Note 3 - Business Combination

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 3. Business Combination

On January 9, 2023, the Company completed the acquisition of Old Catheter for the purpose of acquiring Old Catheter’s existing and developing product lines based on unique electrophysiology technology.

Pursuant to the Merger Agreement, all Old Catheter common stock shares issued and outstanding and convertible promissory notes, representing an aggregate principal of $25.2 million, were converted into a right to receive 14,649.592 shares of a new class of the Company’s preferred stock, designated Series X Convertible Preferred Stock. Additionally, all outstanding stock options to purchase Old Catheter common stock were assumed and converted into options to purchase approximately 75,367 shares of the Company's common stock.

The total purchase consideration for the Merger was $72.5 million which represents the sum of the (i) estimated fair value of the 14,649.592 Series X Convertible Preferred Stock issued and (ii) the portion of the estimated fair value of $3.4 million representing the Company stock options issued in replacement of Old Catheter share-based payment awards as required under FASB Topic 805, Business Combinations ("Topic 805").

The fair value of the Series X Convertible Preferred Stock includes certain discounts applied to the closing stock price of the Company, on January 9, 2023, of $60.90 per share.

The following table summarizes the fair value of the consideration associated with the Merger (in thousands):

	Fair Value as of
Description	January 9, 2023
Fair value of 14,649.592 Series X convertible preferred stock issued	$	69,140
Fair value of Old Catheter’s fully vested stock options		3,404
Total Purchase Price	$	72,544

The Merger was accounted for as a business combination in accordance with Topic 805, and the Company has been determined to be the accounting acquirer. The Company allocated the purchase price to the assets acquired and liabilities assumed at fair value. The purchase price allocation reflects various fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, liabilities assumed, and goodwill, which were subject to change within the measurement period as valuations were being finalized (generally one year from the acquisition date). Measurement period adjustments were recorded in the reporting period in which the estimates are finalized, and adjustment amounts were determined. During the three months ended June 30, 2023, the Company recorded measurement period adjustments based on changes to certain estimates and assumptions and their related impact to the purchase price allocation. Developed technology was revised from $35.1 million to $27.0 million; trademarks were revised from $1.7 million to $1.3 million; customer relationships were revised from $220 thousand to $62 thousand; goodwill was revised from $56.0 million to $60.9 million; and royalties payable due to related parties were revised from $7.6 million to $14.2 million.

The following table summarizes the final purchase price allocations relating to the Merger (in thousands): 

Description	Fair Value
Assets acquired:
Cash and cash equivalents	$	15
Accounts receivable		71
Inventories		52
Prepaid expenses and other current assets		23
Property and equipment, net		26
Lease right-of-use assets		119
Other assets		8
Developed technology		27,014
Customer relationships		62
Trademarks		1,285
Goodwill		60,934
Total assets acquired	$	89,609
Liabilities assumed:
Accounts payable	$	922
Accrued expenses		1,389
Lease liability		124
Interest payable		198
Convertible promissory notes		250
Royalties payable due to related parties		14,182
Total liabilities assumed		17,065
Total purchase price	$	72,544

All intangible assets acquired are subject to amortization and their associated estimated acquisition date fair values and estimated useful lives are as follows:

Intangible Assets	Estimated Fair Value		Estimated Useful Life
Developed technology- VIVO	$	8,244		15
Developed technology- LockeT		18,770		14
Customer relationships		62		6
Trademark- VIVO		876		9
Trademark- LockeT		409		9
	$	28,361

Notwithstanding the above, as described in Note 7, management determined that there were indicators of asset impairment during the year ended December 31, 2023, and assessed the carrying values of the Company’s intangible assets and goodwill. As a result, the Company recorded an impairment charge relating to goodwill of $60.9 million during the year ended December 31, 2023. This amount represented the purchase price amount ascribed to goodwill. 

Transaction costs incurred in connection with this business combination amounted to approximately $1.7 million during the year ended December 31, 2023.

Pro forma financial information

The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2023. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods. The following information for the year ended December 31, 2023 and is presented in thousands except for the per share data (in thousands, except per share data):

	For the Year Ended December 31,
	2023
Revenues	$	445
Net loss	$	(70,742	)
Net loss attributable to common stockholders	$	(71,542	)
Basic and diluted net loss per share – on a pro forma basis	$	(118.30	)