 | December 31, 2024 | |||||||
Cash and cash equivalents: | ||||||||
Cash | $ | $ | ||||||
Money market funds | ||||||||
Total cash and cash equivalents | $ | $ | ||||||
Marketable securities, short-term: | ||||||||
Asset backed securities | $ | $ | ||||||
Commercial paper | ||||||||
Corporate bonds | ||||||||
US Treasury securities | ||||||||
Total marketable securities, short-term | $ | $ | ||||||
Marketable securities, long-term: | ||||||||
Asset backed securities | $ | $ | ||||||
Corporate bonds | ||||||||
US Treasury securities | ||||||||
Total marketable securities, long-term | $ | $ | ||||||
Total cash, cash equivalents, and marketable securities | $ | $ |
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our condensed consolidated balance sheets as of March 31, 2025 and March 31, 2024, to the total of such amounts as presented in the condensed consolidated statements of cash flows:
March 31, 2025 | March 31, 2024 | |||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash, noncurrent | ||||||||
Total cash, cash equivalents, and restricted cash | $ | $ |
During the three-month period
ended March 31, 2025, marketable securities were sold or matured for proceeds of $
13 |
The following tables summarizes the unrealized gains and losses related to the Company’s available-for-sale marketable securities, by major security type, as of March 31, 2025 and December 31, 2024:
As of March 31, 2025 | ||||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized (losses) | Fair Value | |||||||||||||
Marketable securities | ||||||||||||||||
Asset backed securities | $ | $ | $ | ( | ) | $ | ||||||||||
Commercial paper | ( | ) | ||||||||||||||
Corporate bonds | ( | ) | ||||||||||||||
US Treasury securities | ( | ) | ||||||||||||||
Total marketable securities | $ | $ | $ | ( | ) | $ |
As of December 31, 2024 | ||||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized (losses) | Fair Value | |||||||||||||
Marketable securities | ||||||||||||||||
Asset backed securities | $ | $ | $ | $ | ||||||||||||
Commercial paper | ( | ) | ||||||||||||||
Corporate bonds | ( | ) | ||||||||||||||
US Treasury securities | ( | ) | ||||||||||||||
Total marketable securities | $ | $ | $ | ( | ) | $ |
The following table shows the unrealized losses and fair values for those marketable securities that were in an unrealized loss position as of March 31, 2025 and December 31, 2024, aggregated by major security type and the length of time the marketable securities have been in a continuous loss position:
As of March 31, 2025 | ||||||||||||||||||||||||
In Loss Position for Less Than 12 Months | In Loss Position for 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Asset backed securities | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
Commercial paper | ( | ) | ( | ) | ||||||||||||||||||||
Corporate bonds | ( | ) | ( | ) | ||||||||||||||||||||
US Treasury Securities | ( | ) | ( | ) | ||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) |
As of December 31, 2024 | ||||||||||||||||||||||||
In Loss Position for Less Than 12 Months | In Loss Position for 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Commercial paper | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
Corporate bonds | ( | ) | ( | ) | ||||||||||||||||||||
US Treasury Securities | ( | ) | ( | ) | ||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) |
The contractual maturities of the Company’s marketable securities as of March 31, 2025, were as follows:
Fair Value | ||||
One year or less | $ | |||
Two years to three years | ||||
Total minimum payments | $ |
14 |
Note 5 - Fair value measurement
Management’s assessment of the significance of a particular input to the fair value measurement requires judgement and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy, as discussed in Note 3, “Summary of significant accounting policies”. At March 31, 2025 and December 31, 2024, the fair value measurement of the Company’s financial assets measured on a recurring basis were as follows:
Fair Values as of March 31, 2025 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents | ||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||
Marketable securities | ||||||||||||||||
Asset backed securities | ||||||||||||||||
Commercial paper | ||||||||||||||||
Corporate bonds | ||||||||||||||||
US Treasury securities | ||||||||||||||||
Total | $ | $ | $ | $ |
Fair Values as of December 31, 2024 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash equivalents | ||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||
Marketable securities | ||||||||||||||||
Asset backed securities | ||||||||||||||||
Commercial paper | ||||||||||||||||
Corporate bonds | ||||||||||||||||
US Treasury securities | ||||||||||||||||
Total | $ | $ | $ | $ |
In the Company’s unaudited condensed consolidated balance sheets, the carrying values of non-trade receivables, other assets, accounts payable and accrued expenses approximated their fair values due to the nature and relatively short maturities. The fair value of debt approximates its carrying value as it is variable rate debt or has relatively short maturities.
Note 6 - Condensed consolidated balance sheet components
Non-trade receivables and unbilled reimbursements, net
Non-trade receivables and unbilled reimbursements include sales of materials to contract manufacturers, reimbursements of clinical trial expenses incurred, and various other reimbursements. Non-trade receivables and unbilled reimbursements were as follows as of March 31, 2025 and December 31, 2024:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Non-trade receivables | $ | $ | ||||||
Unbilled reimbursements | ||||||||
Reimbursement for leasehold improvements | ||||||||
Related party reimbursement | ||||||||
Non-trade receivables and unbilled services | ||||||||
Less: provision for credit losses | ||||||||
Non-trade receivables and unbilled services, net | $ | $ |
As
of March 31, 2025, the Company had an outstanding receivable of $
15 |
Pre-launch inventory
Pre-launch inventory consisted of the following as of March 31, 2025 and December 31, 2024:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Raw materials | $ | $ | ||||||
Work in process | ||||||||
Finished goods | ||||||||
Pre-launch inventory | $ | $ | ||||||
Pre-launch inventory – current | $ | $ | ||||||
Pre-launch inventory – noncurrent | $ | $ |
Property and equipment, net
Property and equipment consisted of the following as of March 31, 2025 and December 31, 2024:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Equipment | $ | $ | ||||||
Computer software | ||||||||
Leasehold improvements | ||||||||
Construction in progress | ||||||||
Total property and equipment | ||||||||
Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||
Total property and equipment, net | $ | $ |
Depreciation
and amortization expense for the three months ended March 31, 2025 and 2024, was $
Accrued expenses and other liabilities
Accrued expenses and other liabilities consisted of the following at March 31, 2025 and December 31, 2024:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Accrued compensation and related liabilities | $ | $ | ||||||
Accrued development expenses | ||||||||
Accrued warranty reserves | ||||||||
Accrued other expenses | ||||||||
Accrued expenses and other liabilities | $ | $ |
See Note 16, “Commitments and contingencies” for additional disclosure on accrued warranty reserves.
Note 7 – Leases
The
Company has an operating lease for its corporate headquarters and laboratory space, located in Sunnyvale, California. The initial lease
expired June 30, 2024, with an option to extend the lease an additional sixty-months, which was used in the calculation of the right of
use operating lease asset and operating lease liability. The Company held no other lease agreements at December 31, 2024. In January 2024,
the Company signed an addendum to the operating lease, extending the expiration of the lease through June 30, 2025, and adjusting the
monthly rent from $
16 |
In
January 2025, the Company executed an operating lease for its new corporate headquarters, laboratory and manufacturing facility in Santa
Clara, California. The term of the lease commenced on January 17, 2025, the date on which the landlord made the property available to
the Company for the purpose of constructing leasehold improvements that will remain the property of the Company during lease term. As a
result of entering into this lease agreement, the Company recorded a right-of-use asset and corresponding lease liability of $
Amounts reported in the unaudited condensed consolidated balance sheets for operating leases in which the Company is the lessee as of March 31, 2025 and December 31, 2024, were as follows:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Right of use asset | $ | $ | ||||||
Lease liability, current | ||||||||
Lease liability, noncurrent | ||||||||
Weighted-average remaining lease term | ||||||||
Weighted-average discount rate | % | % |
The following table presents the components of lease costs in our statements of operations for three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Operating lease costs | $ | $ | ||||||
Variable lease costs | ||||||||
Short-term lease costs | ||||||||
Total lease expense | $ | $ |
Future lease payments for non-cancellable operating leases, net of the tenant improvement allowance as of March 31, 2025, were as follows:
Years Ended December 31, | ||||
2025 | $ | |||
2026 | ||||
2027 | ||||
2028 | ||||
2029 | ||||
Thereafter | ||||
Total undiscounted lease payments | ||||
Less: effects of discounting | ( | ) | ||
Less: tenant improvement allowance | ( | ) | ||
Total operating lease liabilities | $ |
17 |
Note 8 - Notes payable
At March 31, 2025 and December 31, 2024, notes payable consisted of the following:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Notes payable, current | ||||||||
Current portion of notes payable | $ | $ | ||||||
Notes payable, noncurrent | ||||||||
Long-term portion of notes payable | ||||||||
Less: unamortized deferred loan costs | ( | ) | ( | ) | ||||
Less: unamortized discount | ( | ) | ( | ) | ||||
Notes payable, noncurrent, net | $ | $ | ||||||
Total notes payable, net | $ | $ |
The following table presents information regarding the Company’s notes payable principal repayment obligations as of March 31, 2025:
Years Ended December 31, | ||||
2025 | $ | |||
2026 | ||||
2027 | ||||
Total minimum payments | $ |
Runway Growth Finance Corp
On
June 30, 2022, the Company entered into a loan and security agreement with Runway Growth Finance Corp. The debt is secured against substantially
all assets of the Company, except for the Company’s intellectual property but includes all proceeds from the sale of intellectual
property. The loan agreement provides three term loan tranches. The Company received the initial draw of $
Interest
on the term loan accrues on the principal amount outstanding at a floating per annum rate equal to the greater of the rate of interest
noted in The Wall Street Journal Money Rates section, as the “Prime Rate” or 4.00% plus a margin of 4.9% and is payable monthly
in arrears and shall be computed on the basis of a 360-day year for the actual number of days elapsed. The Company is required to make
interest only payments from July 2022 to May 2027. The note payable has a maturity date of
The
Company has accounted for the final payment of $
The
Company incurred loan costs of $
The Company is subject to customary financial and reporting covenants under the loan and security agreement. As of March 31, 2025 and December 31, 2024, the Company was in compliance with all debt covenants.
18 |
Bank of America Leasing & Capital, LLC
In
March 2024, the Company entered into an equipment purchase agreement for the purchase of software totaling $
Note 9 - Convertible preferred stock
As of March 31, 2025 and December 31, 2024, shares of convertible preferred stock were authorized, of which shares were issued or outstanding.
Note 10 - Common stock
Each
share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders
are entitled to receive dividends, as may be declared by the Company’s board of directors. As of March 31, 2025 and December 31,
2024,
As of March 31, 2025 and December 31, 2024, shares, respectively, were outstanding including shares underlying all CDIs. shares were authorized, of which shares and
The Company completed its initial public offering and began trading on the Australian Securities Exchange (“ASX”) on November 24, 2021, under the symbol “EBR”. The ASX uses an electronic system called CHESS for the clearance and settlement of trades on the ASX. The State of Delaware does not recognize the CHESS system of holding securities or electronic transfers of legal title to shares. To enable companies to have their securities cleared and settled electronically through CHESS, CHESS depository instruments called CDIs are issued. CDIs are units of beneficial ownership in shares and are traded in a manner similar to shares of Australian companies listed on the ASX. The legal title to the shares are held by a depository, CDN, which is a wholly owned subsidiary of the ASX, and is an approved general participant of ASX Settlement.
Additionally, the Company has reserved the following shares of common stock for issuance as of March 31, 2025:
Conversion of Common Stock warrants | ||||
2013 Equity Incentive Plan | ||||
2021 Equity Incentive Plan | ||||
Outside of 2021 Equity Incentive Plan | ||||
Total shares of Common stock reserved for issuance |
Note 11 - Warrants
Equity classified common stock warrants
The
Company has issued warrants to purchase shares of its common stock, which are exercisable any time at the option of the holder until their
expiration date. As of March 31, 2025, the weighted-average exercise price of outstanding warrants was $
19 |
The following warrants were outstanding as of March 31, 2025 and December 31, 2024:
Shares of Common Stock Issuable for Outstanding Warrants as of | ||||||||||||||
Warrant Issuance | March 31, 2025 | December 31, 2024 | Exercise Price | Expiration Date | ||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
$ | ||||||||||||||
Total |
The Company and its stockholders adopted an equity incentive plan (the “2013 Plan”) in 2013, which reserved shares of the Company’s common stock for the granting of incentive and nonqualified stock options to employees, directors, and consultants. On October 14, 2021, the Company replaced the 2013 Plan with the 2021 Plan in connection with its initial public offering. Under the 2021 Plan, shares of common stock are reserved. The Company may grant options to purchase common stock, stock appreciation rights, restricted stock awards and other forms of stock-based compensation. Stock options generally vest over four years and expire no later than 10 years from the date of grant. The Board of Directors has the authority to select the employees to whom options are granted and determine the terms of each option, including: i) the number of shares of common stock subject to the option; ii) when the option becomes exercisable; iii) the option exercise price, which must be at least 100% of the fair market value of the common stock as of the date of grant; and iv) the duration of the option, which may not exceed 10 years.
As of March 31, 2025, options to purchase a total of shares of common stock remained outstanding and shares remain available for grant under the 2021 Plan and remained outstanding outside of the 2021 Plan. As of March 31, 2025, options to purchase a total of shares of common stock remained outstanding under the 2013 Plan. As of March 31, 2025, shares of common stock remain available for grant under the 2013 Plan.
Stock option activity for the three-month period ended March 31, 2025, was as follows:
Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in years) | ||||||||||
Outstanding at December 31, 2024 | $ | |||||||||||
Granted | ||||||||||||
Cancelled | ( | ) | ||||||||||
Exercised | ( | ) | ||||||||||
Outstanding at March 31, 2025 | $ | |||||||||||
Vested and expected to vest at March 31, 2025 | $ | |||||||||||
Exercisable at March 31, 2025 | $ |
20 |
The fair value of the options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, an assumed risk-free interest rate and expected dividends. The Company uses the simplified calculation of expected life and volatility is based on an average of the historical volatilities of the common stock of several publicly traded entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses the straight-line method for expense attribution. The weighted-average grant-date fair values of stock options granted during the three months ended March 31, 2025 and 2024, was $ per share and $ per share, respectively.
The following assumptions were used to calculate the grant-date fair value of employee stock options granted during the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Expected term (in years) | – | |||||||
Expected volatility | % - | % | % - | % | ||||
Expected dividend yield | % | % | ||||||
Risk-free interest rate | % - | % | % - | % |
The following table presents classification of stock-based compensation expense within the accompanying unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Research and development | $ | $ | ||||||
General and administrative | ||||||||
Total | $ | $ |
At March 31, 2025, there was $ of unamortized stock-based compensation cost, related to unvested stock options which is expected to be recognized over a weighted-average period of years.
Note 13 - Income taxes
During
the three months ended March 31, 2025 and 2024, the Company does
The
Company’s effective tax rate was
During
the three-month period ended March 31, 2025, there were
21 |
The following tables sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Numerator – basic & diluted: | ||||||||
Net loss attributable to common stockholders, basic and diluted | $ | ( | ) | $ | ( | ) | ||
Denominator: | ||||||||
Weighted-average number of shares outstanding, basic and diluted | ||||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | ) | $ | ) |
The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive at March 31, 2025 and 2024:
March 31, | March 31, | |||||||
2025 | 2024 | |||||||
Outstanding warrants | ||||||||
Outstanding stock options | ||||||||
Total dilutive shares |
Note 15 - Segment information
An operating segment is defined as a component of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company is currently in the pre-revenue development stage and its primary activity is the development of its leadless cardiac pacing system, WiSE CRT. Thus, the total Company’s consolidated results represent only the results of the WiSE CRT Segment. The Company currently conducts its operations primarily in the U.S. Operations in countries outside of the U.S. are limited to Australia and Europe and are not significant. Business activity conducted in the U.S and in our international locations are similar in nature and economic characteristics and are consolidated for reporting purposes. As such, management has determined that the Company operates as one operating and reportable segment that is currently focused exclusively on the advancement of the Company’s WiSE CRT System.
The Company’s operating expenses and net loss are the primary measures of the segment’s performance used by the Company’s CODM. The segment is in the pre-revenue operating stage, and therefore the CODM primarily focuses on research and development expenses, general and administrative expenses, and the net loss as the primary measure of the segment’s performance used by the Company’s CODM. In addition to the segment’s expenses that are presented on the consolidated statement of operations, the information about the segment’s expenses is disaggregated into significant expenses, which are not separately presented on the Company’s consolidated statement of operations, as included below.
22 |
The table below reports information about the segment loss for the three months ended March 31, 2025 and 2024.
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Research and development expenses | ||||||||
Personnel-related expenses | $ | $ | ||||||
Clinical expenses | ||||||||
Quality assurance and regulatory approval expense | ||||||||
Contract manufacturing, materials and components | ||||||||
Facility-related and other expenses | ||||||||
Total research and development expenses | ||||||||
General and administrative expenses | ||||||||
Personnel-related expenses | ||||||||
Professional services expenses | ||||||||
Corporate expense | ||||||||
Facility-related and other expenses | ||||||||
Total general and administrative expense | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other (expense) income | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Interest income | ||||||||
Other Income, net (a) | ( | ) | ||||||
Total other (expense), net | ( | ) | ( | ) | ||||
Income tax (expense) | ||||||||
Consolidated net loss | $ | ( | ) | $ | ( | ) |
(a) |
Note 16 - Commitments and contingencies
Purchase commitments
The
Company purchases raw materials, manufacturing equipment, and various services from a variety of vendors. During the normal course
of business, in order to manage manufacturing lead times and help ensure an adequate supply of certain items, we enter into agreements
with suppliers that either allow us to procure goods and services when we choose or that establish purchase requirements over the term
of the agreement. In certain instances, our purchase agreements allow us to cancel, reschedule, or adjust our purchase requirements based
on our business needs prior to firm orders being placed. Consequently, only a portion of our purchase commitments are firm and noncancelable.
As of March 31, 2025, the Company’s obligations under such arrangements were approximately
$
Contingencies
The Company is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain, and it is not possible to definitively predict the ultimate disposition of any of these proceedings. The Company does not believe that there are any pending legal proceedings or other loss contingencies that will, either individually or in the aggregate, have a material adverse impact on the Company’s unaudited condensed consolidated financial statements.
Accrued warranty reserves
The Company accrues for the estimated cost of product warranties based on historical experience at the time a patient enrolls in the clinical trial. Adjustments to initial obligations for warranties are made as changes to the obligations become reasonably estimable. Accrued warranty reserves are included in accrued expenses and other liabilities in the accompanying unaudited condensed consolidated balance sheets.
23 |
Changes in accrued warranty reserves were as follows for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Beginning of period | $ | $ | ||||||
Warranty reserve accrued during the period | ||||||||
Settlement of warranty claims | ( | ) | ( | ) | ||||
End of period | $ | $ |
24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024. In addition to historical data, this discussion contains forward-looking statements about our business, ability to continue as a going concern, ability to successfully commercialize our WiSE CRT System, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties, assumptions, and other important factors. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "potential," "seek," "should," "will," "would," and similar expressions to identify forward-looking statements.
Overview
EBR is a U.S. based medical device company that developed the WiSE CRT System (“WiSE’), an implantable cardiac pacing system able to provide stimulation to endocardial heart tissue for the correction of heart rhythm conditions without requiring the use of leads. That implantable device is part of a cardiac resynchronization therapy (“CRT”), offering endocardial heart tissue stimulation without the complications associated with traditional lead-based systems. Cardiac rhythm management (“CRM”) systems use leads to conduct electricity from an implantable pulse generator (“IPG”) to electrodes that deliver therapeutic electric pulses to heart tissue. While leads are a critical part of most CRM systems, they have long been recognized as a primary shortcoming of these systems and are a leading cause of device failure.
We initially developed the WiSE CRT System for use in conjunction with another implanted pacemaker to provide CRT to patients who are unable to receive CRT from a traditional lead-based system or are at high risk of complications from an upgrade procedure. WiSE CRT technology is engineered to benefit patients who have not seen success with conventional CRT or face high complication risks. By eliminating lead requirements for left ventricular pacing, WiSE CRT introduces a novel approach to cardiac pacing, with the potential to transform CRT delivery.
On April 11, 2025, we received notification that the Center for Devices and Radiological Health (“CDRH”) of the Food and Drug Administration (“FDA”) had completed its review of our premarket approval application (“PMA”) for the WiSE CRT System and approved the WiSE CRT System for commercial distribution in the U.S. for adult patients who are at least 22 years of age, are indicated for CRT, have an existing or are eligible for an implanted right ventricular pacing system, and are in one of the following two categories: patients in whom previous coronary sinus (“CS”) lead implantation was unsuccessful, or where an implanted lead has been turned off, referred to as "previously untreatable"; or patients with previously implanted pacemakers or Implantable Cardioverter-Defibrillators (“ICDs”) in whom standard CRT upgrade is not advisable due to known relative contraindications for CS lead or CRT device implantation, referred to as "high risk upgrades".
We intend to commercially launch WiSE with the focus on driving adoption of WiSE at key, high-volume, luminary sites within the U.S. to be followed by select, high-volume sites in markets outside the U.S. (“OUS”) that we would target after evaluating regulatory and reimbursement considerations.
a) | U.S. Strategy |
We plan to implement a phased Limited Market Release (“LMR”), with the following phases:
LMR Phase 1: Initial Target Accounts
· | Launch in target accounts from the SOLVE-CRT (Stimulation of the Left Ventricular Endocardium for Cardiac Resynchronization Therapy) pivotal trial. |
· | Leverage existing relationships with trial sites to streamline patient identification and device implantation. |
25 |
LMR Phase 2: Expansion and Optimization
· | Strategically expand our field team to broaden our market presence into additional high-volume sites. |
· | Focus on optimizing the customer training programs and enhancing EBR's business operations. |
LMR Phase 3: Increase Implants Per Site
· | The field team will focus on increasing the number of cases per month per site by improving hospital implant workflows and familiarity with the technology. |
Full Market Release
· | Expand market presence and maximize product adoption. |
· | Utilize refined business operations and continue scaling the field team. |
· | Focus on expanding into additional sites, leveraging the experience and efficiency gained from the LMR. |
b) | OUS Strategy |
Our OUS commercial activities will not commence until we obtain regulatory approvals and certification in select, target markets. These initial target markets include Australia, the United Kingdom, and the European Union. The timing of launch in each of these OUS markets thus depends on meeting additional regulatory requirements, as well as on securing the appropriate payment coverage for WiSE in each market.
As a result of its breakthrough device designation (“BDD”), our WiSE CRT technology is expected to be eligible for incremental payment coverage in the U.S. for up to three years following FDA approval. The Centers for Medicare & Medicaid Services (“CMS”) has proposed approval of the New Technology Add-On Payment (“NTAP”) for our WiSE CRT System for fiscal year 2026, subject to final approval before October 1, 2025. CMS has recommended WiSE receive the maximum add on payment of 65% of the device cost, which is in additional to the normal Medicare Severity Diagnosis Related Group (“MS-DRG”) payment. In combination, if approved, these reimbursements are intended to fully cover the cost of the WiSE CRT System.
Financial overview
Since inception, we have incurred significant net losses and expect to continue to incur net losses for the foreseeable future. Since our inception, our operations have been financed primarily by net proceeds from the sale of our CDIs, common stock, convertible preferred stock, and indebtedness. As of March 31, 2025, we had $50.2 million in cash, cash equivalents, and marketable securities and an accumulated deficit of $364.0 million.
Our WiSE CRT System has been approved by the FDA for commercial distribution in April 2025, and we will begin commercializing WiSE during the second quarter of 2025. The commercial potential of and our ability to successfully commercialize WiSE is unproven and will require, among other things, effective sales, marketing, manufacturing, distribution, information systems and pricing strategies, as well as compliance with applicable laws and regulations. Based on our current operating plans and assumptions we believe that our existing cash, cash equivalents, and current and noncurrent marketable securities, together with projected revenue from U.S. sales of WiSE will be sufficient to fund our projected operating requirements into the first quarter of 2026.
Factors Affecting Our Business
There are a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth. These factors include:
· | Regulatory clearances/post-approval study (“PAS”). Our business strategy depends on the successful FDA submission of our PAS and ongoing annual reporting of our WiSE CRT System to the FDA. |
26 |
· | Market acceptance. The growth of our business depends on our ability to successfully commercialize our WiSE CRT System and gain wide acceptance of our WiSE CRT System by continuing to make physicians and other hospital staff aware of the benefits of WiSE CRT to generate increased demand and frequency of use and thus increase sales to our hospital customers. Our ability to grow our business will also depend on our ability to expand our customer base in existing or new target markets. |
· | Sales force size and effectiveness. The rate at which we grow our sales force and the speed at which newly hired salespeople become effective can impact our revenue growth or our costs incurred in anticipation of such growth. We intend to make significant investments in our sales and marketing organization by increasing the number of U.S. sales representatives and expanding our international marketing programs to help facilitate further adoption among existing hospital accounts as well as broaden awareness of our products to new hospital accounts. |
· | Competition. Our industry is intensely competitive and, in particular, we compete with a number of large, well-capitalized companies on multiple fronts. We must strive to be successful in light of our competitors’ existing and future products and related pricing and their resources to successfully market to the physicians who use our products. |
· | Reimbursement. The level of reimbursement from third-party payors for procedures performed using our products could have a substantial impact on the prices we are able to charge for our products and how widely our products are accepted. The level at which reimbursement is set for procedures using our products, and any increase in reimbursement for procedures using our products, will depend substantially on our ability to generate clinical evidence, to gain advocacy in the respective physician societies and to work with CMS and payors, and to capitalize on recent CMS proposals to approve our WiSE CRT System for the NTAP beginning October 1, 2025. |
· | Clinical results. Publications of clinical results by us, our competitors and other third parties can have a significant influence on whether, and the degree to which, our products are used by physicians and the procedures and treatments those physicians choose to administer for a given condition. |
While these factors may present significant opportunities for us, they also pose significant risks and challenges that we must address.
Components of our Consolidated Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses primarily consist of personnel-related expenses, including salaries, bonuses, fringe benefits and other compensation-related costs, including stock-based compensation expense, for employees engaged in research and development functions. Research and development expenses also include costs of conducting our ongoing clinical studies, such as expenses associated with our clinical research organization, or CRO, who provided project management and other services related to our SOLVE-CRT study, outside service fees paid to third party consultants and contractors related to our product candidate engineering, quality assurance and regulatory approval, as well as contract manufacturing of our product candidate and allocated facility costs.
We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and other long-term assets, which are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered, or the services rendered.
The successful development of product candidates is subject to numerous risks and uncertainties. For a discussion of certain risks related to the development of product candidates and costs of clinical trials, see “Item 1A. Risk Factors” in our Form 10-K.
We anticipate that our research and development expenses will increase in the future as we:
· | hire and retain additional personnel, including research, clinical, development, quality control, quality assurance and regulatory personnel; |
· | conduct additional clinical studies beyond our current SOLVE-CRT study; |
· | continue to advance the research and development of our WiSE CRT system; |
· | develop, establish, and validate our commercial-scale current good manufacturing practice (“cGMP”). |
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General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related costs, including salaries, bonuses, fringe benefits and other compensation-related costs, including stock-based compensation expense, for our personnel and external contractors involved in our executive, finance, legal and other administrative functions as well as our commercial function, who is involved in market access related activities. General and administrative expenses also include costs incurred for outside services associated with such functions, including costs associated with obtaining and maintaining our patent portfolio and professional fees for accounting, auditing, tax, legal services, and other consulting expenses.
We anticipate that our general and administrative expenses will increase significantly in the future as we:
· | hire and retain additional general and administrative personnel to support the expected growth in our research and development activities and the preclinical and clinical development of our product candidates; |
· | continue to expand our commercial and administrative function to support the commercial launch of our WiSE CRT System; |
· | pursue payor coverage and reimbursement for our current and future product candidates; |
· | maintain, expand, and protect our intellectual property portfolio; and |
· | incur increased expenses associated with operating as a U.S. publicly reporting company, including increased costs of accounting, audit, legal, regulatory, and tax-related services, and director and officer insurance premiums. |
Other Income (Expenses), net
Interest expense
Interest expense primarily consists of cash and non-cash interest related to our notes payable. See “Loan and Security Agreements” section below for more details about our debt agreements.
Interest income
Interest income consists of interest income, including accretion of discounts, generated from our cash, cash equivalent, and marketable securities.
Other income
Other income includes reimbursements of clinical trial expenses as well as refundable tax incentives from the Australian Taxation Office.
Gain/ (loss) on foreign currency
Gains and losses arising from the settlement and remeasurement of monetary assets and liabilities denominated in currencies other than a subsidiary’s functional currency.
Critical Accounting Estimates
Our critical accounting estimates are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to our critical accounting estimates since December 31, 2024.
Recent Accounting Pronouncements
See the sections titled “Summary of Significant Accounting Policies—Recently issued accounting pronouncements” in Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Non- GAAP Financial Measures
Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), a non-GAAP measure used by management to assess operating performance, is defined as net loss, excluding interest expense, net, depreciation and amortization, and stock-based compensation. Adjusted EBITDA is intended as a supplemental measure of our performance and provides useful information to management and investors regarding our operating results.
We present Adjusted EBITDA in this filing because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. Period-to-period comparison of Adjusted EBITDA helps our management identify additional trends in our company’s financial results that may not be shown solely by period-to-period comparison of net loss. In addition, we believe that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to net loss, helps investors make comparisons between our company and other companies that may have different capital structures, different capitalized asset values, different forms of employee compensation and different strategic nonrecurring projects. Adjusted EBITDA has its limitations as an analytical tool because of the excluded items, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations include:
· | Adjusted EBITDA does not reflect interest expense and interest income because these items are not directly attributable to the performance of our business operations and may vary over time due to a variety of financing transactions that we have entered into or may enter into in the future. |
· | Adjusted EBITDA does not reflect certain non-cash items, including depreciation and amortization, and stock-based compensation expense. We believe that excluding the effect of these expenses from Adjusted EBITDA assists management and investors in making period-to-period comparisons in our company’s operating performance because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. |
A reconciliation between net loss and adjusted EBITDA is presented below:
Three Months Ended March 31, | ||||||||
(in thousands) | 2025 | 2024 | ||||||
Reconciliation of net loss to non-GAAP Adjusted EBITDA | ||||||||
Net loss | $ | (10,554 | ) | $ | (9,150 | ) | ||
Interest expense, net | (764 | ) | (584 | ) | ||||
Depreciation and amortization | 79 | 213 | ||||||
Stock-based compensation (a) | 505 | 357 | ||||||
Adjusted EBITDA | $ | (10,734 | ) | $ | (9,164 | ) |
(a) | Represents non-cash expense associated with our share-based payments. |
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Results of Operations
Comparison of the Three Months Ended March 31, 2025, to the Three Months Ended March 31, 2024
We recorded a net loss of $10.6 million in the three-month period ended March 31, 2025, an increase of $1.4 million, or 15.4%, from the three-month period ended March 31, 2024. The increased loss in 2025 was due to an increase in general and administrative expenses, which was partially offset by a decrease in research and development expenses, as discussed below. Other (expense), net also increased in 2025, primarily due to a decrease in interest income, as discussed below.
The following table summarizes our operating results for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | Change | |||||||||||||||
(in thousands) | 2025 | 2024 | Amount | % | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 5,419 | $ | 6,401 | $ | (982 | ) | (15.3 | %) | |||||||
General and administrative | 4,363 | 2,173 | 2,190 | 100.8 | % | |||||||||||
Total operating expenses | 9,782 | 8,574 | 1,208 | 14.1 | % | |||||||||||
Other (expense), net | (773 | ) | (576 | ) | (197 | ) | 34.2 | % | ||||||||
Loss before income tax | (10,555 | ) | (9,150 | ) | (1,405 | ) | 15.4 | % | ||||||||
Income tax expense | - | - | - | 0.0 | % | |||||||||||
Net Loss | $ | (10,555 | ) | $ | (9,150 | ) | $ | (1,405 | ) | 15.4 | % |
Operating Expenses
Research and Development
The following table presents our total research and development expenses by category:
Three Months Ended March 31, | Change | |||||||||||||||
(in thousands) | 2025 | 2024 | Amount | % | ||||||||||||
Research and development expenses: | ||||||||||||||||
R&D personnel expense | $ | 4,183 | $ | 3,861 | $ | 322 | 8.3 | % | ||||||||
Clinical expenses | 393 | 292 | 101 | 34.6 | % | |||||||||||
Quality assurance | 86 | 61 | 25 | 41.0 | % | |||||||||||
Contract manufacturing, materials & components | 731 | 1,731 | (1,000 | ) | (57.8 | %) | ||||||||||
Facility related and other expense | 26 | 456 | (430 | ) | (94.3 | %) | ||||||||||
Total research and development expense | $ | 5,419 | $ | 6,401 | $ | (982 | ) | (15.3 | %) |
Research and development expenses decreased by $1.0 million, or 15.3% during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease was primarily due to a $1.0 million decrease in contract manufacturing, materials and components, resulting from a decrease in professional services related to the development testing of WiSE CRT System, as well as capitalization of pre-launch inventory. Facility-related expenses decreased by $0.4 million, as we began to capitalize certain overhead costs during the three months ended March 31, 2025. These decreases were partially offset by a $0.3 million increase in personnel-related expenses, including salaries, bonuses, and certain fringe benefits, resulting from an expansion in our workforce to support the ongoing development efforts of the WiSE CRT System; and a $0.1 million increase in clinical expenses, primarily resulting from higher travel expenses, including lodging, air travel and ground transportation due to patient follow-up visits for the SOLVE-CRT Study.
General and Administrative Expenses
General and administrative expenses increased by $2.2 million, or 100.8%, during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Personnel-related expenses including salaries, bonuses, stock-based compensation and certain fringe benefits increased by $1.2 million as a result of the expansion of our workforce to support our commercialization effort in anticipation of FDA approval of the WiSE CRT System. Professional fees increased by $0.6 million, primarily resulting from higher accounting and legal related services associated with being a public filer in the US. Travel expenses increased by $0.3 million, which included higher lodging, air travel and ground transportation expenses resulting from travel required for training of the commercial team. Corporate expenses increased by $0.1 million, primarily resulting from the higher expenses related to insurance premiums.
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Other (expense) income, net
Other (expense) income, net increased by $0.2 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This increase primarily resulted from a $0.3 million decrease in interest income earned on investments in marketable securities, including the accretion of discounts on marketable securities, which was partially offset by a $0.1 million decrease in interest expense.
Liquidity and Capital Resources
We manage our cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. We continuously assess our working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements and future investments. As of March 31, 2025 and December 31, 2024, we had approximately $50.2 million and $66.0 million, respectively, in cash, cash equivalents, and marketable securities. Based on our cash, cash equivalents, and marketable securities as of March 31, 2025, and our expectation to generate operating losses and negative operating cash flows in the foreseeable future, there exists substantial doubt regarding our ability to continue as a going concern for a period of at least twelve months from the date of this Form 10-Q.
Going concern consideration
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. For the three months ended March 31, 2025 and 2024, we incurred a net loss of $10,554,271 and $9,150,003, respectively. During the three months ended March 31, 2025 and 2024, we had negative cash flows from operations of $13,563,695 and $10,059,772, respectively. As of March 31, 2025, we had working capital of $46,751,043 and accumulated deficit of $364,011,951. These factors raise substantial doubt about our ability to continue as a going concern. Until we are able to generate consistent and sufficient revenue from sales of our WiSE CRT System, our ability to continue as a going concern is dependent on our ability to raise additional capital through the issuance of additional common stock or borrowings from financial institutions. Our ability to obtain additional capital in the equity capital markets is subject to several factors, including market and economic conditions, our performance, and investor sentiment with respect to our company and our industry.
Loan and Security Agreements
On June 30, 2022, we entered into a loan and security agreement with Runway Growth Finance Corp. The debt is secured against substantially all of our assets, except for intellectual property, but includes all proceeds from the sale of intellectual property. The loan agreement provides three term loan tranches. We received the initial draw of $20,000,000 in June 2022. We received positive interim analysis data, sufficient to proceed with the clinical trial and premarket approval submission to the U.S. Food and Drug Administration, which allowed us to draw the second tranche of $20,000,000 in June 2023. The final tranche provided $10,000,000 from the date of approval from the FDA for the WiSE CRT System and ended on June 30, 2024. We did not receive FDA approval by June 30, 2024, and therefore did not meet the draw requirements of the third and final tranche.
Interest on the term loan accrues on the principal amount outstanding at a floating per annum rate equal to the greater of the rate of interest noted in The Wall Street Journal Money Rates section, as the “Prime Rate” or 4.00% plus a margin of 4.9% and is payable monthly in arrears and shall be computed on the basis of a 360-day year for the actual number of days elapsed. We are required to make interest only payments from July 2022 to May 2027. The note payable has a maturity date of June 15, 2027, at which time any unpaid interest, outstanding principal balance, and a final payment of 4.5% of the original principal amount borrowed shall be due in full. If we repay the loan prior to maturity, we will be required to pay a prepayment fee of 0.5% - 1% of the outstanding principal balance. We are also required to pay a 3% success fee of the funded principal amount of the term loan at the time of a liquidity event, as defined in the loan and security agreement. The success fee is enforceable within 10 years from the execution date of the agreement.
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As of March 31, 2025 and December 31, 2024, the outstanding principal balance was $41,800,000, which included the principal borrowings under tranche one and tranche two, as well as the final payment of 4.5% of the principal borrowings to date.
We are subject to customary financial and reporting covenants under the loan and security agreement. As of March 31, 2025 and December 31, 2024, we were in compliance with all debt covenants.
Future Funding Requirements
Despite recent FDA approval of WiSE CRT System, the outcome of any clinical activities and/or regulatory approval process is highly uncertain, we cannot reasonably estimate whether our future development activities may succeed; or whether we will be able to effectively commercialize WiSE CRT System in the U.S., if at all. We may never recoup our investment in any WiSE CRT System development which would adversely affect our financial condition and our business and business prospects. In addition, our plans and timing expectations could be further delayed or interrupted by the effects of macroeconomic or other global conditions, including those resulting from inflation, rising interest rates, prospects of a recession, bank failures and other disruptions to financial systems, civil or political unrest, military conflicts, pandemics or other health crises and supply chain and resource issues.
To date, we have not generated any commercial product revenue. We will continue to require additional capital to successfully commercialize WiSE CRT System and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses, manufacturing automation and scaleup, and general and administrative expenses. We expect our expenses to continue to increase in connection with our ongoing activities as we continue to commercialize WiSE CRT System.
We may seek to raise capital through equity offerings or debt financings, collaboration agreements, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our consolidated financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:
· | the cost and timing of establishing sales, marketing a distribution capabilities; |
· | the cost, timing and results of our post-marketing trial and regulatory reviews; |
· | the cost of our research and development activities for new and modified products; |
· | the terms and timing of other collaborative, licensing and other arrangements that may establish including any contract manufacturing arrangements; |
· | the timing, receipt and amount of sales from our current and potential products; |
· | the degree of success we experience in commercializing our WiSE CRT System; |
· | the emergence of competing or complementary technologies; |
· | the impact of global business, political and macroeconomic conditions, including inflation, rising interest rates, uncertainty with respect to the federal budget, instability in the global banking system, volatile market conditions, supply chain disruptions, cybersecurity events, and global events, including regional conflicts around the world; |
· | the cost of preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights; and |
· | the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
If we raise additional capital through debt financing, we may be subject to covenants that restrict our operations including limitations on our ability to incur liens or additional debt, pay dividends, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us. If we raise funds through collaborations, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or delay investments in our manufacturing scale-up and automation. In addition, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets. Furthermore, this Quarterly Report on Form 10-Q contains statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.
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Contractual Obligations and Commitments
As of March 31, 2025, we had $1.0 million in operating lease obligations for our corporate headquarters and laboratory space located in Sunnyvale, California. Additionally, in January 2025, we entered into a new lease agreement for our new corporate headquarters, laboratory and manufacturing facility in Santa Clara, California, for which we had recorded $13.3 million in operating lease obligations as of March 31, 2025.
As of March 31, 2025, the outstanding principal balance under our loan and security agreement described above was $41,800,000, which included the principal borrowings under tranche one and tranche two, as well as the final payment of 4.5% of the principal borrowings to date.
In addition, we have entered into an equipment purchase agreement for the purchase of certain software. As of March 31, 2025, the outstanding principal balance was $14,914. Additionally, we enter into contracts in the normal course of business with third-party contract organizations for clinical trials, manufacturing and other services and products for operating purposes. In certain instances, our purchase agreements allow us to cancel, reschedule, or adjust our purchase requirements based on our business needs prior to firm orders being placed. Consequently, only a portion of our purchase commitments are firm and noncancelable. As of March 31, 2025, our obligations under such arrangements were approximately $16.2 million.
Working Capital
March 31, 2025, Compared to December 31, 2024
As of March 31, 2025, we had working capital of $46.8 million, comprised of current assets of $53.5 million and current liabilities of $6.7 million. Current assets, consisting of cash and cash equivalents, marketable securities, pre-launch inventory, prepaid expenses, non-trade receivables and other current assets, decreased by $11.2 million as of March 31, 2025, compared to December 31, 2024. The decrease was primarily caused by a decrease in cash, cash equivalents and marketable securities as a result of cash used in operating activities for the three months ended March 31, 2025. Refer to the cash flows discussion below for further details. Current liabilities, consisting primarily of accounts payable, accrued liabilities, lease obligations, the current portion of notes payable and interest payable, decreased by approximately $1.8 million as of March 31, 2025, compared to December 31, 2024. The decrease primarily resulted from the payout of annual bonuses in January 2025, and a reduction in accounts payable from December 31, 2024 to March 31, 2025.
Cash Flows
March 31, 2025, Compared to March 31, 2024
The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||||
(in thousands) | 2025 | 2024 | ||||||
Net cash used in operating activities | $ | (13,564 | ) | $ | (10,060 | ) | ||
Net cash provided by investing activities | 17,906 | 3,034 | ||||||
Net cash provided by financing activities | 242 | 193 | ||||||
Effect of exchange rate change on cash | 1 | (20 | ) | |||||
Net change in cash and cash equivalents | $ | 4,585 | $ | (6,853 | ) |
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Operating Activities
Net cash used in operating activities during the three months ended March 31, 2025, was $13.6 million, compared to $10.1 million during the three months ended March 31, 2024, representing an increase in use of $3.5 million. This increase is primarily attributed to an increase in net loss of $1.4 million, a decrease in cash from changes in working capital of $2.8 million, which were partially offset by an increase in non-cash adjustments of $0.7 million.
· | The increase in net loss of $1.4 million primarily resulted from increases in personnel costs, increases in professional fees, and decrease in interest income, as further described under “Results of Operations” above. |
· | Non-cash items primarily consisted of increases in accretion of discount on marketable securities of $0.5 million driven by fluctuating interest rates and maturity term, and a $0.2 million increase in the adjustment to lease amortization due to the company entering into a new lease agreement in 2025. |
· | The decrease in changes from working capital activities primarily consisted of $2.1 million use of cash for pre-launch inventory purchases during the three months ended March 31, 2025, a $0.7 million decrease in accounts payable and accrued expenses due to the timing of invoice payments, and a $0.4 million decrease in non-trade receivables due to the timing of collections. These decreases were partially offset by a $0.4 million increase in operating lease liability due to the company entering into a new lease agreement in 2025. |
Investing Activities
Net cash provided by investing activities during the three months ended March 31, 2025, was $17.9 million, compared to $3.0 million during the three months ended March 31, 2024, representing an increase in cash provided of $14.9 million. The increase was attributable to a $8.9 million decrease in the purchase of marketable securities, as well as a $6.0 million increase in cash from the maturities and sales of marketable securities during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.
Financing Activities
Net cash provided by financing activities during both three months ended March 31, 2025 and 2024, was $0.2 million. The cash provided by financing activities during the three months ended March 31, 2025, was primarily attributable to the proceeds from exercise of stock options. Cash provided by financing activities during the three months ended March 31, 2024, was comprised from $0.1 million in proceeds from exercise of stock options and $0.1 million in proceeds from note payable related to the software purchase agreement.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information specified under this item.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15(d)-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025.
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Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our Chief Executive Officer and our Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this quarterly report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS
In addition to other information set forth in this report, readers should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" of our 2024 Annual Report on Form 10-K, as updated and supplemented below. Any of the risk factors disclosed in our reports could materially affect our business, financial condition or future results. The risks described here and in our 2024 Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. The discussion of the risk factor below updates the corresponding disclosure under the same heading in the 2024 Annual Report on Form 10-K and may contain material changes to the corresponding risk factor discussion in our 2024 Annual Report on Form 10-K.
There is substantial doubt regarding our ability to continue as a going concern. If we are unable to raise additional capital when needed, we may be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.
In April 2025, we received FDA approval to commercialize WiSE CRT System in the U.S., and we plan to initiate a commercial launch of WiSE in the U.S. during the second quarter of 2025. WiSE is our only product approved for marketing by the FDA and our ability to generate revenue from product sales and achieve profitability is wholly dependent on our ability to successfully commercialize WiSE in the U.S. Our operations have consumed substantial amounts of cash since our inception.
As of March 31, 2025, we had working capital of $46,751,043 and accumulated deficit of $364,011,951. These factors raise substantial doubt about our ability to continue as a going concern. Until we are able to generate consistent and sufficient revenue from the sales of our WiSE CRT System, our ability to continue as a going concern is dependent on our ability to raise additional capital through the issuance of additional common stock or borrowings from financial institutions. Our ability to obtain additional capital in the equity capital markets is subject to several factors, including market and economic conditions, our performance, and investor sentiment with respect to our company and our industry.
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We may not be able to obtain additional funding on acceptable terms, or at all. As a result of geopolitical events, including the conflicts in Ukraine and Gaza, inflation, rising interest rates and other conditions, the global credit and financial markets have experienced volatility and disruptions. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.
Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants and other operating restrictions that could adversely impact our ability to conduct our business. Our current lender already has a security interest in substantially all of our assets, including proceeds from the sale of our intellectual property, which may prevent or limit our ability to incur additional indebtedness.
Our funding requirements and the timing of our need for additional capital are subject to change based on a number of factors, including:
· | the degree of success we experience in commercializing our WiSE CRT System; |
· | the cost, timing and results of our post-marketing trial and regulatory reviews; |
· | the cost of our research and development activities for new and modified products; |
· | the cost and timing of establishing sales, marketing and distribution capabilities; |
· | the terms and timing of any collaborative, licensing and other arrangements that may establish including any contract manufacturing arrangements; |
· | the timing, receipt and amount of sales from our current and potential products; |
· | the emergence of competing or complementary technologies; |
· | the impact of global business, political and macroeconomic conditions, including inflation, rising interest rates, uncertainty with respect to the federal budget, instability in the global banking system, volatile market conditions, supply chain disruptions, cybersecurity events, and global events, including regional conflicts around the world; |
· | the cost of preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights; and |
· | the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.
Changes in economic conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business, operations, and financial condition.
Our operations and performance are impacted by global, regional and U.S. economic and geopolitical conditions. There is inherent risk, based on the complex relationships among the U.S. and the countries in which we conduct our business, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business and operations. The current international trade and regulatory environment is subject to significant ongoing uncertainty. The U.S. government has recently announced substantial new tariffs affecting a wide range of products and jurisdictions and has indicated an intention to continue developing new trade policies, including with respect to the medical device industry. In response, certain foreign governments have announced or implemented retaliatory tariffs and other protectionist measures. These developments have created a dynamic and unpredictable trade landscape, which may adversely impact our business, results of operations, financial condition and prospects.
The complexity of announced or future tariffs may also increase the risk that we or our customers or suppliers may be subject to civil or criminal enforcement actions in the United States or foreign jurisdictions related to compliance with trade regulations. Foreign governments may also adopt non-tariff measures, such as procurement preferences or informal disincentives to engage with, purchase from or invest in U.S. entities, which may limit our ability to attract non-U.S. investment, employees, customers, and suppliers. Foreign governments may also take other retaliatory actions against U.S. entities, such as decreased intellectual property protection, increased enforcement actions, or delays in regulatory approvals, which may result in heightened international legal and operational risks. In addition, the United States and other governments have imposed and may continue to impose additional sanctions, such as trade restrictions or trade barriers, which could restrict us from doing business directly or indirectly in or with certain countries or parties and may impose additional costs and complexity to our business.
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Trade disputes, tariffs, restrictions and other political tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns. The ultimate impact of current or future tariffs and trade restrictions remains uncertain and could materially and adversely affect our business, financial condition, and prospects. While we actively monitor these risks, any prolonged economic downturn, escalation in trade tensions, or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, ability to access the capital markets or other financing sources, results of operations, financial condition, and prospects. In addition, tariffs and other trade developments have and may continue to heighten the risks related to other risk factors described in our 2024 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
The following exhibits are filed or furnished as part of this report:
*Filed herewith
# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EBR SYSTEMS, INC. | ||
By: | /s/ John McCutcheon | |
Name: | John McCutcheon | |
Title: |
Chief Executive Officer (Principal Executive Officer) |
By: | /s/ Gary Doherty | |
Name: | Gary Doherty | |
Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: May 13, 2025
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