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Business Combination

3 Months Ended

Mar. 31, 2024

Business Combination

Business Combination

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 753,699 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 $6.09 per share.

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

Description		Fair Value as of 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 preliminary purchase price allocation reflects various preliminary 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 preliminary 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 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			14,182
Total liabilities assumed			17,065
Total purchase price		$	72,544

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

Intangible Assets		Fair Value				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 three months ended March 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 $56.1 million during the three months ended March 31, 2023. This amount represented the preliminary purchase price amount ascribed to goodwill.

Transaction costs incurred in connection with this business combination amounted to approximately $1.7 million during the three months ended March 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 three months ended March 31, 2023 is presented in thousands except for the per share data ($ in thousands, except per share data):

		Three Months Ended March 31,
		2023
Revenues		$	88
Net loss		$	(66,570	)
Net loss attributable to common stockholders		$	(67,370	)
Basic and diluted net loss per share – on a pro forma basis		$	(13.56	)