SEC Filing - Minerva Surgical, Inc

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-40919

MINERVA SURGICAL, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	26-3422906
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4255 Burton Dr. Santa Clara, CA	95054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (855) 646-7874

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $ 0.001 par value

UTRS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 25, 2023 the registrant had 176,842,499 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION	28

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		71

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, commercial activities and costs, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control, including those risks described in our Annual Report on Form 10-K for the year ended December 31, 2022, and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•

estimates of our addressable market, market growth, future revenue, key performance indicators, expenses, capital requirements, and our needs for additional financing;

•

our expectations regarding the rate and degree of physician, patient, and hospital awareness and acceptance of our treatments for abnormal uterine bleeding (AUB);

•

our ability to establish and maintain intellectual property protection for our products or avoid, defend, or pursue claims of infringement;

•

our ability to retain and expand our experienced commercial team and increase its productivity;

•

the integration of our acquired products into our existing sales and marketing organization;

•

the size and growth of the addressable market for the treatment of AUB;

•

competitive companies and technologies and our industry;

•

our ability to increase our manufacturing production and decrease our fixed manufacturing costs;

•

the performance of third-party manufacturers and suppliers;

•

our ability to research, develop and commercialize new or enhanced products;

•

the impact of COVID-19 and its variants on our business and on the market for the treatment of AUB;

•

the potential effects of government regulation;

•

our ability to hire and retain key personnel and to manage our future growth effectively;

•

our ability to obtain additional financing in future offerings;

•

the volatility of the trading price of our common stock;

•

the impact of local, regional, and national and international economic conditions including inflation and events including the war in Ukraine;

•

our debt and debt service requirements which may restrict our operational and financial flexibility, as well as imposing unfavorable interest and financing costs;

•

our ability to maintain our existing credit facilities or obtain satisfactory new credit facilities or other borrowings;

•

if we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock;

•

being a "controlled company" within the meaning of Nasdaq rules and, as a result, qualifying for and intending to rely on exemptions from certain corporate governance requirements;

•

our expectations about market trends;

•

our anticipated use of our existing resources; and

•

other risks and uncertainties, including those listed in the section titled “Risk factors.”

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements are current only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained herein to reflect events or circumstances after the date of this Quarterly Report, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Minerva Surgical, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)


		March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	25,255	$	6,942
Restricted cash, current		604		604
Accounts receivable, net		7,392		7,244
Inventory		17,195		16,850
Prepaid expenses and other current assets		3,665		4,479
Total current assets		54,111		36,119
Restricted cash, net of current portion		265		265
Intangible assets, net		24,733		26,778
Property and equipment, net		5,375		5,042
Operating lease right-of-use asset		109		270
Other non-current assets		575		426
Total assets	$	85,168	$	68,900
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,690	$	2,804
Accrued compensation		3,142		3,701
Accrued liabilities		4,723		5,524
Operating lease liability		143		355
Current portion of long-term debt		5,139		1,894
Total current liabilities		16,837		14,278
Long-term debt		34,260		37,441
Total liabilities		51,097		51,719
Commitments and contingencies (Note 8)
Stockholders` equity:
Preferred stock, $0.001 par value, 15,000,000 and 5,000,000 shares authorized, and no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—		—
Common stock, $0.001 par value, 300,000,000 and 100,000,000 shares authorized, and 176,800,219 shares and 29,816,161 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		176		29
Additional paid-in capital		328,740		300,809
Accumulated other comprehensive income		11		11
Accumulated deficit		(294,856)		(283,668)
Total stockholders’ equity		34,071		17,181
Total liabilities and stockholders’ equity	$	85,168	$	68,900

The accompanying notes are an integral part of these financial statements.

Minerva Surgical, Inc.

Condensed Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)


	For the Three Months Ended
		2023				2022
Revenues	$		12,533		$		10,935
Cost of goods sold			5,518				5,522
Gross profit			7,015				5,413
Operating expenses
Sales and marketing			10,202				9,473
General and administrative			5,358				4,985
Research and development			1,765				1,255
Total operating expenses			17,325				15,713
Loss from operations			(10,310	)			(10,300	)
Interest income			38				9
Interest expense			(1,068	)			(632	)
Other expense, net			(3	)			(2	)
Net loss before income taxes			(11,343	)			(10,925	)
Income tax expense			—				—
Net loss	$		(11,343	)	$		(10,925	)
Net loss per share attributable to common stockholders, basic and diluted	$		(0.12	)	$		(0.38	)
Weighted-average common shares used in computing net loss per share, basic and diluted			96,573,894				28,480,745

The accompanying notes are an integral part of these financial statements.

Minerva Surgical, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)


	Common stock					Additional paid-in		Accumulated other comprehensive		Accumulated			Total stockholders'
	Shares			Amount		capital		income		deficit			equity
Balances, December 31, 2021		28,822,283	$		28	$	293,621	$	11	$	(249,556	)	$	44,104
Issuance of common stock upon exercise of stock options		5,166			—		3		—		—			3
Vesting of early exercised stock options		—			—		39		—		—			39
Stock-based compensation expense		—			—		1,523		—		—			1,523
Net loss		—			—		—		—		(10,925	)		(10,925	)
Balances, March 31, 2022		28,827,449	$		28	$	295,186	$	11	$	(260,481	)	$	34,744


	Common stock					Additional paid-in		Accumulated other comprehensive		Accumulated			Total stockholders'
	Shares			Amount		capital		income		deficit			equity
Balances, December 31, 2022		29,816,161	$		29	$	300,809	$	11	$	(283,668	)	$	17,181
Cumulative effect adjustment from adoption of ASU 2016-13		—			—		—		—		155			155
Proceeds from issuance of common stock, Share Purchase Agreement, net		146,627,565			147		26,627		—		—			26,774
Issuance of common stock upon release of RSUs		356,487			—		—		—		—			—
Issuance of common stock upon exercise of stock options		6			—		—		—		—			—
Vesting of early exercised stock options		—			—		30		—		—			30
Stock-based compensation expense		—			—		1,274		—		—			1,274
Net loss		—			—		—		—		(11,343	)		(11,343	)
Balances, March 31, 2023		176,800,219	$		176	$	328,740	$	11	$	(294,856	)	$	34,071

The accompanying notes are an integral part of these financial statements.

Minerva Surgical, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)


	Three Months Ended March 31,
		2023		2022
Cash Flows From Operating Activities:
Net loss	$	(11,343)	$	(10,925)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and debt issuance costs		64		61
Depreciation and amortization		2,514		2,668
Non-cash lease expense		161		153
Stock-based compensation expense		1,274		1,523
Change in fair value of contingent consideration liability		—		(151)
Property and equipment write-downs/disposals		—		10
Net changes in operating assets and liabilities:
Accounts receivable, net		7		142
Inventory		(1,128)		(1,127)
Prepaid expenses and other current assets		814		997
Other non-current assets		(149)		—
Accounts payable		942		(550)
Accrued liabilities		(771)		402
Accrued compensation		(559)		(631)
Operating lease liability		(212)		(197)
Net cash used in operating activities		(8,386)		(7,625)
Cash Flows From Investing Activities:
Purchase of property and equipment		(75)		(82)
Net cash used in investing activities		(75)		(82)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock under Share Purchase Agreement, net		26,774		—
Payment of contingent consideration		—		(5,000)
Proceeds from issuance of common stock		—		3
Net cash (used in) provided by financing activities		26,774		(4,997)
Net increase (decrease) in cash, cash equivalents and restricted cash		18,313		(12,704)
Cash, cash equivalents and restricted cash at the beginning of the period		7,811		48,415
Cash, cash equivalents and restricted cash at the end of the period	$	26,124	$	35,711
Reconciliation of cash, cash equivalents and restricted cash to balance sheets
Cash and cash equivalents	$	25,255	$	27,904
Restricted cash		869		7,807
Cash, cash equivalents and restricted cash in balance sheets	$	26,124	$	35,711
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	986	$	568
Supplemental Disclosure of Non-cash Items:
Vesting of early exercised stock options	$	30	$	39
Purchases of property and equipment included in accounts payable	$	—	$	18
Net reclassification of inventory to property and equipment for customer usage agreements	$	783	$	805
Cumulative effect adjustment from adoption of ASU 2016-13	$	155	$	—
Right of use asset acquired under operating lease on the adoption of ASC 842	$	—	$	894

The accompanying notes are an integral part of these financial statements.

Minerva Surgical, Inc.

Notes to Interim Condensed Financial Statements (Unaudited)

1. Formation and Business of the Company

The Company

Minerva Surgical, Inc. (the Company, we, us, and our) was incorporated in the state of Delaware on November 3, 2008. The Company's headquarters are in Santa Clara, California. The Company is a medical device company that develops therapeutic devices that treat abnormal uterine bleeding in a minimally invasive manner. The Company commenced commercial introduction of its products in the United States in 2015 following the clearance by the U.S. Food and Drug Administration (FDA).

In May 2020, the Company acquired certain assets from Boston Scientific Corporation (BSC) to broaden its product offerings to its customers. The Company derives all of its revenue from sales to customers in the United States through a direct sales force.

Private Placement

On December 27, 2022, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) for a private placement (the “Private Placement”) with Accelmed Partners II L.P. (“Accelmed”) and New Enterprise Associates 13, L.P. (each, a “Purchaser,” and collectively, the “Purchasers”). Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate of 146,627,565 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, at a purchase price of $0.2046 per Share, which represented a 25% premium to the trailing five-day volume-weighted average price of the Company’s common stock on December 23, 2022. On February 9, 2023, the Private Placement closed, and the Company issued the Shares to the Purchasers, resulting in aggregate gross proceeds to the Company of $30.0 million before deducting placement agent fees and estimated offering expenses of $3.2 million.

Liquidity

In accordance with Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 205-40, Presentation of Financial Statements – Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company incurred a net loss of $11.3 million during the three months ended March 31, 2023 and had an accumulated deficit of $294.9 million as of March 31, 2023. The Company had cash and cash equivalents of $25.3 million as of March 31, 2023.

The Company prepared an internal forecast that includes alternatives to refinance its outstanding term loan and to potentially raise additional capital as needed over the next twelve months. Under the current terms of the outstanding term loan, the Company will be required to begin repaying the principal balance starting November 2023, the end of the interest only period. Should the Company fail to refinance the CIBC Agreement or raise additional capital, the latest forecast represents the possibility that its cash and cash equivalents will not be sufficient to fund the Company's operations within the next twelve months.

As of March 31, 2023, the Company was in compliance with the financial covenants required by its Loan and Security Agreement with Canadian Imperial Bank of Commerce (the CIBC Agreement). However, the inherent uncertainties described above may impact the Company’s ability to remain in compliance with these covenants over the next twelve months.

A potential financial covenant violation, should it occur, would put the company in technical default per the terms of the CIBC Agreement and provide for remedies to the bank per that agreement.

These circumstances impact the Company's ability to fund its current business plan within the twelve months from the date of issuance of these financial statements.

The presence of these conditions, individually or in the aggregate, raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company is considering raising additional capital through debt, equity or a combination financing in the future. However, such additional financings may not be available on acceptable terms, or at all. If the Company is unable obtain adequate financing on acceptable terms, it may terminate or delay the development of one or more of its products, delay sales and marketing efforts or other activities necessary to commercialize its products or modify its operations to operate within available resources. Failure to manage discretionary spending or raise additional financing as needed, may adversely impact its ability to achieve its intended business objectives. While the Company believes its plans will alleviate the conditions that raise substantial doubt, these plans are not entirely within the Company's control and cannot be assessed as being probable of occurring.

Impact of the COVID-19 pandemic

The COVID-19 pandemic and the resulting economic downturn have impacted business conditions in the industry in which the Company operates. Since March 2020, the Company’s net sales were negatively impacted by the COVID-19 pandemic as hospitals and ambulatory surgical centers (ASCs) delayed or canceled elective procedures. In response to the pandemic, many state and local governments in the U.S. issued orders that temporarily precluded elective procedures in order to conserve scarce health system resources. The decrease in hospital and ASCs admission rates and elective surgeries reduced both the number of patients being evaluated for treatment with and demand for elective procedures using the Company's products.

More recently, we have seen the impacts from COVID-19 lessening with hospitals and ASCs returning to more normal operations and supply chain disruptions becoming less frequent. The staffing impacts on hospitals may continue for some time but the elimination of elective procedures has been diminishing. The ultimate extent of the impact of the COVID-19 pandemic on the Company is highly uncertain and subject to change. This impact may result in a material, adverse impact on liquidity, capital resources, supply chain, operations and revenue and may affect third parties on which the Company relies.

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying financial statements have been prepared using accounting principles generally accepted in the United States of America (GAAP). Certain prior year amounts have been reclassified to conform to the current year presentation.

Unaudited interim financial information

The accompanying condensed balance sheet as of March 31, 2023, the condensed statements of operations, the condensed statements of stockholders’ equity and condensed statements of cash flows for the periods ended March 31, 2023 and 2022 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the 2022 audited annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the three-month periods ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three-month periods ended March 31, 2023 and 2022 are also unaudited. The results for the three-month period ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim condensed financial statements. These unaudited interim condensed financial statements should be read in conjunction with the audited annual financial statements and related notes. The significant accounting policies used in the preparation of the unaudited condensed financial statements for the three-month periods ended March 31, 2023 and 2022, are consistent with those discussed in Note 2 to the audited financial statements and notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (SEC) on March 22, 2023. There have been no significant changes in the significant accounting policies or critical accounting estimates since December 31, 2022, except for the accounting policy related to FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments discussed below.

Use of estimates

The preparation of financial statements in conformity with GAAP 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. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Significant estimates and assumptions include accounts receivable allowances, inventory allowances, recoverability of long-term assets, including definite-lived intangible assets, revaluation of equity instruments and equity-linked instruments, valuation of common stock, stock-based compensation, contingent consideration liability, valuation of the redeemable convertible preferred stock warrant liability and derivative liabilities, deferred tax assets and related valuation allowances, impact of contingencies and the Company’s incremental borrowing rate used to calculate lease assets.

Change in accounting estimate

In accordance with our policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review, which included a study of historic replacement requirements, indicated that the actual lives of equipment under customer usage agreements were longer than the estimated useful lives used for depreciation purposes. As a result, effective January 1, 2023, the Company changed its estimate of the useful lives of equipment under customer usage agreements from three to five years. The effect of this change in estimate was to reduce depreciation expense by $0.3 million, decrease net loss by $0.3 million and decrease basic and diluted loss per share by an immaterial amount, for the three months ended March 31, 2023.

Fair value of financial instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their fair value due to the short-term nature of these assets and liabilities. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates its fair value and is classified as a Level 2 liability.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents balances with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation (FDIC) insured limits.

The Company earns revenue from sale of disposable devices and controllers to customers such as hospitals, ambulatory surgical centers and physician offices. The Company’s accounts receivable are derived from revenue earned from customers. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. At March 31, 2023 and 2022, and for the periods then ended, no customer accounted for more than 10.0% of accounts receivable or revenue.

Concentration of suppliers

The Company purchases certain components of its products from a single or small number of suppliers. A change in or loss of these suppliers could cause a delay in filling customer orders and a possible loss of sales, which could adversely affect our results of operations; however, management believes that suitable replacement suppliers could be obtained in such an event.

Accounts Receivable and Estimated Credit Losses

The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2023 using the modified retrospective method. The adoption of this standard did not have a material cumulative effect on opening accumulated deficit as of January 1, 2023 and did not have a material impact on the Company’s financial statements for the three months ended March 31, 2023.

As of January 1, 2023, accounts receivable are recorded at invoice value, net of the Company's reserve for estimated credit losses. The Company applies its loss-rate method to measure its estimated credit loss for receivables using its historical collection experience, current and ongoing evaluation of customer balances including transaction history, aging status and financial condition of its customers, plus reasonable and supportable forecast of future economic market conditions. Specific credit loss reserve amounts are established to record the appropriate reserve for the Company's current estimate of credit losses (CECL) reserves for its pool of identified customers that have an identified risk of default. A general credit loss reserve is then established based upon the Company’s assessment of estimated credit losses for its remaining receivables pool based on its loss-rate method. Balances are written-off when they are ultimately determined to be uncollectible.

The following table summarizes the activity in the reserve for credit loss account (in thousands):


January 1, 2023	$	542
Amounts charged (reversed) to costs and expenses		(1	)
Write-offs		(26	)
March 31, 2023	$	515

Advertising costs

Expenses related to advertising of products are charged to sales and marketing expense as incurred. During the three months ended March 31, 2023, the Company incurred $0.1 million in advertising expenses. The Company did not have any material advertising expenses during the three months ended March 31, 2022.

Net loss per share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, , redeemable convertible preferred stock warrants, convertible notes, common stock subject to repurchase, restricted stock units and common stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. Because the Company has reported a net loss for the three-month periods ended March 31, 2023 and 2022, diluted net loss per common share is the same as basic net loss per common share for all periods presented.

3. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2016-3, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13) effective January 1, 2023, using the modified retrospective approach with a cumulative effect adjustment to the accumulated deficit at the beginning of the period of adoption. Upon adoption of ASU 2016-13, the Company derecognized its allowance for doubtful accounts of $0.7 million, recognized a CECL reserve of $0.5 million with a net adjustment to retained earnings of $0.2 million as of January 1, 2023 with no resulting impact to the condensed statements of operations or condensed statements of cash flows.

4. Revenue

Disaggregation of revenue


	For the Three Months Ended March 31,
		2023	2022
Minerva ES		45.2%	44.0%
Genesys HTA		27.8%	30.3%
Symphion		26.3%	25.1%
Other		0.7%	0.6%
		100.0%	100%

For the three months ended March 31, 2023 and 2022, approximately 100% and 99.4% of the Company’s revenue is subject to point-in-time recognition for single-use (disposable) products and capital equipment across all revenue streams. Sale of extended warranties on capital equipment within other revenue represents 0.1% and less than 1.0% of the Company’s revenue for the three-month periods ended on March 31, 2023 and 2022. In addition, for the three months ended March 31, 2023 and 2022, 98.3% and 97.0% of the Company’s total revenue is derived from the sale of single-use (disposable) products; therefore, the Company did not include disaggregated revenue data to present the amounts attributed to capital equipment, associated warranties, and miscellaneous revenue separately.

Contract balances

The Company’s contract balances consist of the following (in thousands):


	March 31,		December 31,
		2023		2022
Accounts receivable, net	$	7,392	$	7,244
Contract liability—current (see Note 6)	$	581	$	339

5. Fair value measurements

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value

hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis—Financial assets held by the Company measured at fair value on a recurring basis include money market funds which are classified as Level 1 within the fair value hierarchy as the inputs used to measure fair value are quoted prices in active markets for identical assets.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Fair value of assets and liabilities

The following tables summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	20,687	$	—	$	—	$	20,687
Total financial assets	$	20,687	$	—	$	—	$	20,687

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	3,149	$	—	$	—	$	3,149
Total financial assets	$	3,149	$	—	$	—	$	3,149

The change in fair value of the contingent consideration liability is summarized below (in thousands):


		Contingent consideration liability
Fair value, December 31, 2021	$		14,094
Change in fair value