Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s financial statements are based upon a number of estimates including, but not limited to, allowance for credit losses, evaluation of impairment of assets, valuation of long-lived assets and their associated estimated useful lives, reserves for warranty costs, evaluation of probable loss contingencies and fair value of equity awards granted.

Segment Reporting

Segment Reporting

After the sale of the Dermatology Business in August 2021, the Company began operating its business in one segment which included all activities related to the research, development and manufacture of the DABRA system. The chief operating decision-maker reviews the operating results on an aggregate basis and manages the operations as a single operating segment.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in readily available checking and money market accounts. The Company maintains deposits in financial institutions in excess of federally insured limits.

Fair Value Measurements

Fair Value Measurements

Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier value hierarchy is used to identify inputs used in measuring fair value as follows:

Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

Level 2 - Inputs other than the quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Cash equivalents, trade accounts receivable and accounts payable are reported on the balance sheets at carrying value which approximates fair value due to the short-term maturities of these instruments.

Accounts Receivable

Accounts Receivable

Trade accounts receivable are presented net of allowances for credit losses. Prior to the discontinuation of sales of catheters in June 2022, the Company sold its catheters directly to distributors or physicians and maintained an allowance for credit losses for balances that appeared to have specific collection issues. The collection process was based on the age of the invoice and required attempted contacts with the customer at specified intervals. Delinquent accounts receivable were charged against the allowance for credit losses once the Company determined the amounts were uncollectible. The factors considered in reaching this determination were the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers deteriorated, resulting in an impairment of their ability to make payments, additional allowances might have been required.

The following table shows the activity in the allowance for credit losses for the periods presented (in thousands):

	Year Ended December 31,
	2022		2021
Balance at beginning of year	$	131	$	84
Provision for credit losses		21		47
Balance at end of year	$	152	$	131

Inventories

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company reduced the carrying value of inventories for those items that were potentially excess, obsolete or slow-moving based on changes in customer demand, technological developments or other economic factors. See Note 14. Restructuring and Impairment Charges for a description of the inventory obsolescence charges for the year ended December 31, 2022. There were no inventory obsolescence charges for the year ended December 31, 2021.

Prior to June 6, 2022, the Company’s catheters were manufactured in-house and each catheter was tested at various stages of the manufacturing process for adherence to quality standards. Catheters that did not meet

functionality specification at each test point were destroyed and immediately written off, with the expense recorded in cost of revenues in the statements of operations. Once manufactured, completed catheters that passed quality assurance, were sent to a third-party for sterilization and sealed in a sterile container. Upon return from the third-party sterilizer, a sample of catheters from each batch were re-tested. If the sample tests were successful, the batch was accepted into finished goods inventory. If the sample tests were unsuccessful, the entire batch was written off, with the expense recorded in cost of revenues in the statements of operations.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives as follows:

Lasers	8 years
Machinery and equipment	5-10 years
Computer hardware and software	4-5 years
Furniture and fixtures	5 years

Leasehold improvements were depreciated over the shorter of the useful life of the leasehold improvement or the term of the underlying property’s lease.

The Company periodically reviewed the residual values and estimated useful lives of each class of its property and equipment for ongoing reasonableness, considering long-term views on its intended use of each class of property and equipment and the planned level of improvements to maintain and enhance assets within those classes. Effective January 1, 2022, based on management’s revised assessment of average laser on-time utilization, the Company changed the estimated useful life of its lasers to eight years.

When assets were retired or otherwise disposed of, the cost and related accumulated depreciation were removed from the account balances and any resulting gain or loss was recognized in income for the period. The cost of repairs and maintenance was expensed as incurred, whereas significant betterments were capitalized.

Impairment of Long-lived Assets

Impairment of Long-Lived Assets

The Company periodically reviewed its long-lived assets for impairment when certain events or changes in circumstances indicate that the carrying value of the long-lived assets may not be recoverable. Should the sum of the undiscounted expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. See Note 14. Restructuring and Impairment Charges for a description of the impairment costs of long-lived assets for the year ended December 31, 2022. There were no impairment charges for the year ended December 31, 2021.

Product Warranty

Product Warranty

Products were warrantied against defects in material and workmanship when properly used for their intended purpose and appropriately maintained. Accordingly, the Company generally replaced catheters that kinked or failed to calibrate. The product warranty liability was determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor. The product warranty liability also includes the estimated costs of a product recall.

The warranty accrual is included in accrued expenses in the accompanying balance sheets. Warranty expenses are included in cost of revenues in the accompanying statements of operations. Changes in estimates to previously established warranty accruals resulted from current period updates to assumptions regarding repair and product recall costs and are included in current period warranty expense.

Revenue Recognition

Revenue Recognition

The Company generated revenue from the sales of products and services. Product sales consisted of the sales of catheters for use with the DABRA laser system. The Company paused selling commercial products in late 2020 and was only selling catheters for use in the atherectomy clinical trial prior to the discontinuation of such sales in June 2022. The Company’s sales agreements generally did not include right-of-return provisions for any form of consideration, including partial refund or credit against amounts owed to the Company. Services and other revenues primarily consisted of billable services, including fees related to DABRA laser commercial usage agreements.

The Company determined revenue recognition incorporating the following steps:

• Identification of each contract with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when, or as, performance obligations were satisfied.

The Company accounted for a contract with a customer when it had a legally enforceable contract with the customer, the arrangement identified the rights of the parties, the contract had commercial substance, and the Company determined it was probable that it would collect the contract consideration. The Company recognized revenue when control of the promised goods or services transferred to customers, in an amount that reflected the consideration the Company expected to be entitled to in exchange for those goods or services. Taxes collected from customers relating to goods or services and remitted to governmental authorities were excluded from revenue.

Catheter Revenue

When engaged in commercial sales, the Company entered into a DABRA laser commercial usage agreement or DABRA laser placement acknowledgement with each customer that was supplied a DABRA laser, collectively the “usage agreement”, which provided for specific terms of continued use of the DABRA laser, including a nominal periodic fee. The terms of a usage agreement typically allowed the Company to place a DABRA laser at a customer’s specified location without a specified contract term. Under the usage agreement terms, the Company retained all ownership rights to the DABRA laser and was permitted to request the return of the equipment within 10 business days of notification. While the laser periodic fees were nominal, the usage agreement provided the Company the exclusive rights to supply related single-use catheters to the customer which aggregated the majority of the product sales revenue. There were no specified minimum purchase commitments for the catheters.

The Company recognized revenue associated with the usage agreements and catheter supply arrangements in accordance with Financial Accounting Standards Board (“FASB”) “Revenue from Contracts with Customers (Topic 606),” (“Topic 606”) since (i) the contract primarily included variable payments, (ii) the catheters were priced at their standalone selling price, and (iii) the laser equipment was insignificant in the context of the contract. Revenue was recognized when the performance obligation was satisfied which was generally upon shipment of the catheter.

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs charged to customers are included in net product sales, while all other shipping and handling costs are included in selling, general and administrative expenses in the accompanying statements of operations.

Research and Development

Research and Development

Major components of research and development costs include personnel expenses, stock-based compensation, consulting, supplies and clinical trial expenses. Research and development expenses were charged to operations in the period they were incurred.

Patents

Patents

The Company expensed patent costs, including related legal costs, as incurred and recorded such costs as selling, general and administrative expenses in the accompanying statements of operations.

Share-based Compensation

Stock-Based Compensation

The Company records stock-based compensation expense associated with stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) issued to employees, members of the Company’s board of directors and consultants in accordance with the authoritative guidance for stock-based compensation. The Company evaluates whether an award should be classified and accounted for as a liability award or equity award for all stock-based compensation awards granted. The cost of an award of an equity instrument is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing valuation model (“Black-Scholes model”) which incorporates various assumptions including expected term, volatility and risk-free interest rate, and is recognized as expense on a straight-line basis over the requisite service period of the award. Share-based compensation for an award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized, and any previously recognized compensation expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

Income Taxes

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Any resulting net deferred tax assets are evaluated for recoverability and, accordingly, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and other expense, respectively.

Concentrations of Credit Risk

Concentrations of Credit Risk

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of cash equivalent balances maintained in excess of Federal Depository Insurance Corporation limits, and accounts receivable which have no collateral or security. The Company monitors the financial condition of the banks in which it currently has deposits. The Company has not experienced any significant losses in this respect and believes that it is not exposed to any significant related risk.

Exposure to losses on accounts receivable is dependent upon the individual customer’s financial condition. The Company monitors its exposure to credit losses and reserves for those accounts receivable that it deems to be not collectible.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during the period from transactions and other events and non-owner sources. The Company had no such transactions or other events and non-owner sources during the years ended December 31, 2022 and 2021.

Discontinued Operations

Significant Accounting Policies Related to Discontinued Operations

Laser Sales

The Company recognized revenue on laser sales at the point in time that control transferred to the customer. Control of the product typically transferred upon shipment.

Warranty Service Revenue

The Company typically provided a 12-month warranty with the purchase of its laser systems. Customers could extend the warranty period through the purchase of extended warranty service contracts. Extended warranty service contracts were sold with contract terms ranging from 12 to 60 months and covered periods after the end of the initial 12-month warranty period. The warranty provided the customer with maintenance services in addition to the assurance that the laser product complied with agreed-upon specifications. Therefore, the warranty service was treated as a separate performance obligation from the laser system. Warranty services were a stand-ready obligation, and the Company recognized revenue on a straight-line basis over the service contract term. Warranty service revenue was included in service and other revenue in the statement of operations.

Contracts With Multiple Performance Obligations

Certain of the Company’s contracts with customers contained multiple performance obligations. For these contracts, the Company accounted for individual products and services as separate performance obligations if they are distinct, which was if (i) a product or service is separately identifiable from other items in the arrangement and (ii) the customer can benefit from the product or service on its own or with other readily available resources. The transaction price was allocated to the separate performance obligations on a relative standalone selling price basis. The Company determined standalone selling prices based on observable prices of products or services sold separately in comparable circumstances to similar customers.

Significant Financing Component

For multi-year warranty service contracts in which there was a difference between the cash selling price and the consideration in the contract and a significant amount of time between the payment, which was due up-front, and delivery of the services (greater than one year), the Company recorded an adjustment for significant financing to reflect the time value of money. The Company recognized revenue associated with the cash selling price and interest expense using the effective interest method as the Company satisfied its performance obligation(s). The amount of interest expense the Company recognized over the contract term was based on the contract liability balance, which increased for the accrual of interest and decreased as services are provided.

For services contracts that had an original duration of one year or less, the Company used the practical expedient applicable to such contracts and did not adjust the transaction price for the time value of money.

Practical Expedients Elected

As part of the Company’s adoption of Topic 606, the Company elected to use the following practical expedients:

• not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company’s transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less;

• to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less;

• to exclude government assessed taxes from the transaction price; and

• not to recast revenue for contracts that begin and end in the same fiscal year.

Contract Costs

The Company capitalized costs to obtain contracts that were considered incremental and recoverable, such as sales commissions. The capitalized costs were amortized to selling, general and administrative expense over the estimated period of benefit of the asset, which was the contract term. The Company elected to use the practical expedient to expense the costs to obtain a contract when the amortization period was less than one year.

Rental Income

The Company also derived income pursuant to product operating lease agreements for its Pharos laser systems, prior to the sale of the Dermatology Business. Consequently, the Company retained title to the equipment. Depreciation expense on these leased lasers was recorded to cost of revenues on a straight-line basis. The costs to maintain these leased lasers were charged to cost of revenues as incurred.

These lease arrangements contained one lease component (the laser) and one non-lease component (warranty service) for which the Company elected the practical expedient to not separate the non-lease component from the lease component. The Company accounted for the combined lease component as an operating lease and recognized lease income on a straight-line basis over the lease term.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncement

In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance requires that the if-converted method is used in computing diluted earnings per share for all convertible instruments. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2021. The Company adopted ASU 2020-06 on January 1, 2022 using a modified retrospective approach, and the adoption did not impact its financial statements or per share amounts.

Recently Announced Accounting Pronouncements

Recently Announced Accounting Pronouncements

On October 28, 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) which amends FASB Accounting Standards Codification 805, Business Combinations (“ASC 805”) to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The new standard is effective for the Company for its fiscal year beginning January 1, 2023 and interim periods within its fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of adopting this standard.

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2022-03 on its financial statements.

As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies.