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What changed in AtriCure, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AtriCure, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+295 added−307 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-22)

Top changes in AtriCure, Inc.'s 2023 10-K

295 paragraphs added · 307 removed · 223 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

101 edited+26 added−23 removed85 unchanged
Biggest changeWith the approval of the EPi-Sense System, we began programs to train physicians on the use of the EPi-Sense system in a hybrid approach to treating patients with long-standing persistent Afib. We believe these training and education programs have increased awareness about the surgical treatment of Afib, and we will continue to make investments to serve our physician customers.
Biggest changeWe believe these training and education programs have increased awareness about the surgical treatment of Afib, and we will continue to make investments to serve our physician customers. As a result of the educational process, we believe that awareness of our technologies is growing and will result in the increased use of our products. Evaluate Acquisition Opportunities.
ITEM 1. BUSINESS Overview We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain. Afib is an irregular heartbeat, or arrhythmia, which affects over 37 million people worldwide, including more than eight million people in the United States, and is a growing epidemic.
ITEM 1. BUSINESS Overview We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management. Afib is an irregular heartbeat, or arrhythmia, which affects over 37 million people worldwide, including more than eight million people in the United States, and is a growing epidemic.
The AtriClip ® LAA Exclusion System includes various combinations of an implantable device (AtriClip) coupled to a single-use disposable applier. The AtriClip is designed to exclude the left atrial appendage by mechanically clamping the appendage from the outside of the heart. The left atrial appendage has been shown to be a source of arrhythmias.
The AtriClip ® LAA Exclusion System includes various combinations of an implantable device (AtriClip) coupled to a single-use disposable applier. The AtriClip device is designed to exclude the left atrial appendage by mechanically clamping the appendage from the outside of the heart. The left atrial appendage has been shown to be a source of arrhythmias.
While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license patents and related technology of importance to the commercialization of our products.
While we own much of our intellectual property, including patents, patent applications, trademarks, trade secrets, know-how and proprietary information, we also license know-how and related technology of importance to the commercialization of our products.
Studies have also suggested that 90% of clots that cause strokes in patients who have Afib originate from within the LAA. Recently, a very large independent international randomized trial, Left Atrial Appendage Occlusion Study (LAAOS) III, demonstrated a significant reduction in strokes when the LAA was managed during cardiac surgery.
Studies have also suggested that 90% of clots that cause strokes in patients who have Afib originate from within the LAA. Recently, a large independent international randomized trial, Left Atrial Appendage Occlusion Study (LAAOS) III, demonstrated a significant reduction in strokes when the LAA was managed during cardiac surgery.
Our strategy is to expand the treatment options for patients who suffer from Afib, have a high risk of stroke, or who suffer from post-operative pain, through the continued development of our technologies and expansion of our product offerings, global commercial expansion and clinical science investments. The key elements of our strategy include: New Product Innovation.
Our strategy is to expand the treatment options for patients who suffer from Afib, have a high risk of stroke, or who suffer from post-operative pain, through the continued development of our technologies and expansion of our product offerings, clinical science investments and global commercial expansion. The key elements of our strategy include: New Product and Procedure Innovation.
AtriCure has the only medical devices that are approved by FDA for treating long-standing persistent Afib: the Isolator Synergy Ablation, the first medical device to receive FDA approval for the treatment of persistent Afib in a concomitant setting, and the EPi-Sense System, which received FDA approval for standalone treatment of Afib with Hybrid AF Therapy.
Competition AtriCure has the only medical devices that are approved by FDA for treating long-standing persistent Afib: the Isolator Synergy Ablation, the first medical device to receive FDA approval for the treatment of persistent Afib in a concomitant setting, and the EPi-Sense System, which received FDA approval for standalone treatment of Afib with Hybrid AF Therapy.
The various configurations provide the user with options to address patient specific procedure requirements or anatomy; however, all the clamps provide consistent performance using the same core technology. The parallel closure compresses tissue and evacuates the blood and fluids from the energy pathway to make the ablation more effective.
The various configurations provide the user with options to address patient specific procedure requirements or anatomy; however, all the clamps provide consistent performance using the same core technology. The parallel closure evenly compresses tissue and evacuates the blood and fluids from the energy pathway to make the ablation more effective.
Afib is an under-diagnosed condition due in large part to the fact that patients with Afib often have mild or no symptoms, and their Afib is often only diagnosed when they seek treatment for an associated condition, such as a structural heart disease or stroke.
Afib is an under-diagnosed condition due in large part to the fact that patients with Afib often have mild or no symptoms, and their Afib is diagnosed when they seek treatment for an associated condition, such as a structural heart disease or stroke.
Because of the risk of stroke and the significant cost burden on the healthcare system, more and more surgeons are routinely addressing the LAA, both in patients who have Afib, but also in those who do not have Afib but may be at increased risk of developing the disease in the future.
Because of the risk of stroke and the significant cost burden on the healthcare system, more and more surgeons are routinely addressing the LAA, both in patients who have Afib and in those who do not have Afib but may be at increased risk of developing the disease in the future.
Cryo Nerve Block can be delivered using our cryoICE cryoSPHERE ® probe, which is specifically designed for Cryo Nerve Block. Depending on the degree of invasiveness, physicians and their nursing staff will take advantage of multiple ways of managing pain for their patients.
Cryo Nerve Block can be delivered using our cryoICE cryoSPHERE ® probe, which is specifically designed for Cryo Nerve Block therapy. Depending on the degree of invasiveness, physicians and their nursing staff will take advantage of multiple ways of managing pain for their patients.
Devices that bear the CE mark may be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror the medical device directives or medical device regulations. Pervasive and Continuing Regulation .
Devices that bear the CE mark may be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror the medical device regulations. Pervasive and Continuing Regulation .
All our pen and ablation devices are cleared for sale in the United States under FDA 510(k) clearances, with indications for the ablation of cardiac tissue and/or the treatment of cardiac arrhythmias.
All our pen and linear ablation devices are cleared for sale in the United States under FDA 510(k) clearances, with indications for the ablation of cardiac tissue and/or the treatment of cardiac arrhythmias.
Thus, we believe the EPi-Sense ablation system used as a minimally invasive or Hybrid AF TM therapy represents a significant growth opportunity for the Company.
Thus, we believe the EPi-Sense ablation system used as a minimally invasive or Hybrid AF TM therapy also represents a significant growth opportunity for the Company.
Catheter ablation is considered a percutaneous procedure that does not require the opening of the chest and involves catheters inserted through a small puncture in the groin. In addition to catheter ablation, there are other treatment options for patients with Afib, including pharmacological therapy (anti-arrhythmic drugs) and implantable pacemakers.
Catheter ablation is considered a percutaneous procedure that does not require the opening of the chest; rather, catheters are inserted through a small puncture in the groin. In addition to catheter ablation, there are other treatment options for patients with Afib, including pharmacological therapy (anti-arrhythmic drugs) and implantable pacemakers.
Our international sales team includes approximately 50 employees focused on our direct markets, such as Germany, France, the United Kingdom, Australia and the Benelux region. We also maintain a network of distributors who market and sell our products in Asia, South America and Canada, as well as certain countries in Europe.
Our international sales team includes approximately 60 employees focused on our direct markets, such as Germany, France, the United Kingdom, the Benelux region, Canada and Australia. We also maintain a network of distributors who market and sell our products in Asia and South America, as well as certain countries in Europe.
In the event that we grant a waiver under our Code of Conduct to any of our officers or directors or make any material amendments to the Code of Conduct, we will publish it on our website within four business days. Information on our website is not deemed to be a part of this Form 10-K. 13 Table of Contents
In the event that we grant a waiver under our Code of Conduct to any of our officers or directors or make any material amendments to the Code of Conduct, we will publish it on our website within four business days. Information on our website is not deemed to be a part of this Form 10-K. 14 Table of Contents
We recognize that the use of tobacco is linked to many adverse health effects, including those that impact the heart, and we offer our employees tobacco cessation programs. As of 2021, our Ohio office locations are entirely tobacco- and nicotine-free, and to the extent permitted in the states of our other offices, those locations are also entirely tobacco- and nicotine-free.
We recognize that the use of tobacco is linked to many adverse health effects, including those that impact the heart, and we offer our employees tobacco cessation programs. Since 2021, our Ohio office locations are entirely tobacco- and nicotine-free, and to the extent permitted in the states of our other offices, those locations are also entirely tobacco- and nicotine-free.
Afib often occurs in conjunction with other cardiovascular diseases, including hypertension, congestive heart failure, left ventricular dysfunction, coronary artery disease and valvular disease. Our ablation and left atrial appendage management (LAAM) products are used by physicians during open-heart and minimally invasive procedures.
Afib often occurs in conjunction with other cardiovascular diseases, including hypertension, congestive heart failure, left ventricular dysfunction, coronary artery disease and valvular disease. Our cardiac ablation and left atrial appendage management (LAAM) products are used by physicians during open-heart and minimally invasive surgical procedures.
We only promote our products for uses described in their labeling as cleared or approved by relevant regulatory agencies, and train our sales force on the use of our products to the extent the products are cleared or approved. Our sales team in the United States has approximately 260 employees.
We only promote our products for uses described in their labeling as cleared or approved by relevant regulatory agencies, and train our sales force on the use of our products to the extent the products are cleared or approved. Our sales team in the United States has approximately 290 employees.
The continuous Afib patient population includes early persistent Afib, which lasts seven days to 6 months, persistent Afib, which lasts 6 months to one year, and long-standing persistent Afib, which lasts longer than one year. It is estimated that 3.5 million people in the United States suffer from long-standing persistent Afib.
The continuous Afib patient population includes early persistent Afib, which lasts seven days to 6 months, persistent Afib, which lasts 6 months to one year, and long-standing persistent Afib, which lasts longer than one year. It is estimated that over 3.5 million people in the United States currently suffer from long-standing persistent Afib.
The Isolator Synergy System has been studied in multiple FDA approved clinical trials, including the previously completed ABLATE clinical trial which supported a pre-market approval (PMA) in 2011, as well as the ongoing DEEP AF IDE pivotal trial and HEAL-IST clinical trial.
The Isolator Synergy Ablation System has been studied in multiple FDA approved clinical trials, including the previously completed ABLATE clinical trial which supported a pre-market approval (PMA) in 2011, as well as the ongoing DEEP AF IDE and HEAL-IST clinical trials.
To continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities. All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us.
To continue developing and commercializing our current and future products, we may license intellectual property from commercial or academic entities to obtain the rights to technology that is required for our research, development and commercialization activities. 11 Table of Contents All of our employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us.
Surgeons may utilize the cryoICE devices in combination with Isolator Synergy clamps or independently. Our cryoablation devices are cleared for sale in the United States under FDA 510(k) clearances, bear the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.
Surgeons may utilize the cryoICE devices in combination with Isolator Synergy clamps or independently. 4 Table of Contents Our cryoablation devices are cleared for sale in the United States under FDA 510(k) clearances, bear the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.
It is estimated that approximately 250,000 to 350,000 Afib patients are treated by catheter ablation every year in the U.S., a number that is expected to grow 10 to 15% annually.
It is estimated that approximately 350,000 to 450,000 Afib patients are treated by catheter ablation every year in the U.S., a number that is expected to grow 10 to 15% annually.
Similar to surgical ablation for Afib or surgical LAAM, cryoablation performed for post-operative pain management is reimbursed as part of the primary procedure, open thoracic or cardiac surgery, MS-DRG. We believe hospital reimbursement rates are adequate in these situations. Physicians are reimbursed for their services separately under the Medicare Part B physician fee schedule.
Similar to surgical ablation for Afib or surgical LAAM, cryoablation performed for post-operative pain 8 Table of Contents management is reimbursed as part of the primary procedure, open thoracic or cardiac surgery, MS-DRG. We believe hospital reimbursement rates are typically adequate in these situations. Physicians are reimbursed for their services separately under the Medicare Part B physician fee schedule.
Our manufacturing facilities and processes are also subject to FDA inspections to ensure compliance with QSR. In addition to FDA regulation, the advertising and promotion of certain medical devices are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities.
Our manufacturing facilities and processes are also subject to FDA inspections to ensure compliance with Quality System Regulations (QSR). In addition to FDA regulation, the advertising and promotion of certain medical devices are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities.
The method for assessing conformity varies depending on the type and class of the product, but typically involves a combination of quality system assessment and product conformity assessment by a third-party notified body, an independent and neutral institution appointed by a country to conduct the conformity assessment.
The method for assessing conformity varies depending on the type and class of the product, but typically involves a combination of quality system assessment and product conformity 10 Table of Contents assessment by a third-party notified body, an independent and neutral institution appointed by a country to conduct the conformity assessment.
Many Afib patients without other underlying structural heart disease, especially those with more advanced forms of the disease, are symptomatic and experience conditions such as palpitations, breathlessness and drowsiness. Because of this, these patients tend to be motivated to seek treatment to alleviate their symptoms. Many patients who are symptomatic are treated by an electrophysiologist using catheter ablation.
Many Afib patients without other underlying structural heart disease, especially those with more advanced forms of Afib, are symptomatic and experience conditions such as palpitations, breathlessness and drowsiness. These patients tend to be motivated to seek treatment to alleviate their symptoms. Patients who are symptomatic are often treated by an electrophysiologist using catheter ablation.
FDA regulates the promotion of medical devices by manufacturers and prohibits the promotion by manufacturers of uses that are not within the approved or cleared labeling of the device.
Educational Grants . FDA regulates the promotion of medical devices by manufacturers and prohibits the promotion by manufacturers of uses that are not within the approved or cleared labeling of the device.
We believe that our AtriClip system is safer, more effective and easier to use than other products and techniques for excluding the LAA during cardiac surgery. Therefore, we believe that the market for our ablation products and the AtriClip system represent a significant growth opportunity.
We believe that our AtriClip system is safer, more effective and easier to use than other products and techniques for excluding the LAA during cardiac surgery. Therefore, we believe that the market for our ablation products and the AtriClip system represent significant growth opportunities.
Manufacturing We assemble, inspect, test and package the majority of our products at our facilities in Ohio, and our products are sterilized by third parties. Purchased components are generally sourced from a single supplier, but alternatives to these suppliers are available in the event this would be needed.
Manufacturing We assemble, inspect, test and package the majority of our products at our facilities in Ohio, and our products are sterilized by third parties. Purchased components are often sourced from a single supplier, but alternatives to critical suppliers are available in the event this would be needed.
It is the most common cardiac arrhythmia encountered in clinical practice and results in high utilization of healthcare services. Patients often progress from being in Afib intermittently (paroxysmal) to being in Afib continuously.
It is the most common cardiac arrhythmia encountered in clinical practice and results in high utilization of healthcare services and significant cost burden. Patients often progress from being in Afib intermittently (paroxysmal) to being in Afib continuously.
We are also required to obtain the written informed consent of patients in form and substance that complies with both FDA requirements and other human subject protection regulations established by FDA. We must conduct our clinical studies in compliance with state and federal privacy laws, including the Health Insurance Portability and Accountability Act (HIPAA). Educational Grants .
We are also required to obtain the written informed consent of patients in form and substance that complies with both FDA requirements and other human 9 Table of Contents subject protection regulations established by FDA. We must conduct our clinical studies in compliance with state and federal privacy laws, including the Health Insurance Portability and Accountability Act (HIPAA).
We continue to invest in landmark clinical trials to validate the long-term results of procedures using our products and to support applications to regulatory agencies for expanded indications. We also make clinical research grants to support our product development efforts and expand the body of clinical evidence. Build Physician and Societal Relationships.
We continue to invest in landmark clinical trials to validate the long-term results of procedures using our products and to support applications to regulatory agencies for expanded indications. We also make clinical research grants to support our product development efforts and expand the body of clinical evidence.
We believe that increasing awareness of Afib and improved diagnostic screening will result in an increased number of patients diagnosed with Afib over time. Also, since the prevalence of Afib increases with age, there will likely be an increase in the number of diagnosed Afib patients in the United States as the population ages.
We believe that increasing awareness of Afib and improved diagnostic screening will result in an increased number of patients diagnosed with Afib over time. Also, since the prevalence of Afib increases with age, there will likely be an increase in the number of diagnosed Afib patients globally as the world population ages.
Recovery from cardiothoracic and thoracic surgery can be complicated and painful. Many surgeons use multi-modal pain management strategies that include various pain management techniques, including oral delivery of opioid and non-opioid pain medications.
Recovery from cardiothoracic and thoracic surgery can be complicated and painful. Many surgeons use multi-modal pain management strategies that include oral delivery of opioid and non-opioid pain medications.
The cryoSPHERE probe is 510(k) cleared for managing pain by temporarily ablating peripheral nerves and bears the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.
The cryoSPHERE probe is 510(k) cleared for managing pain by temporarily ablating peripheral nerves and bears the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive. Products for appendage management: • AtriClip System .
Our product development pipeline includes projects which extend and improve our existing products, as well as research and development projects for new technologies. We plan to continue to develop new and innovative products, including those that allow us to enter new markets or expand our growth in existing markets. Invest in Clinical Science.
Our product development pipeline includes projects which extend and improve our existing products, as well as research and development projects for new technologies and new procedural techniques. We plan to continue to develop new and innovative products and procedures, including those that allow us to enter new markets or expand our growth in existing markets. Investments in Clinical Science.
This prospective, multicenter, randomized trial evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery and effectiveness with a minimum follow-up of five years post procedure for all subjects. The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide. Site initiation and enrollment is ongoing. HEAL-IST.
This prospective, multicenter, randomized trial evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery and effectiveness with a minimum follow-up of five years post procedure for all subjects. The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide.
Lead times may vary significantly depending on the size of the order, time required to fabricate and test the 11 Table of Contents components, specific supplier requirements and current market demand for the components and subassemblies. To date, we have not experienced significant product availability or delay issues directly related to obtaining any of our components.
Lead times may vary significantly depending on the size of the order, time required to fabricate and test the components, specific supplier requirements and current market demand for the components and raw materials. To date, we have not experienced significant product availability or delay issues directly related to obtaining any of our components.
Scientific data that has been published on the effects of Cryo Nerve Block has generally shown a significant reduction in prescription of opioids, significantly reduced length of stay for patients in the hospital and other benefits. Products for appendage management: • AtriClip System .
Scientific data that has been published on the effects of Cryo Nerve Block has generally shown a significant reduction in prescription of opioids, significantly reduced length of stay for patients in the hospital and other benefits.
There are numerous regulatory requirements that apply after a product is cleared or approved by FDA, including, but not limited to: annual establishment registration and product listing; current 9 Table of Contents good manufacturing practice for devices, referred to as the Quality System Regulation (QSR); labeling requirements and advertising and promotion guidelines; assessing the significance of any changes to a device; monitoring and reporting serious and adverse events and certain device malfunctions; and reporting certain device corrections and removals.
There are numerous regulatory requirements that apply after a product is cleared or approved by FDA, including, but not limited to: annual establishment registration and product listing; current good manufacturing practice for devices (GMP); labeling requirements and advertising and promotion guidelines; assessing the significance of any changes to a device; monitoring and reporting serious and adverse events and certain device malfunctions; and reporting certain device corrections and removals.
Our EPi-Sense ® System was studied through the CONVERGE clinical trial and was subsequently approved in 2021 by FDA for the treatment of patients with systemic, drug refractory, long-standing persistent Afib when augmented with an endocardial ablation catheter.
Our EPi-Sense ® System was studied through the CONVERGE clinical trial and was subsequently approved in 2021 by FDA for the treatment of patients with systemic, drug refractory, long-standing persistent Afib when augmented with an endocardial ablation catheter. Our EPi-Sense ST Guided Coagulation System was approved via PMA supplement in late 2022.
These products are available for sale in a number of other countries globally. 4 Table of Contents The ICE-AFIB clinical trial is studying the safety and efficacy of the cryoICE system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery. Products for minimally invasive ablation: • EPi-Sense Guided Coagulation System with VisiTrax Technology .
These products are available for sale in a number of other countries globally. The ICE-AFIB clinical trial is studying the safety and efficacy of the cryoICE system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery. Products for minimally invasive ablation: • EPi-Sense Systems .
Certain products of our AtriClip LAA Exclusion System bear the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive. These products are available for sale in a number of other countries globally.
Certain products of our AtriClip LAA Exclusion System bear the CE mark for commercial distribution throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.
We believe that these trends in the United States also apply globally. Afib is a condition that doctors often find difficult to treat and, historically, there has been no widely accepted long-term cure for Afib. This difficulty is exacerbated with more serious forms of Afib, or persistent and long-standing persistent Afib.
Afib is a condition that doctors often find difficult to treat and, historically, there has been no widely accepted long-term cure for Afib. This difficulty is exacerbated with more serious forms of Afib, or persistent and long-standing persistent Afib.
Recent randomized, prospective, multi-center data from the CONVERGE™ IDE clinical trial show that these long-standing persistent Afib patients can experience double the success rate by adding an ablation on the outside surface of the heart using AtriCure’s EPi-Sense ablation system.
Randomized, prospective, multi-center data from the CONVERGE™ IDE clinical trial, along with a number of other recent real-world studies performed by physician investigators, show that these long-standing persistent Afib patients can experience more than double the success rate by adding an ablation on the outside surface of the heart using AtriCure’s EPi-Sense ablation system.
We have implemented multiple safety programs and regularly perform safety hazard evaluations within our facilities. Programs include our Emergency Site Action Plan for emergencies such as fire response, severe weather threats and shelter in place incidents, as well as our Certified First Responders safety program that include Red Cross training of employees in CPR, AED Usage and First Aid practices.
Programs include our Emergency Site Action Plan for emergencies such as fire response, severe weather threats and shelter in place 13 Table of Contents incidents, as well as our Certified First Responders safety program that include Red Cross training of employees in CPR, AED Usage and First Aid practices.
The MDSAP program is recognized in Australia, Brazil, Canada, Europe, Japan and the United States. We are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and disposal of hazardous or potentially hazardous substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control.
We are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and disposal of hazardous or potentially hazardous substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control.
In addition, Afib is thought to be responsible for approximately 15% to 20% of the estimated 800,000 strokes that occur annually in the United States. According to the American Heart Association, the risk of stroke is five times higher in people with Afib.
Today, we estimate that less than 20% of those candidates are being treated with surgical ablation. In addition, Afib is thought to be responsible for approximately 15% to 20% of the estimated 800,000 strokes that occur annually in the United States. According to the American Heart Association, the risk of stroke is five times higher in people with Afib.
The Coolrail ® device enables the user to make longer linear lines of ablation. Surgeons generally use one or more of our pen and linear devices in combination with Isolator Synergy clamps.
The device comes in multiple configurations that have unique tissue contacting and shaft lengths. The Coolrail ® device enables the user to make longer linear lines of ablation. Surgeons generally use one or more of our pen and linear devices in combination with Isolator Synergy clamps.
In the past five years, both the Society for Thoracic Surgeons and the Heart Rhythm Society have released new guidelines on the surgical treatment of Afib in both open-heart and minimally-invasive settings. Provide Training and Education.
In the past five years, the Society for Thoracic Surgeons (STS), Heart Rhythm Society (HRS), American College of Cardiology (ACC), American Heart Association (AHA) and American College of Clinical Pharmacy (ACCP) have released new guidelines on the surgical treatment of Afib in both open-heart and minimally-invasive settings. Provide Training and Education.
The EPi-Sense Guided Coagulation System with VisiTrax technology utilizes monopolar RF energy for the coagulation of tissue. The EPi-Sense device is a single-use disposable which is also capable of intraoperative cardiac signal sensing and recording when connected to an external recording device.
The EPi-Sense Guided Coagulation System with VisiTrax technology and the new EPi-Sense ST ® Guided Coagulation System utilize monopolar RF energy for the coagulation of tissue. Our EPi-Sense devices are single-use disposable ablation devices capable of intraoperative cardiac signal sensing and recording when connected to an external recording device.
The MAX Pen devices enable surgeons to evaluate cardiac arrhythmias, perform temporary cardiac pacing, sensing and stimulation and ablate cardiac tissue with the same device. Surgeons can readily toggle back and forth between these functions. The device comes in multiple configurations that have unique tissue contacting and shaft lengths.
These devices are single-use disposable RF products that come in multiple configurations. The MAX Pen devices enable surgeons to evaluate cardiac arrhythmias, perform temporary cardiac pacing, sensing and stimulation and ablate cardiac tissue with the same device. Surgeons can readily toggle back and forth between these functions.
Annual pay increases and other forms of incentive compensation are based on performance and market evaluation. Performance expectations are communicated to employees at the time of hiring, as well as upon internal transfer or promotion, and documented through our annual performance management process.
Performance expectations are communicated to employees at the time of hiring, as well as upon internal transfer or promotion, and documented through our annual performance management process.
Cardiothoracic and thoracic surgery involving an incision through the ribcage, typically referred to as thoracotomy access, can often result in significant post-operative pain and longer hospital recovery times as patients refrain from mobilizing their chest near the incision site. It is estimated that each year approximately 150,0000 cardiac and thoracic procedures are performed in the United States.
Thoracic surgery involving an incision through the ribcage, typically referred to as thoracotomy access, and cardiothoracic surgery can often result in significant post-operative pain and longer hospital recovery times as patients refrain from mobilizing their chest near the incision site.
The Company is in the process of analyzing data for publication, future development activities, or possible evaluation of label expansions. These trials include the DEEP AF Pivotal Study, CEASE AF and aMAZE IDE clinical trials. Sales, Marketing and Medical Education Our global sales and marketing efforts focus on educating physicians about our unique technologies and their clinical benefits.
The Company is in the process of analyzing additional trial data for publication, future development activities, or possible evaluation of label expansions. 7 Table of Contents Sales, Marketing and Medical Education Our global sales and marketing efforts focus on educating physicians about our unique technologies and their clinical benefits.
It is also estimated that one in seven cardiothoracic surgical patients develops an unhealthy post-procedural addiction to prescription narcotics, making alternative, non-opioid pain management modalities, such as Cryo Nerve Block, an increasingly important part of how physicians manage post-operative pain.
It is also estimated that one in seven thoracic surgery patients develops an unhealthy post-procedural addiction to prescription narcotics, making alternative, non-opioid pain management modalities, such as Cryo Nerve Block, an increasingly important part of how physicians manage post-operative pain. We believe the market for our pain management ablation product represents a significant growth opportunity.
New product introductions, technological advances and regulatory clearances from competitors may impact the use of our products in cardiac procedures. In addition to the cardiac surgery market, we also consider competition within the post-operative pain market. Currently, we are not aware of other companies in the United States who are pursuing cryothermic nerve block therapies for thoracic surgery.
We are aware of other companies developing technology for cardiac tissue ablation and appendage management. New product introductions, technological advances and regulatory clearances from competitors may impact the use of our products in cardiac procedures. In addition to the cardiac surgery market, we also consider competition within the post-operative pain market.
We regularly audit our suppliers for compliance with our quality system requirements, the QSR and/or applicable International Organization of Standardization (ISO) standards. We are an FDA-registered medical device manufacturer and certified to ISO 13485:2016. In addition, we have successfully participated in the Medical Device Single Audit Program (MDSAP) and have been certified accordingly.
We regularly audit our suppliers for compliance with our quality system requirements, the QSR and/or applicable International Organization of Standardization (ISO) standards. We are an FDA-registered medical device manufacturer and certified to ISO 13485:2016. We routinely conduct internal audits of our quality systems in accordance with various international standards.
Our international employee benefits vary due to local regulations and offerings. We ensure compliance with all statutory and mandatory benefits which vary by country, such as medical, disability, retirement/pension, workers compensation, accident, social benefits and paid leave.
Our international employee benefits vary due to local regulations and offerings. We ensure compliance with all statutory and mandatory benefits which vary by country, such as medical, disability, retirement/pension, workers compensation, accident, social benefits and paid leave. None of our employees are represented by a labor union, and we have never experienced any employment-related work stoppages.
Products for open and minimally invasive ablation: • Isolator Synergy Clamps . Our Isolator Synergy System generates the majority of our ablation-related revenue. All our clamps are single-use disposable RF products with jaws that close in a parallel fashion. We sell multiple configurations of our Isolator Synergy clamps.
We generally place this capital equipment with our direct customers and sell to our distributors. Products for open and minimally invasive ablation: • Isolator ® Synergy ™ Clamps . Our Isolator Synergy Ablation System clamps are single-use disposable RF products with jaws that close in a parallel fashion. We sell multiple configurations of our Isolator Synergy clamps.
MedTech Europe and its members are committed to a high level 10 Table of Contents of ethical business practices and have put in place strict guidelines to advise medical technology manufacturers on how to collaborate ethically with healthcare professionals (HCPs).
AtriCure is a member of MedTech Europe, a voluntary trade association for the medical technology industry including diagnostics, medical devices and digital health. MedTech Europe and its members are committed to a high level of ethical business practices and have put in place strict guidelines to advise medical technology manufacturers on how to collaborate ethically with healthcare professionals (HCPs).
In February 2022, FDA approved the protocol for the Hybrid Epicardial and Endocardial Sinus Node Sparing Ablation Therapy for Inappropriate Sinus Tachycardia (IST) clinical trial (HEAL-IST).
In January 2023, we enrolled our first patient; site initiation and enrollment is ongoing. HEAL-IST. In February 2022, FDA approved the protocol for the Hybrid Epicardial and Endocardial Sinus Node Sparing Ablation Therapy for Inappropriate Sinus Tachycardia (IST) clinical trial (HEAL-IST).
We conducted the CONVERGE IDE clinical trial to evaluate the safety and efficacy of the EPi-Sense Guided Coagulation System with VisiTrax technology to treat symptomatic persistent and long-standing persistent Afib patients who are refractory or intolerant to at least one Class I and/or III anti-arrhythmic drug.
The first patient enrollment in the trial occurred in June 2022; site initiation and enrollment is ongoing. CONVERGE. The CONVERGE IDE clinical trial proved the safety and efficacy of the EPi-Sense System to treat symptomatic persistent and long-standing persistent Afib patients who are refractory or intolerant to at least one Class I and/or III anti-arrhythmic drug.
In open-heart procedures, physicians are typically performing heart surgery for other emergent heart conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure.
In open-heart procedures, the physician is performing heart surgery for other conditions, such as a mitral valve repair or a coronary artery bypass, and our products are used in conjunction with (“concomitant” to) such a procedure.
Our cryoICE cryoSPHERE ® probe for pain management (Cryo Nerve Block) provides temporary relief of post-operative pain, allowing the patient's body to heal after surgery while the nerves regenerate and sensation is regained.
Our cryoICE cryoSPHERE ® probe for pain management (Cryo Nerve Block) provides temporary relief of post-operative pain, allowing the patient's body to heal after surgery while the nerves regenerate and sensation is regained. We sell our products to medical centers through our direct sales force in the United States, Germany, France, the United Kingdom, the Benelux region, Canada and Australia.
Products for cardiac tissue ablation include those that create scar tissue using radio frequency (RF) energy or cryothermic modalities. Our ablation products are part of platforms each consisting of disposable hand pieces which connect to either a RF generator or a cryothermic generator. We generally place this capital equipment with our direct customers and sell to our distributors.
The results of these studies have assessed efficacy, ease of use and safety endpoints. Products for cardiac tissue ablation include those that create scar tissue using radio frequency (RF) energy or cryothermic modalities. Our ablation products are part of platforms each consisting of disposable hand pieces which connect to either a RF generator or a cryothermic generator.
Leading cardiothoracic surgeons and electrophysiologists, including those who serve or who have served as consultants to us, have published results of preclinical and clinical studies utilizing our devices. The results of these studies have assessed efficacy, ease of use and safety endpoints.
We have completed, and continue to invest in, clinical studies for the use of our ablation and LAAM products to treat Afib and reduce stroke. Leading cardiothoracic surgeons and electrophysiologists, including those who serve or who have served as consultants to us, have published results of preclinical and clinical studies utilizing our devices.
The AtriClip LAA Exclusion System is currently being evaluated under the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS™) IDE clinical trial. We sell additional products and enabling technologies that hold 510(k) approvals and/or bear the CE mark. The LARIAT ® System is a solution for soft-tissue closure that includes a suture loop coupled to a single-use disposable applier.
These products are available for sale in a number of other countries globally. 5 Table of Contents The AtriClip LAA Exclusion System is currently being evaluated under the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS™) IDE clinical trial. We sell additional products and enabling technologies that hold 510(k) approvals and/or bear the CE mark.
The trial provides for enrollment of up to 150 patients at up to 20 sites in the United States. Enrollment began in January 2019 and remains ongoing. We have invested in other clinical trials to validate the long-term results of procedures using our products and to support applications to regulatory agencies for expanded indications.
The first patient enrollment in the trial occurred in June 2022; site initiation and enrollment is ongoing. We have invested in other clinical trials to validate the long-term results of procedures using our products and to support applications to regulatory agencies for expanded indications.
We also engage third-party reimbursement consultants that provide support to our customers in the event of a coverage denial. 8 Table of Contents Outside of the United States, third-party reimbursement varies widely by geography and by the type of therapy in which our devices are used.
Outside of the United States, third-party reimbursement varies widely by geography and by the type of therapy in which our devices are used.
We have formed consulting relationships with cardiothoracic surgeons, cardiologists, electrophysiologists, stroke neurologists and thoracic surgeons who work with us to develop and evaluate our products. Additionally, we regularly form advisory boards made up of key opinion leaders in multiple specialties to provide input to our training and clinical programs.
Additionally, we regularly form advisory boards made up of key opinion leaders in multiple specialties to provide input to our training and clinical programs.
The first patient enrollment in the trial occurred in June 2022; site initiation and enrollment is ongoing. ICE-AFIB. The ICE-AFIB clinical trial is designed to study the safety and efficacy of the cryoICE ® system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery.
The ICE-AFIB clinical trial is designed to study the safety and efficacy of the cryoICE ® system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery. The trial provides for enrollment of up to 150 patients at up to 20 sites in the United States, which was completed in May 2023.
There are other companies outside of the United States who market their devices for a similar therapy. Third-Party Reimbursement Reimbursement for health care services in the United States is generally made by third-party payors. These payors include private insurers and government insurance programs, such as Medicare and Medicaid.
Currently, we are not aware of other companies in the United States who are pursuing cryothermic nerve block therapies for thoracic surgery. There are other companies outside of the United States who market their devices for a similar therapy. Third-Party Reimbursement Reimbursement for health care services in the United States is generally made by third-party payors.
In April 2022, we launched our most recent configuration, the EnCompass ® clamp, following 510(k) clearance for ablation of cardiac tissue during cardiac surgery in July 2021. The EnCompass clamp was cleared through the FDA 510(k) process and is indicated for cardiac soft tissue ablation.
In April 2022, we launched our most recent configuration, the ENCOMPASS ® clamp, following 510(k) clearance in July 2021. The ENCOMPASS clamp is indicated for cardiac soft tissue ablation. The configuration is designed to make concomitant surgical ablations more efficient and is expected to drive deeper penetration of cardiac surgery procedures. • Multifunctional Pens and Linear Ablation Devices .
The current coverage policies of these private payors may differ from the Medicare program, and payment rates may be higher, lower, or the same as the Medicare program. In some cases, certain private payors adopt negative coverage policies with respect to therapies involving our products.
In addition to the Medicare program, many private payors look to CMS policies as a guideline in setting their coverage policies and payment amounts. The current coverage policies of these private payors may differ from the Medicare program, and payment rates may be higher, lower, or the same as the Medicare program.
In April 2022, FDA approved the protocol for the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial.
In addition, we also conduct various studies to gather clinical data regarding our products. Key trials and studies are: LeAAPS. In April 2022, FDA approved the protocol for the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial.
In addition, some private third-party payors require that certain procedures or the use of certain products be authorized in advance as a condition of reimbursement.
In addition, some private third-party payors require that certain procedures or the use of certain products be authorized in advance as a condition of reimbursement. In some countries, cost containment initiatives and health care policies may significantly reduce reimbursement for procedures using our medical devices or deny coverage for those procedures altogether.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThird-party payors are increasingly exerting pressure on medical device companies to reduce their prices. Even to the extent that the use of our products is reimbursed by private payors and governmental payors, adverse changes in payors’ policies toward coverage and reimbursement for surgical procedures would also harm our ability to promote and sell our products.
Biggest changeAdverse changes in governmental and third-party payors’ policies toward coverage and reimbursement for surgical procedures would harm our ability to promote and sell our products. Third-party payors are increasingly exerting pressure on medical device companies to reduce their prices.
Industry Condition Risks • A prolonged downturn in macroeconomic conditions may materially adversely affect our business. • Rising healthcare costs may result in efforts by government and private payors to contain or reduce healthcare spending, including for procedures that utilize our products. • Adverse changes in governmental and third party payors’ policies toward coverage and reimbursement for surgical procedures would harm our ability to promote and sell our products.
Industry Condition Risks • A prolonged downturn in macroeconomic conditions may materially adversely affect our business. • Rising healthcare costs may result in efforts by government and private payors to contain or reduce healthcare spending, including reimbursement for procedures that utilize our products. • Adverse changes in governmental and third-party payors’ policies toward coverage and reimbursement for surgical procedures would harm our ability to promote and sell our products.
Operational Risks We may experience unfavorable publicity relating to our business or our industry. This publicity could have a negative impact on our ability to attract and retain customers, our sales, clinical studies involving our products, our reputation and our stock price.
Operational Risks We may experience unfavorable publicity relating to our business or our industry. This publicity could have a negative impact on our sales, our ability to attract and retain customers, clinical studies involving our products, our reputation and our stock price.
We have key relationships with physicians that involve procedure, product, market and clinical development and training. If any of these physicians end their relationship with us, our business could be negatively impacted. We cannot assure you that we will be able to attract and retain the personnel and physician relationships necessary to grow and expand our business and operations.
We have key relationships with physicians that involve procedure, product, market and clinical development and training. Our business could be negatively impacted if any of these physicians end their relationship with us. We cannot assure you that we will be able to attract and retain the personnel and physician relationships necessary to grow and expand our business and operations.
The laws that affect our ability to operate our business in addition to the FDCA and FDA regulations include, but are not limited to, the following: • the Federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid Programs; • the Federal False Claims Act, which prohibits submitting a false claim or causing the submission of a false claim to the government; • Medicare laws and regulations that prescribe the requirements for coverage and payment, including the amount of such payment, and laws prohibiting false claims for reimbursement under Medicare and Medicaid; • state consumer protection, fraud and business practice laws, including the California Consumer Privacy Act (“CCPA”), which among other things, requires disclosures to California consumers and provides consumers new abilities to opt out of certain sales of personal information; • state laws that prohibit the practice of medicine by non-doctors and by doctors not licensed in a particular state, and fee-splitting arrangements between doctors and non-doctors, as well as state law equivalents to the Anti-Kickback Statute and the Stark Law, which may not be limited to government-reimbursed items; • federal and state healthcare fraud and abuse laws or laws protecting the privacy of patient medical information, including the Health Insurance Portability and Accountability Act (HIPAA) which protects medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting reasonably necessary to accomplish the intended purpose; • laws and regulations, such as the General Data Protection Regulation in the European Union, that govern collection, use, disclosure, transfer and storage of personal data that we may collect from our employees, consultants or in conjunction with clinical trials; 22 Table of Contents • the Federal Trade Commission Act and similar laws regulating advertising and consumer protection; and • similar and other regulations outside the United States.
The laws that affect our ability to operate our business in addition to the FDCA and FDA regulations include, but are not limited to, the following: • the Federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid Programs; • the Federal False Claims Act, which prohibits submitting a false claim or causing the submission of a false claim to the government; • Medicare laws and regulations that prescribe the requirements for coverage and payment, including the amount of such payment, and laws prohibiting false claims for reimbursement under Medicare and Medicaid; • state consumer protection, fraud and business practice laws, including the California Consumer Privacy Act (“CCPA”), which among other things, requires disclosures to California consumers and provides consumers new abilities to opt out of certain sales of personal information; • state laws that prohibit the practice of medicine by non-doctors and by doctors not licensed in a particular state, and fee-splitting arrangements between doctors and non-doctors, as well as state law equivalents to the Anti-Kickback Statute and the Stark Law, which may not be limited to government-reimbursed items; • federal and state healthcare fraud and abuse laws or laws protecting the privacy of patient medical information, including the Health Insurance Portability and Accountability Act (HIPAA) which protects medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting reasonably necessary to accomplish the intended purpose; • laws and regulations, such as the General Data Protection Regulation in the European Union, that govern collection, use, disclosure, transfer and storage of personal data that we may collect from our employees, consultants or in conjunction with clinical trials; • the Federal Trade Commission Act and similar laws regulating advertising and consumer protection; and 22 Table of Contents • similar and other regulations outside the United States.
Any interruption or delay in the manufacture of the product or any of its components could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products and could, therefore, have a material adverse effect on our business, financial condition and results of operations.
Interruption or delay in the manufacture of the product or any of its components could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products and could, therefore, have a material adverse effect on our business, financial condition and results of operations.
Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, and which could adversely affect our operations and operating results.
Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control and could adversely affect our operations and operating results.
We may be subject to fines, injunctions and penalties if we are found to be promoting our products for unapproved or off-label uses. 14 Table of Contents • Modifications to our products may require new clearances or approvals by FDA; failure to obtain such clearances or approvals where required could result in a recall of the modified products and limitation on future sales until cleared or approved. • If we or our third-party vendors fail to comply with extensive FDA regulations relating to the manufacturing of our products we may be subject to fines, injunctions and penalties. • Any adverse finding, judgement, settlement or enforcement action against us as a result of the current qui tam lawsuit could negatively affect our business. • The use of products we sell may result in injuries or other adverse events that lead to product liability claims. • Our ability to compete in the marketplace could be affected if our intellectual property rights fail to provide meaningful commercial protection for our products. • Litigation and administrative proceedings over patent and other intellectual property rights are common in our industry, and any litigation or claim against us may cause us to incur substantial costs. • We are subject to various regulatory and other risks related to selling our products internationally which could harm our revenue. • Any allegation or determination of wrongdoing under the Foreign Corrupt Practices Act or other anti-corruption laws could have a material adverse effect on our business. • Compliance with European Union medical device regulation may limit our ability to sell our products in European markets.
We may be subject to fines, injunctions and penalties if we are found to be promoting our products for unapproved or off-label uses. • Modifications to our products may require new clearances or approvals by FDA; failure to obtain such clearances or approvals where required could result in a recall of the modified products and limitation on future sales until cleared or approved. 15 Table of Contents • If we or our third-party vendors fail to comply with extensive FDA regulations relating to the manufacturing of our products we may be subject to fines, injunctions and penalties. • Any adverse finding, judgement, settlement or enforcement action against us as a result of the current qui tam lawsuit could negatively affect our business. • The use of products we sell may result in injuries or other adverse events that lead to product liability claims. • Our ability to compete in the marketplace could be affected if our intellectual property rights fail to provide meaningful commercial protection for our products. • Litigation and administrative proceedings over patent and other intellectual property rights are common in our industry, and any litigation or claim against us may cause us to incur substantial costs. • We are subject to various regulatory and other risks related to selling our products internationally which could harm our revenue. • Any allegation or determination of wrongdoing under the Foreign Corrupt Practices Act or other anti-corruption laws could have a material adverse effect on our business. • Compliance with European Union medical device regulation may limit our ability to sell our products in European markets.
Common Stock Risks • We may fail to achieve our publicly announced guidance about our business which could cause a decline in our stock price. • Securities analysts may discontinue coverage for our common stock or issue reports which could have a negative impact on the market price of our common stock. • Our common stock may experience extreme fluctuations in the price and trading volume causing our stockholders to lose some or all of their investment. • The sale of material amounts of common stock could encourage short sales by third parties and depress the price of our common stock causing our stockholders to lose part or all of their investment. • Stockholder ownership of our common stock may be diluted if we sell common stock in a capital raising transaction or issue shares in a future acquisition. • Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law could inhibit a change in control or a change in management that stockholders consider favorable. • Our stockholders must rely on stock appreciation for any return on investment as we do not expect to pay dividends in the foreseeable future. 15 Table of Contents Commercial Execution and Product Performance Risks If our products do not achieve widespread market acceptance in the United States, our operating results will be harmed, and we may not achieve or sustain profitability.
Common Stock Risks • We may fail to achieve our publicly announced guidance about our business which could cause a decline in our stock price. • Securities analysts may discontinue coverage for our common stock or issue reports which could have a negative impact on the market price of our common stock. • Our common stock may experience extreme fluctuations in the price and trading volume causing our stockholders to lose some or all of their investment. • The sale of material amounts of common stock could encourage short sales by third parties and depress the price of our common stock causing our stockholders to lose part or all of their investment. • Stockholder ownership of our common stock may be diluted if we sell common stock in a capital raising transaction or issue shares in a future acquisition. • Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law could inhibit a change in control or a change in management that stockholders consider favorable. • Our stockholders must rely on stock appreciation for any return on investment as we do not expect to pay dividends in the foreseeable future. 16 Table of Contents Commercial Execution and Product Performance Risks If our products do not achieve widespread market acceptance in the United States, our operating results will be harmed, and we may not achieve or sustain profitability.
Companies also compete with us to attract qualified scientific and technical personnel as well as funding. Most of our competitors and potential competitors have greater financial, manufacturing, marketing and research and development capabilities than we have, and may obtain FDA approval or clearance for their products.
Companies also compete with us to attract qualified scientific, technical and commercial personnel as well as funding. Most of our competitors and potential competitors have greater financial, manufacturing, marketing and research and development capabilities than we have, and may obtain FDA approval or clearance for their products.
Our reliance on outside manufacturers, sterilizers and suppliers also subjects us to risks that could harm our business, including: • we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms; • we may have difficulty timely locating and qualifying alternative suppliers or sterilizers; 19 Table of Contents • switching components may require product redesign and new submissions to FDA which would increase our costs and could significantly delay production or, if FDA refuses to approve the changes, completely eliminate our ability to sell our products; • future regulatory actions to modify sterilization processes may cause sterilizers to close, even on a temporary basis, or require new regulatory approvals for us to use, creating lost sterilization capacity and delays; • our suppliers manufacture products for a range of customers, and fluctuations in demand for the products those suppliers manufacture for others may affect their ability to deliver components to us in a timely manner; and • our suppliers may encounter financial hardships unrelated to our demand for components, which could inhibit their ability to fulfill our orders and meet our requirements.
Our reliance on outside manufacturers, sterilizers and suppliers also subjects us to risks that could harm our business, including: • we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms; • we may have difficulty timely locating and qualifying alternative suppliers or sterilizers; • switching components may require product redesign and new submissions to FDA which would increase our costs and could significantly delay production or, if FDA refuses to approve the changes, completely eliminate our ability to sell our products; • future regulatory actions to modify sterilization processes may cause sterilizers to close, even on a temporary basis, or require new regulatory approvals for us to use, creating lost sterilization capacity and delays; • our suppliers manufacture products for a range of customers, and fluctuations in demand for the products those suppliers manufacture for others may affect their ability to deliver components to us in a timely manner; and • our suppliers may encounter financial hardships unrelated to our demand for components, which could inhibit their ability to fulfill our orders and meet our requirements.
These distributors are owed amounts from public hospitals that are funded by their governments. Adverse financial conditions in these countries may negatively affect the length of time that it will take us to collect associated accounts receivable or impact the likelihood of ultimate collection. We may be unable to comply with the covenants of our Loan Agreement.
These distributors are owed amounts from public hospitals that are funded by their governments. Adverse financial conditions in these countries may negatively affect the length of time that it will take us to collect associated accounts receivable or impact the likelihood of ultimate collection. We may be unable to comply with the covenants of our Credit Agreement.
We cannot provide any assurance that the data collected during our clinical trials will be compelling to the medical community because it may not be scientifically meaningful, may identify unexpected safety concerns, and may not demonstrate that procedures utilizing our 16 Table of Contents products are an attractive option when compared against data from alternative procedures and products.
We cannot provide any assurance that the data collected during our clinical trials will be compelling to the medical community because it may not be scientifically meaningful, may identify unexpected safety concerns, and may not demonstrate that procedures utilizing our products are an attractive option when 17 Table of Contents compared against data from alternative procedures and products.
If our past or present operations are found to be in violation of any of the laws described above or the other governmental regulations to which we, our distributors or our customers are subject, we may be subject to the applicable penalty associated with the violation, including civil and criminal penalties, damages, fines, exclusion from Medicare, Medicaid and other government programs and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of the laws described above or the other governmental regulations to which we, our distributors or our customers are subject, we may be subject to the applicable penalty associated with the violation, including civil and criminal penalties, damages, fines, exclusion from Medicare, Medicaid and other government programs and the curtailment or restructuring of our operations.
For example, we rely on one vendor to manufacture several of our RF generators, as well as separate vendors to manufacture our EPi-Sense System and related RF generator. It would be a time consuming and lengthy process to secure these products from an alternative supplier. We have significant concentrations with a limited number of vendors.
For example, we rely on one vendor to manufacture our RF generator, as well as separate vendors to manufacture our EPi-Sense System and related RF generator. It would be a time consuming and lengthy process to secure these products from an alternative supplier. We have significant concentrations with a limited number of vendors.
The market price of our common stock may have and has had a history of substantial fluctuation due to a variety of factors, including, but not limited to those risk factors described in the “Risk Factors” section herein. These factors, some of which are not within our control, may cause the price of our stock to fluctuate substantially.
The market price of our common stock has had and may continue to have substantial fluctuation due to a variety of factors, including, but not limited to those risk factors described in the “Risk Factors” section herein. These factors, some of which are not within our control, may cause the price of our stock to fluctuate substantially.
As previously disclosed, on December 11, 2017, the Company received a Civil Investigative Demand (CID) from the USDOJ stating that it was investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of Afib.
As previously disclosed, on December 11, 2017, the Company received a Civil Investigative Demand (CID) from the US Department of Justice (USDOJ) stating that it was investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of Afib.
We also rely on third parties to handle our warehousing and logistics functions for European and several international markets on our behalf.
We also rely on third parties to handle our warehousing and logistics functions for European and several other international markets on our behalf.
Operational Risks • Unfavorable publicity relating to our business or industry could negatively impact our operations. • Reliance upon single and limited source third-party suppliers and service providers could harm our business if such third parties cannot provide materials or products or perform services for us in a timely manner. • Our manufacturing operations are highly centralized and any disruption could harm our business. • Our business could be negatively impacted if we fail to successfully integrate acquisitions. • If we fail to properly manage our anticipated growth, our business could suffer. • If we cannot retain our skilled and experienced officers and other employees, or recruit, hire, train and integrate sufficient additional qualified personnel, our business may suffer. • Disruptions of critical information systems or material breaches in the security of our systems could harm our business, customer relations and financial condition. • Our insurance may not cover our indemnification obligations and other liabilities associated with our operations.
Operational Risks • Unfavorable publicity relating to our business or industry could negatively impact our operations. • Reliance upon single and limited source third-party suppliers and service providers could harm our business if such third parties cannot provide materials or products or perform services for us in a timely manner. • Our manufacturing operations are highly centralized and disruption could harm our business. • If we fail to properly manage our anticipated growth, our business could suffer. • If we cannot retain our skilled and experienced officers and other employees, or recruit, hire, train and integrate sufficient additional qualified personnel, our business may suffer. • Disruptions of critical information systems or material breaches in the security of our systems could harm our business, customer relations and financial condition. • Our insurance may not cover our indemnification obligations and other liabilities associated with our operations.
Legal & Compliance Risks • We could face substantial penalties if we do not fully comply with federal, state and foreign regulations. • We may be subject to fines, injunctions and penalties if we fail to comply with extensive FDA regulations. • Unless and until we obtain additional FDA approval for our products, we will not be able to promote most of them to prevent stroke and our inability to maintain or grow our business could be harmed.
Legal & Compliance Risks • We could face substantial penalties if we do not fully comply with federal, state and foreign regulations. • We may be subject to fines, injunctions and penalties if we fail to comply with extensive FDA regulations. • Unless and until we obtain additional FDA approval for our products, we will not be able to promote them for treatment of Afib and/or to prevent stroke, and our inability to maintain or grow our business could be harmed.
Any modification to a 510(k)-cleared device that would constitute a change in its intended use, design or manufacture could require a new or supplemental 510(k) clearance or, possibly, submission and FDA approval of a PMA application.
Any modification to a 510(k)-cleared device or PMA-approved device that would constitute a change in its intended use, design or manufacture could require a new or supplemental 510(k) clearance or, possibly, submission and FDA approval of a PMA application or PMA supplement.
During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which dropped allegations of off-label promotion and now alleges that the Company paid illegal kickbacks to healthcare providers in exchange for using or referring the Company’s products, in violation of the federal Anti-Kickback Statute and various comparable state and local 25 Table of Contents laws.
During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which dropped allegations of off-label promotion and now alleges that the Company paid illegal kickbacks to healthcare providers in exchange for using or referring the Company’s products, in violation of the federal Anti-Kickback Statute and various comparable state and local laws.
If sufficient securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our common stock. It may be difficult for companies such as ours, with a smaller market capitalization, to attract and maintain sufficient independent financial analysts that will cover our common stock.
If sufficient securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our common stock. It may be difficult for companies such as ours, with a smaller market capitalization, to attract and 30 Table of Contents maintain sufficient independent financial analysts that will cover our common stock.
We have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor our systems on an ongoing basis for any current or potential threats. We can 21 Table of Contents give no assurances that these measures and efforts will prevent interruptions or breakdowns.
We have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor our systems on an ongoing basis for any current or potential threats. We can give no assurances that these measures and efforts will prevent interruptions or breakdowns.
Any finding that the value of our goodwill has been impaired would require us to record an impairment 29 Table of Contents charge which could materially reduce the value of our assets and reduce our net income or increase our net loss for the year in which the impairment charge occurs and increase our accumulated deficit.
Any finding that the value of our goodwill has been impaired would require us to record an impairment charge which could materially reduce the value of our assets and reduce our net income or increase our net loss for the year in which the impairment charge occurs and increase our accumulated deficit.
While we rely on our personnel and information technology systems for inventory management, our personnel and information technology systems may fail to adequately perform these functions or may experience an interruption. An excessive amount of inventory reduces our cash available for operations and may result in excess or obsolete materials.
While we rely on our personnel and information technology systems for inventory management, our personnel and 29 Table of Contents information technology systems may fail to adequately perform these functions or may experience an interruption. An excessive amount of inventory reduces our cash available for operations and may result in excess or obsolete materials.
We believe that such publicity would potentially have a negative impact on our clinical studies, business, results of operations and financial condition, or cause other adverse effects, including a decline in the price of our stock.
We believe that such publicity would potentially have a negative 19 Table of Contents impact on our business, results of operations and financial condition and our clinical studies, or cause other adverse effects, including a decline in the price of our stock.
If we or our third-party vendors fail to comply with extensive FDA regulations relating to the manufacturing of our products or any component part, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be hurt.
If we or our third-party vendors fail to comply with extensive FDA regulations relating to the manufacturing of our products or component parts, we may be subject to fines, injunctions and penalties, and our ability to commercially distribute and sell our products may be hurt.
FDA requires every medical device company to make the determination as to whether a 510(k) must be filed, but FDA may review any medical device company’s decision. We have made modifications to our products and concluded 24 Table of Contents that such modifications did not require us to submit a new or supplemental 510(k).
FDA requires every medical device company to make the determination as to whether a 510(k) must be filed, but FDA may review any medical device company’s decision. We have made modifications to our products and concluded that such modifications did not require us to submit a new or supplemental 510(k).
FDA may not agree with our decisions regarding whether submissions were required. If FDA were to disagree with us and require us to submit a 510(k), PMA or a PMA supplement for then-existing modifications, we could be required to cease promoting or to recall the modified product until we obtain clearance or approval.
FDA may not agree with our decisions regarding whether submissions were required. 24 Table of Contents If FDA were to disagree with us and require us to submit a 510(k), PMA or a PMA supplement for then-existing modifications, we could be required to cease promoting or to recall the modified product until we obtain clearance or approval.
Current worldwide economic conditions, natural disasters and other factors discussed in this “Risk Factors” section also may 28 Table of Contents impact our sales results, causing our quarterly operating results to be difficult to predict and may fluctuate significantly from quarter to quarter or from prior year to current year periods.
Current worldwide economic conditions, natural disasters and other factors discussed in this “Risk Factors” section also may impact our sales results, causing our quarterly operating results to be difficult to predict and may fluctuate significantly from quarter to quarter or from prior year to current year periods.
Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals. To achieve our revenue goals, we must successfully increase production output as required by customer demand.
Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals. 20 Table of Contents To achieve our revenue goals, we must successfully increase production output as required by customer demand.
While the Company is contesting the case, it is not possible to predict when the lawsuit will be resolved, the outcome of the lawsuit or its potential impact on the Company.
While the Company is contesting the case, it is not possible to predict when the lawsuit 25 Table of Contents will be resolved, the outcome of the lawsuit or its potential impact on the Company.
The introduction of new products, procedures or clinical solutions, or our competitors obtaining FDA approvals or clearances, may result in price reductions, reduced margins, loss of market share, or may render our products obsolete, which could adversely affect our revenue and future profitability.
The introduction of new products, procedures or clinical solutions, or our competitors obtaining FDA approvals or clearances, such as Medtronic's Penditure device, may result in price reductions, reduced margins, loss of market share, or may render our products obsolete, which could adversely affect our revenue and future profitability.
If we are unable to pay those amounts, SVB could proceed against the collateral granted to it pursuant to the Loan Agreement, and we may in turn lose access to our current source of borrowing availability.
If we are unable to pay those amounts, our lenders could proceed against the collateral granted to it pursuant to the Credit Agreement, and we may in turn lose access to both our collateral and our current source of borrowing availability.
Financial Risks • Our quarterly financial results are likely to fluctuate significantly. • We have a history of net losses, and we may never become profitable. • Our income tax expense could increase and adversely impact cash flows if our federal tax net operating loss and general business credit carryforwards expire or are limited. • Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate. • Our goodwill may become impaired which could adversely affect our financial performance. • We may take inventory-related charges as a result of inaccurate forecasting or estimates of product life cycles which would negatively affect our gross margins and results of operations. • We are subject to credit risk from our accounts receivable related to our sales. • We may be unable to comply with the covenants of our Loan Agreement.
Financial Risks • Our quarterly financial results are likely to fluctuate significantly. • We have a history of net losses, and we may never become profitable. • Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate. • Our goodwill may become impaired which could adversely affect our financial performance. • We may take inventory-related charges as a result of inaccurate forecasting or estimates of product life cycles which would negatively affect our gross margins and results of operations. • We are subject to credit risk from our accounts receivable related to our sales. • We may be unable to comply with the covenants of our Loan Agreement.
Unless and until we obtain additional FDA approval for our products, we will not be able to promote most of them to prevent stroke, and our ability to maintain and grow our business could be harmed.
Unless and until we obtain additional FDA approval for our products, we will not be able to promote them for the treatment of Afib and/or to prevent stroke, and our ability to maintain and grow our business could be harmed.
While we take precautions and are in process of qualifying a second building on our Ohio campus, we do not maintain a backup manufacturing facility, making us dependent on the current facility and production workers for the continued operation of our business.
While we take precautions, such as qualifying a second building for manufacturing, we do not maintain a backup manufacturing facility outside of our Ohio campus, making us dependent on the current facilities and production workers for the continued operation of our business.
These provisions include those: • authorizing the issuance without further approval of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; • prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; • limiting the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders; and • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions include those: • authorizing the issuance without further approval of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; • prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; • limiting the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders; and • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. 31 Table of Contents In addition, Section 203 of the Delaware General Corporation Law limits business combination transactions with 15% stockholders that have not been approved by our board of directors.
Department of Justice (USDOJ), which may include any of the following sanctions, among others: • warning letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our products; • operating restrictions, partial suspension or total shutdown of production; • suspension or termination of our clinical trials; • refusing or delaying our pending requests for 510(k) clearance or PMAs, new intended uses or modifications to existing products; 23 Table of Contents • withdrawing 510(k) clearance or PMAs that have already been granted; and • criminal prosecution.
Department of Justice (USDOJ), which may include any of the following sanctions, among others: • warning letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our products; • operating restrictions, partial suspension or total shutdown of production; • suspension or termination of our clinical trials; • refusing or delaying our pending requests for 510(k) clearance or PMAs, new intended uses or modifications to existing products; • withdrawing 510(k) clearance or PMAs that have already been granted; and • criminal prosecution. 23 Table of Contents If any of these events were to occur, we could lose customers and our production, product sales, business, results of operations and financial condition would be harmed.
Even though we reported net income of $50,199 in 2021, we have a history of net losses, including net losses of $46,466 in 2022, and $48,155 in 2020. As of December 31, 2022, we had an accumulated deficit of $326,619.
Even though we reported net income of $50,199 in 2021, we have a history of net losses, including net losses of $30,438 in 2023, and $46,466 in 2022. As of December 31, 2023, we had an accumulated deficit of $357,057.
Commercial Execution and Product Performance Risks • Failure to achieve widespread market acceptance domestically may harm operating results. • Competition from existing and new products and procedures may decrease our market share. • Clinical data may be negative, or our trials may not satisfy requirements of regulatory authorities, slowing or reversing the rate of adoption or reducing use of our products by the medical community. • Our success depends, in part, on the adoption of the EPi-Sense device for the treatment of Afib following 2021 FDA pre-market approval of this product. • We may be unable to promptly train sufficient numbers of physicians in the use of our products, resulting in slower market acceptance. • Reliance on independent distributors to sell our products in some international markets could adversely impact our sales.
Commercial Execution and Product Performance Risks • Failure to achieve widespread market acceptance domestically may harm operating results. • Competition from existing and new products and procedures may decrease our market share. • Clinical data may be negative, or our trials may not satisfy requirements of regulatory authorities, slowing or reversing the rate of adoption or reducing use of our products by the medical community. • Reliance on independent distributors to sell our products in some international markets could adversely impact our sales.
Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, the market price of our common stock could decline. 30 Table of Contents Securities analysts may not continue, or additional securities analysts may not initiate, coverage for our common stock or may issue negative reports.
Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, the market price of our common stock could decline.
If we fail to comply with the new MDR, we may not be able to continue to sell existing products in the EU or introduce new products for sale in the EU, either of which could materially harm our results of operations and financial condition.
If we fail to comply with the new MDR, we may not be able to continue to sell existing products in the EU or introduce new products for sale in the EU, either of which could materially harm our results of operations and financial condition. 28 Table of Contents Financial Risks Our quarterly financial results are likely to fluctuate significantly because the pace of adoption of our products by clinicians are uncertain.
The occurrence of an event of default could result in an increase to the applicable interest rate by 3.0%, an acceleration of all obligations, an obligation to repay all obligations in full and a right by SVB to exercise all remedies available to them.
The occurrence of an event of default could result in an obligation to repay all obligations in full and a right by our lenders to exercise all remedies available to them.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Like other companies, we experience attempts to gain unauthorized access to our systems and information on a regular basis.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Like many other companies, we experience attempts to gain unauthorized access to our systems and information on a regular basis, and a number of our employees work remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
Some healthcare providers have sought to consolidate and create new companies with greater market power, including hospitals. As the healthcare industry consolidates, competition to provide products and services has become and will continue to become more intense.
Some healthcare providers have sought to consolidate and create new companies with greater market power, including hospitals. As the healthcare industry consolidates, competition to provide products and services has become and will continue to become more intense. This has resulted and likely will continue to result in greater pricing pressures and the exclusion of certain suppliers from important marketing segments.
If we are unable to detect or prevent a security breach or cyber-attack or other disruption from occurring, then we could incur losses or damage to our data, or inappropriate disclosure of our confidential information or that of others; and we could sustain damage to our reputation and customer and employee relationships, suffer disruptions to our business and incur increased operating costs including costs to mitigate any damage caused and protect against future damage, and be exposed to additional regulatory scrutiny or penalties and to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, operating margins, revenues and competitive position.
We could sustain damage to our reputation and customer and employee relationships, suffer disruptions to our business and incur increased operating costs including costs to mitigate any damage caused and protect against future damage, and be exposed to 21 Table of Contents additional regulatory scrutiny or penalties and to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, operating margins, revenues and competitive position.
This may have a negative impact on the market price of our common stock. Several securities analysts provide research coverage of our common stock. Some analysts have already published statements that do not portray our technology, products or procedures using our products in a positive light and others may do so in the future.
Some analysts have already published statements that do not portray our technology, products or procedures using our products in a positive light and others may do so in the future.
Financial Risks Our quarterly financial results are likely to fluctuate significantly because our sales prospects are uncertain. Due to differing rates of adoption of our devices, our quarterly operating results may fluctuate significantly.
Due to differing rates of adoption of our devices, our quarterly operating results may fluctuate significantly.
With or without insurance, damage to our facility or our other property due to a natural disaster or casualty event could have a material adverse effect on our business, financial condition and results of operations. We may enter into significant acquisitions in the future.
With or without insurance, damage to our facilities or our other property due to a natural disaster or casualty event could have a material adverse effect on our business, financial condition and results of operations. If we fail to properly manage our anticipated growth, our business could suffer.
If our goodwill becomes impaired, it could materially reduce the value of our assets and reduce our net income or increase our net loss for the year in which the impairment occurs.
If our goodwill becomes impaired, it could materially reduce the value of our assets and reduce our net income or increase our net loss for the year in which the impairment occurs. As of December 31, 2023, we had $234,781 in goodwill, which represents purchase price we paid in excess of the fair value of the net assets we acquired.
Geopolitical issues around the world have impacted the global supply chain and could materially adversely affect global economic growth, disrupt discretionary spending habits and generally decrease demand for our products and services.
Specifically, impacts to procedure volumes and hospital staffing may result in reductions of our revenue and materially and adversely affect our results of operations and cash flows. Geopolitical issues around the world have impacted the global supply chain and could materially adversely affect global economic growth, disrupt discretionary spending habits and generally decrease demand for our products and services.
A negative reaction by investors and securities analysts to any sale of our equity securities could result in a decline in the trading price of our common stock. 31 Table of Contents Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law could inhibit a change in control or a change in management that stockholders consider favorable.
Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law could inhibit a change in control or a change in management that stockholders consider favorable.
Furthermore, we may enter into capital raising transactions or issue shares in acquisitions at prices that represent a substantial discount to market price.
Furthermore, we may enter into capital raising transactions or issue shares in acquisitions at prices that represent a substantial discount to market price. A negative reaction by investors and securities analysts to any sale of our equity securities could result in a decline in the trading price of our common stock.
We also rely in part on information technology to store information, interface with customers, maintain financial accuracy, secure our data and accurately produce our financial statements.
We also rely in part on information technology to store information, interface with customers, maintain financial accuracy, secure our data and accurately produce our financial statements. In addition, some of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks.
We also have various state net operating losses and research and development credit carryforwards with varying expirations. Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and accumulated deficit. Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate, until May 26, 2024 at the latest.
Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May 26, 2021, may continue to be placed on the market until 2027 or 2028, depending on device classification, as long as those devices meet the requirements of 2017/745 as amended by EU 2023/607.
Our customers’ ability to borrow money from their existing lenders or to obtain credit from other sources to purchase our products may be impaired, resulting in a decrease in sales. We are unable to predict the extent to which current or future worldwide economic conditions may impact our business. Healthcare costs have risen significantly over the past decade.
We may also encounter interruption or delays in the operations of FDA or other regulatory authorities, which may impact review and approval timelines. We are unable to predict the extent to which current or future worldwide economic conditions may impact our business. Healthcare costs have risen significantly over the past decade.
These factors would affect the rate and extent to which our products are adopted in the medical community. Our success depends, in part, on the adoption of the EPi-Sense device for the treatment of Afib following 2021 FDA pre-market approval of this product.
These factors would affect the rate and extent to which our products are adopted in the medical community.
Our manufacturing operations are currently conducted at a single location, and any disruption at our manufacturing facility could increase our expenses and decrease our revenue. Our manufacturing operations are currently conducted at a single location in Ohio.
Our manufacturing operations are highly centralized, and disruption at our manufacturing facilities could increase our expenses and decrease our revenue. Our manufacturing operations are highly centralized to our corporate headquarters.
This has resulted and likely will continue to result in greater pricing pressures and the exclusion of certain suppliers from important marketing segments. 18 Table of Contents Adverse changes in governmental and third party payors’ policies toward coverage and reimbursement for surgical procedures would harm our ability to promote and sell our products.
Even to the extent that the use of our products is reimbursed by private payors and governmental payors, adverse changes in payors’ policies toward coverage and reimbursement for surgical procedures would also harm our ability to promote and sell our products.
Specifically, impacts to procedure volumes and hospital staffing may result in reductions of our revenue and materially and adversely affect our results of operations and cash flows. We may experience diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites.
Our customers’ ability to borrow money from their existing lenders or to obtain credit from other sources to purchase our products may be impaired, 18 Table of Contents resulting in a decrease in sales. We may experience diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites.
Removed
Our products will be measured on their efficacy which is dependent on the number of patients that experience Afib, stroke, or continued arrhythmias such as IST, following treatment with our products and the number of patients that have serious complications resulting from ablations or LAA exclusion using our products.
Added
In 2023, Medtronic announced the FDA clearance of the Penditure TM Left Atrial Appendage Exclusion System.
Removed
On April 29, 2021, we announced FDA approval of the EPi-Sense System to treat patients diagnosed with long-standing persistent Afib. Our success depends, in part, on the medical community’s acceptance of this and other of our products in the United States.
Added
Our products will be measured on their efficacy.
Removed
We expect that our future revenue will depend on the increasing acceptance by the medical community of our products as standard of care for treating Afib. The U.S. medical community’s acceptance of the EPi-Sense System and other of our products will depend upon our ability to demonstrate long-term clinical performance and advantages and cost-effectiveness of our products.
Added
If we are unable to detect or prevent a security breach or cyber-attack or other disruption from occurring, then we could incur losses or damage to our data, or inappropriate disclosure of our confidential information or that of others. We have cyber-insurance coverage that may not cover all possible events, and this insurance is subject to deductibles and coverage limitations.
Removed
In addition, acceptance of products for the treatment of Afib is dependent upon, among other factors, the level of awareness and education of the medical community about the surgical treatment of Afib and the existence, effectiveness and safety of our products.
Added
The failure to protect either our or our service providers’ information technology infrastructure could disrupt our operations.
Removed
Market acceptance and adoption of our products or procedures for the treatment of Afib, including but not limited to the EPi-Sense System, also depends on the level of health insurer (including Medicare) reimbursement to physicians and hospitals for procedures using our products.
Added
The Credit Agreement entered into on January 5, 2024, contains specific financial covenants and a minimum liquidity requirement, along with other terms restricting indebtedness, liens, investments and acquisitions, asset dispositions, certain payments and other customary representations and warranties.
Removed
Negative publicity resulting from incidents involving our products, or similar products, could have a significant adverse effect on the overall acceptance of our products. Market acceptance could be delayed by lack of physician willingness to attend training sessions by the time required to complete this training, or by restrictions on our ability to provide training.
Added
The Credit Agreement contains mandatory prepayment provisions which require prepayment of amounts outstanding (i) upon the receipt of proceeds from the issuance of any non-permitted indebtedness and (ii) when there is an Availability shortfall, as defined.
Removed
If we are unable to gain and/or maintain such support, training services and collaboration, our ability to grow the market for our products may be impacted and we may not be able to increase our revenue enough to achieve or sustain profitability, and our business and operating results may be seriously harmed.
Added
Securities analysts may not continue, or additional securities analysts may not initiate, coverage for our common stock or may issue negative reports. This may have a negative impact on the market price of our common stock. Several securities analysts provide research coverage of our common stock.
Removed
Our success is dependent on our ability to train surgeons in the safe and effective use of our products. Restrictions on our ability to train surgeons, or unwillingness of surgeons to participate in such training, could reduce the market acceptance of our products.
Removed
Our research and development efforts and our marketing strategy depend heavily on obtaining support, physician training assistance and collaboration from experienced physicians at leading commercial and research hospitals, particularly in the U.S. and Europe. We deliver training on the safe and effective use of our products consistent with their FDA (or equivalent regulatory body) approved or cleared indications.
Removed
While we train providers in the safe and effective use of our products, we do not train them to use any of our products specifically to treat Afib unless the product is FDA-approved specifically for the treatment of Afib.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe space is approximately 9,000 square feet. 32 Table of Contents The Company believes that its existing facilities are adequate to meet its immediate needs and that suitable additional space will be available in the future on commercially reasonable terms as needed. ITEM 3.
Biggest changeThe Company believes that its existing facilities are adequate to meet its immediate needs and that suitable additional space will be available in the future on commercially reasonable terms as needed. 33 Table of Contents ITEM 3. LEGAL PROCEEDINGS We may from time to time become a party to additional legal proceedings that arise in the ordinary course of business.
ITEM 2. PROPERTIES The Company operates in the following principal locations: • AtriCure Corporate Headquarters Campus; Mason, Ohio – This campus encompasses three locations in Mason, Ohio, including our global headquarters facility that contains the Company's administrative, clinical, regulatory, engineering, product development, distribution and manufacturing functions. The headquarters facility is approximately 92,000 square feet.
ITEM 2. PROPERTIES The Company operates in the following principal locations: • AtriCure Corporate Headquarters Campus; Mason, Ohio – This campus encompasses three locations in Mason, Ohio, including our global headquarters facility that contains the Company's administrative, clinical, regulatory, engineering, product development, quality and manufacturing functions. The headquarters facility is approximately 106,000 square feet.
The Mason South facility is primarily used for warehousing and distribution activities and is approximately 40,000 square feet. The Mason Manufacturing Building, opened during 2022, is approximately 37,000 square feet and when qualified will be used for manufacturing and engineering activities. • Minnetonka, Minnesota – This location includes administrative, clinical, regulatory and product development space.
The Mason Distribution Warehouse is primarily used for warehousing and distribution activities and is approximately 40,000 square feet. The Mason Manufacturing Building is approximately 37,000 square feet and is used for manufacturing, quality and engineering activities. • Minnetonka, Minnesota – This location includes administrative, clinical, regulatory and product development space.
LEGAL PROCEEDINGS We may from time to time become a party to additional legal proceedings that arise in the ordinary course of business. See Note 10 – Commitments and Contingencies to our Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 Table of Contents PART II
See Note 10 – Commitments and Contingencies to our Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 Table of Contents PART II
Added
The space is approximately 9,000 square feet. • Hertogenbosch, Netherlands – This location is used for service activities and is approximately 19,000 square feet.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−3 removed0 unchanged
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Market Price Our common stock is traded on the NASDAQ Global Market under the symbol “ATRC”.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Market Price Our common stock is traded on the NASDAQ Global Market under the symbol “ATRC.” As of February 13, 2024, the closing price of our common stock on the NASDAQ Global Market was $31.71 per share, and the number of stockholders of record was 67.
This graph assumes that $100.00 was invested on December 31, 2017 in our common stock, the NASDAQ Composite Index, the NASDAQ Medical Equipment Index, and the NASDAQ Health Care Index, and that all dividends are reinvested. No dividends have been declared or paid on our common stock.
This graph assumes that $100.00 was invested on December 31, 2018, in our common stock, the NASDAQ Composite Index and the NASDAQ Health Care Index, and that all dividends are reinvested. No dividends have been declared or paid on our common stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among AtriCure, Inc., the NASDAQ Composite Index, the NASDAQ Health Care Index, and the NASDAQ Medical Equipment Index *$100 invested on 12/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among AtriCure, Inc., the NASDAQ Composite Index and the NASDAQ Health Care Index *$100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the NASDAQ Composite Index (“NASDAQ Composite”), the NASDAQ Health Care Index (“NASDAQ Health Care”) and the NASDAQ Medical Equipment Index (“NASDAQ Medical Equipment”) for the period beginning on December 31, 2017 and ending on December 31, 2022.
Performance Graph The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the NASDAQ Composite Index (“NASDAQ Composite”) and the NASDAQ Health Care Index (“NASDAQ Health Care”) for the period beginning on December 31, 2018, and ending on December 31, 2023.
Removed
As of February 17, 2023, the closing price of our common stock on the NASDAQ Global Market was $40.34 per share, and the number of stockholders of record was 73.
Added
Stock performance shown in the above chart for our common stock is historical and should not be considered indicative of future price performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 AtriCure, Inc. $ 100.00 $ 106.24 $ 181.93 $ 227.22 $ 145.03 $ 116.63 NASDAQ Composite $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 NASDAQ Health Care $ 100.00 $ 110.75 $ 140.85 $ 126.71 $ 95.29 $ 96.06 ITEM 6. [RESERVED]
Removed
Stock performance shown in the above chart for our common stock is historical and should not be considered indicative of future price performance. Effective December 31, 2022, we have ceased use of the NASDAQ Medical Equipment Index and transitioned to use of the NASDAQ Health Care Index for the comparison.
Removed
We believe the NASDAQ Health Care Index to be a more appropriate index for this comparison, as it is more accessible to stockholders than the NASDAQ Medical Equipment Index and is widely recognized and used. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 AtriCure, Inc. $ 167.76 $ 178.23 $ 305.21 $ 381.20 $ 243.31 NASDAQ Composite $ 97.16 $ 132.81 $ 192.47 $ 235.15 $ 158.65 NASDAQ Health Care $ 83.86 $ 92.88 $ 118.12 $ 106.27 $ 79.91 NASDAQ Medical Equipment $ 62.72 $ 61.17 $ 85.34 $ 88.20 $ 59.54 34 Table of Contents ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

40 edited+30 added−24 removed19 unchanged
Biggest changeResults of Operations Year Ended December 31, 2022 compared to December 31, 2021 The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of total revenue: Year Ended December 31, 2022 2021 % of % of Amount Revenue Amount Revenue Revenue $ 330,379 100.0 % 274,329 100.0 % Cost of revenue 84,439 25.6 68,469 25.0 Gross profit 245,940 74.4 205,860 75.0 Operating expense (benefit): Research and development expenses 57,337 17.4 48,506 17.7 Selling, general and administrative expenses 231,272 70.0 204,649 74.6 Change in fair value of contingent consideration — — (184,800) (67.4) Intangible asset impairment — — 82,300 30.0 Total operating expenses 288,609 87.4 150,655 54.9 (Loss) income from operations (42,669) (12.9) 55,205 20.1 Other expense, net (3,529) (1.1) (4,818) (1.8) (Loss) income before income tax expense (46,198) (14.0) 50,387 18.4 Income tax expense 268 0.1 188 0.1 Net (loss) income $ (46,466) (14.1) % $ 50,199 18.3 % 36 Table of Contents Revenue.
Biggest changeResults of Operations Year Ended December 31, 2023 compared to December 31, 2022 The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of total revenue: Year Ended December 31, 2023 2022 % of % of Amount Revenue Amount Revenue Revenue $ 399,245 100.0 % 330,379 100.0 % Cost of revenue 98,875 24.8 84,439 25.6 Gross profit 300,370 75.2 245,940 74.4 Operating expense (benefit): Research and development expenses 73,915 18.5 57,337 17.4 Selling, general and administrative expenses 253,138 63.4 231,272 70.0 Total operating expenses 327,053 81.9 288,609 87.4 Loss from operations (26,683) (6.7) (42,669) (12.9) Other expense, net (3,164) (0.8) (3,529) (1.1) Loss before income tax expense (29,847) (7.5) (46,198) (14.0) Income tax expense 591 0.1 268 0.1 Net loss $ (30,438) (7.6) % $ (46,466) (14.1) % 37 Table of Contents Revenue.
In December 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require we make milestone payments upon achievement of various enrollment and project milestones over the estimated ten year term, yet the agreement may be terminated early for any reason.
In 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require we make milestone payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason.
For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 8 - Indebtedness. Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2022. Capital Expenditures.
Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2023. For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 8 – Indebtedness. Capital Expenditures.
Uncertain timing of product approvals, variability in product launch strategies and variation in product use all impact inventory reserves for excess, obsolete and expired products. An increase to inventory reserves results in a corresponding increase in cost of revenue. Inventories are written off against the reserve when they are physically disposed.
Uncertain timing of product approvals, variability in product launch strategies and variation in product sales all impact inventory reserves for excess, obsolete and expired products. An increase to inventory reserves results in a corresponding increase in cost of revenue. Inventories are written off against the reserve when they are physically disposed.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollar and share amounts referenced in this Item 7 are in thousands, except per share amounts.) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying Consolidated Financial Statements and notes thereto contained in Item 8, “Financial Statements and Supplementary Data,” to provide an understanding of our results of operations, financial condition and cash flows.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollar and share amounts referenced in this Item 7 are in thousands, except per share amounts.) 35 Table of Contents The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying Consolidated Financial Statements and notes thereto contained in Item 8, “Financial Statements and Supplementary Data,” to provide an understanding of our results of operations, financial condition and cash flows.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 17, 2022. Overview We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 22, 2023. Overview We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management.
Year Ended December 31, 2021 compared to December 31, 2020 For a comparison of our results of operations for the years ended December 31, 2021 and December 31, 2020, see “Part II, Item 7.
Year Ended December 31, 2022 compared to December 31, 2021 For a comparison of our results of operations for the years ended December 31, 2022 and December 31, 2021, see “Part II, Item 7.
In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is significant objectively verifiable negative evidence that must be overcome by objectively-verifiable positive evidence to avoid the need for a valuation allowance.
In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is 41 Table of Contents significant objectively verifiable negative evidence that must be overcome by objectively-verifiable positive evidence to avoid the need for a valuation allowance.
Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive procedures. In open-heart procedures, physicians are typically performing heart surgery for other conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure.
Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive procedures. In open-heart procedures, the physician is performing heart surgery for other conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure.
In the normal course of business, we generally do not accept product returns unless a product is defective as manufactured, and we do not provide customers with the right to a refund.
In the normal course of business, we are not obligated to accept product returns unless a product is defective as manufactured, and we do not provide customers with the right to a refund.
Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining surgical procedures using AtriCure ablation and AtriCure LAAM products with catheter ablation procedures performed by an electrophysiologist. Our pain management device is used by physicians to freeze nerves during cardiothoracic or thoracic surgical procedures.
Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining surgical procedures using AtriCure ablation and LAAM products with catheter ablation procedures performed by electrophysiologists. Our pain management devices are used by physicians to freeze nerves during cardiothoracic or thoracic surgical procedures.
We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell or are in the process of developing. We sell our products to medical centers through our direct sales force in the United States and in certain international markets, such as Germany, France, the United Kingdom, Australia and the Benelux region.
We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell or are in the process of developing. We sell our products to medical centers through our direct sales force in the United States, Germany, France, the United Kingdom, the Benelux region, Australia and Canada.
If additional funds are raised through the issuance of debt securities, these securities would have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. Finally, our term loan agreement and revolving line of credit require compliance with certain financial and other covenants.
If additional funds are raised through the issuance of debt securities, these securities would have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. Finally, our Credit Agreement requires compliance with certain financial and other covenants.
The trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.
The Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.
Furthermore, we will incur additional variable costs, including pass through costs from clinical trial sites. We expect to disburse between $6,000 and $9,000 of fixed and variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.
Furthermore, we incur additional variable costs, including pass through costs from clinical trial sites. We expect to disburse between $14,000 and $17,000 of fixed and 39 Table of Contents variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.
Our future capital requirements depend on a number of factors, including, without limitation: market acceptance of our current and future products; costs to develop and support our products, including clinical evidence needs; future expenses to expand and support our sales, training and marketing efforts; operating and filing costs relating to changes in regulatory policies or laws; costs for clinical trials and to secure regulatory approval for new products; legal defense costs; costs to prosecute, defend and enforce our intellectual property rights; and possible acquisitions and joint ventures, including potential business integration costs.
Our future capital requirements depend on a number of factors, including, without limitation: market acceptance of our current and future products; investments in working capital; costs to develop and support our products, including professional training; costs to expand and support our sales and marketing efforts; operating and filing costs relating to changes in regulatory policies or laws; costs for clinical trials and to secure regulatory approval for new products; costs to prosecute, defend and enforce our intellectual property rights; maintenance and enhancements to our information systems and security; and possible acquisitions and joint ventures, including potential business integration costs.
We also sell our products to distributors who in turn sell our products to medical centers in Japan, China and other international markets. Our business is primarily transacted in U.S. Dollars; direct sales transactions outside the United States are transacted in Euros, British Pounds or Australian Dollars.
We also sell our products to distributors who in turn sell our products to medical centers in other markets. Our business is primarily transacted in U.S. Dollars; direct international sales transactions are transacted in Euros, British Pounds, Australian Dollars or Canadian Dollars.
We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our term loan and revolving line of credit, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.
See Note 2 – Fair Value. Sources of liquidity. We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our Credit Agreement, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.
We believe the following critical accounting policies involve a significant level of estimation uncertainty and judgments that are reasonably likely to have a material impact on our Consolidated Financial Statements. We base our 39 Table of Contents judgments and estimates on historical experience, current conditions and other reasonable factors.
We believe the following critical accounting policies involve a significant level of estimation uncertainty and judgments that are reasonably likely to have a material impact on our Consolidated Financial Statements. We base our judgments and estimates on historical experience, current conditions and other reasonable factors. Actual results could differ from those estimates under different assumptions or conditions.
Inflation has impacted our operating costs throughout 2022. Continued increases in our cost of revenue may effect our ability to maintain our gross margin if the selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely effect our operating results and the ability to make discretionary investments.
Continued increases in our cost of revenue may affect our ability to maintain our gross margin if the selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely affect our operating results and the 40 Table of Contents ability to make discretionary investments.
We estimate the provision for sales returns and allowances using the expected value method based on historical experience and other factors that we believe could impact our expected returns, including defective or damaged products and invoice adjustments.
Significant judgments and estimates involved in the Company’s recognition of revenue include the estimation of a provision for returns. We estimate the provision for sales returns and allowances using the expected value method based on historical experience and other factors that we believe could impact our expected returns, including defective or damaged products and invoice adjustments.
We incur capital expenditures on an ongoing basis to continue investment in our growth and our ability to better serve our customers. Throughout 2021 and 2022, we expanded our manufacturing operations as we completed the renovation of an additional facility of our Mason, Ohio campus. Other Contractual Obligations. Our future obligations include both current and long-term obligations.
We incur capital expenditures on an ongoing basis to continue investment in our growth and our ability to better serve our customers. Throughout 2021 through 2023, we continued expansion and renovation of our manufacturing and engineering facilities in our Mason, Ohio campus. Other Contractual Obligations. Our future obligations include both current and long-term obligations.
We have operating and finance leases primarily for our corporate offices, manufacturing and warehouse facilities, as well as computer equipment. Our finance leases consist primarily of principal and interest payments related to our Mason, Ohio headquarters. As of December 31, 2022, we have current finance lease obligations of $992 and long-term obligations of $9,147.
We have operating and finance leases primarily for our corporate offices, manufacturing and warehouse facilities and automobiles. Our finance leases consist primarily of principal and interest payments related to our Mason, Ohio headquarters building. As of December 31, 2023, we have current finance lease obligations of $1,086 and long-term obligations of $8,061.
Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and investors. Cost of revenue and gross margin. Cost of revenue increased $15,970 primarily reflecting revenue growth.
Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and investors.
Revenue reported on a constant currency basis is a non-GAAP measure and is calculated by applying previous period foreign currency (Euro) exchange rates, which are determined by the average daily Euro to Dollar exchange rate, to each of the comparable periods. Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods.
International revenue increased 23.5% (22.1% on a constant currency basis), across all franchises and major geographic regions. Revenue reported on a constant currency basis is a non-GAAP measure calculated by applying previous period foreign currency exchange rates, which are determined by the average daily exchange rate, to each of the comparable periods.
Actual results could differ from those estimates under different assumptions or conditions. Revenue Recognition— Revenue is generated from the sale of medical devices. We recognize revenue in an amount that reflects the consideration we expect to be entitled to in exchange for those devices when control of promised devices is transferred to customers.
Revenue Recognition— Revenue is generated from the sale of medical devices. We recognize revenue in an amount that reflects the consideration we expect to be entitled to in exchange for those devices when control of promised devices is transferred to customers. We account for revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers”.
We have contractual obligations for contingent consideration payments related to the SentreHEART acquisition. Subject to the terms and conditions of the SentreHEART merger agreement, such contingent consideration would be paid in AtriCure common stock and cash, up to a specified maximum number of shares. The SentreHEART milestones expire on December 31, 2023 and December 31, 2026.
Subject to the terms and conditions of the SentreHEART merger agreement, such contingent consideration would be paid in AtriCure common stock and cash, up to a specified maximum number of shares. As of December 31, 2023, we believe the likelihood of payment is remote, and the estimated fair value of the contingent consideration is $0.
The following table summarizes our consolidated cash flow activities: Years Ended December 31, 2022 2021 Change Net cash used in operating activities $ (22,141) $ (13,780) $ 8,361 Net cash provided by investing activities 44,006 23,504 20,502 Net cash used in financing activities (7,059) (7,642) (583) Cash flows used in operating activities.
The following table summarizes our consolidated cash flow activities: Years Ended December 31, 2023 2022 Change Net cash provided by (used in) operating activities $ 4,484 $ (22,141) $ 26,625 Net cash provided by investing activities 21,817 44,006 (22,189) Net cash used in financing activities (32) (7,059) 7,027 Cash flows provided by (used in) operating activities.
Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations. Credit facility. Our Loan and Security Agreement with Silicon Valley Bank (SVB), as amended, (Loan Agreement), provides for a $60,000 term loan, with an option to make available an additional $30,000 in term loan borrowings, and a $30,000 revolving line of credit.
As of December 31, 2023, we had a Loan and Security Agreement with Silicon Valley Bank (SVB), (SVB Loan Agreement). The SVB Loan Agreement provides for a $60,000 term loan, with an option to make available an additional $30,000 in term loan borrowings, and a $30,000 revolving line of credit.
The Loan Agreement has a five year term and expires November 2026. The term loan accrues interest at the Prime Rate plus 1.25% and is subject to an additional 3.00% fee on the term loan principal amount at maturity. Principal payments are to be made ratably commencing 24 months after the inception of the loan through the loan's maturity date.
The Loan Agreement has a five-year term and expires November 2026. The term loan accrues interest at the Prime Rate plus 1.25% and is subject to an additional 3.00% fee on the term loan principal amount at maturity. We had unused borrowing capacity of approximately $28,750 under our revolving credit facility.
The following table sets forth, for the periods indicated, our revenue by product type and geography expressed as dollar amounts and the corresponding change in such revenues between periods, in both dollars and percentages: Year Ended December 31, Change 2022 2021 Amount % Open ablation $ 86,119 $ 72,396 $ 13,723 19.0 % Minimally invasive ablation 38,553 39,380 (827) (2.1) % Pain management 39,974 22,787 17,187 75.4 % Appendage management 112,555 94,568 17,987 19.0 % Total United States $ 277,201 $ 229,131 $ 48,070 21.0 % Total International 53,178 45,198 7,980 17.7 % Total Revenue $ 330,379 $ 274,329 $ 56,050 20.4 % Worldwide revenue increased 20.4% (21.8% on a constant currency basis).
The following table sets forth, for the periods indicated, our revenue by product type and geography expressed as dollar amounts and the corresponding change in such revenues between periods, in both dollars and percentages: Year Ended December 31, Change 2023 2022 Amount % Open ablation $ 105,287 $ 86,119 $ 19,168 22.3 % Minimally invasive ablation 44,577 38,553 6,024 15.6 % Pain management 49,199 39,974 9,225 23.1 % Appendage management 134,481 112,555 21,926 19.5 % Total United States $ 333,544 $ 277,201 $ 56,343 20.3 % Total International 65,701 53,178 12,523 23.5 % Total Revenue $ 399,245 $ 330,379 $ 68,866 20.8 % Worldwide revenue increased 20.8% (20.6% on a constant currency basis).
Net cash provided by investing activities increased by $20,502 in 2022 compared to 2021, reflecting higher net sales and maturities of available-for-sale securities of $27,630, offset by an increase of $7,128 for the purchase of property and equipment primarily for the expansion of our manufacturing facilities. Cash flows used in financing activities.
Net cash provided by investing activities decreased by $22,189 in 2023 compared to 2022, reflecting the $30,000 acquisition of intellectual property, partially offset by a $4,883 decrease in purchases of property and equipment following our 2022 manufacturing facilities expansion and $2,928 increase in net maturities of available-for-sale securities. Cash flows used in financing activities.
Liquidity and Capital Resources As of December 31, 2022, we had cash, cash equivalents and investments of $172,622 and borrowing capacity of approximately $28,750. All cash equivalents and investments and most of our operating cash are held in United States financial institutions. A minor portion of our cash is held in foreign banks to support our international operations.
A minor portion of our cash is held in foreign banks to support our international operations. We had net working capital of $191,677 and an accumulated deficit of $357,057 as of December 31, 2023. Uses of liquidity and capital resources.
Our operating leases for office and warehouse space includes current obligations of $1,147 and long-term obligations of $3,095. For additional information, see Note 9 - Leases. We additionally maintain a license agreement with terms that require royalty payments of 5% of specified product sales. See Note 10 - Commitments and Contingencies for information about the terms.
Our operating leases for office and warehouse space includes current obligations of $1,447 and long-term obligations of $3,307. For additional information, see Note 9 – Leases. We have contractual obligations for contingent consideration payments related to the SentreHEART acquisition.
We had net working capital of $156,822 and an accumulated deficit of $326,619 as of December 31, 2022. Uses of liquidity and capital resources. Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan.
Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan. Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations.
The EnCompass clamp marks innovation in our core open ablation market, and is expected to drive deeper penetration of cardiac surgery procedures. During September 2022, we received final labeling approval for the next generation EPi-Sense ST device and began a limited launch evaluation in the fourth quarter. CLINICAL SCIENCE.
We received final labeling approval for the next generation EPi-Sense ST device and began a limited launch evaluation in the fourth quarter of 2022, followed by full product launch in the second quarter of 2023. In October 2023, we received clearance for our next generation cryoSPHERE probe for pain management and expect to launch in the first quarter of 2024.
Similar to the Unites States, International revenue growth was driven by appendage management, open ablation and pain management products, while minimally invasive ablation sales declined due to reduction in revenues from legacy products exceeding the growth in Hybrid AF therapy procedures using the EPi-Sense system.
Key products contributing to the increase in revenue in the United States were: • the ENCOMPASS ® clamp in open ablation, • Hybrid AF™ Therapy procedures using the EPi-Sense System in minimally invasive ablation, • the cryoSPHERE ® probe for post-operative pain management and • the AtriClip ® Flex⋅V ® for appendage management.
Lower stock performance contributed to less proceeds from stock option exercise activity and fewer shares repurchased for payment of taxes for stock awards offset with slight increases in employee stock purchase plan activity. Inflation Inflationary pressures may have an adverse impact on our results of operations or financial condition in the foreseeable future.
Inflation Inflationary pressures may have an adverse impact on our results of operations or financial condition in the foreseeable future. Inflation has impacted our operating costs throughout 2023 and 2022.
Working capital fluctuations are primarily due to the $11,237 reduction in accrued liabilities from higher annual variable compensation payments in 2022 due to improved operating performance in 2021 versus 2020, as well as an increase of $3,031 from our investment in inventories. Cash flows provided by investing activities.
Cash used for working capital remained relatively flat year over year, with increased investment in inventories largely offset by increased accruals for annual variable compensation payments due to improved operating performance. Cash flows provided by investing activities.
Removed
During 2022, we continued to experience variability in demand for our products as non-emergent procedures were deferred in order to preserve resources for COVID-19 patients and caregivers, and hospital staffing was impacted by the pandemic and related factors. Beginning in the second quarter, many regions began to stabilize with overall improvements in procedure volume.
Added
In 2023, we realized significant global revenue growth and continued our strategic initiatives of product innovation, clinical science and expanding physician awareness and adoption through superior training and education. Our worldwide revenues for the year ended December 31, 2023 of $399,245 was an increase of 20.8% over the prior year driven by growing adoption across key product lines.
Removed
We expect some variability to continue as we operate in many geographic regions with diverse restrictions that are impacted as new variants of the virus emerge and hospital staffing constraints continue to impact allocation of resources.
Added
Historically there have been limited competitors in our key markets, but we have begun to see more entrants that may cause variability in 2024 results. Highlights of the strategic and operational advancements in 2023 include: PRODUCT INNOVATION.
Removed
Despite the challenging environment resulting from the pandemic, we reported annual revenues of $330,379 for the year ended December 31, 2022, an increase of 20.4% when compared to our prior year as a result of growing adoption across key product lines.
Added
Additionally, we completed several 510k submissions to FDA for new products in development. We also continue to make significant progress on European Medical Device Regulation (EU MDR) clearance submissions for our products. As of the second quarter of 2023, all of our products have been submitted to our notified body under EU MDR.
Removed
We continue to build on our strategic initiatives of product innovation, investing in clinical science and providing superior training and education. PRODUCT INNOVATION. In April 2022, we launched our EnCompass ® clamp, following the July 2021 510(k) clearance for ablation of cardiac tissue during cardiac surgery.
Added
These activities are in addition to several research and development programs currently underway. CLINICAL SCIENCE. We continue to invest in studies to expand labeling claims, support various indications for our products and gather clinical data regarding our products. LeAAPS.
Removed
We continue to invest in studies to expand labeling claims, support indications for the treatment of Afib and other arrhythmias and stroke, and gather clinical data regarding our products. HEAL-IST. In February 2022, FDA approved the protocol for the Hybrid Epicardial and Endocardial Sinus Node Sparing Ablation Therapy for Inappropriate Sinus Tachycardia (IST) clinical trial (HEAL-IST).
Added
In January 2023, the first patient was enrolled in the trial, and we ended 2023 with nearly 1,400 patients enrolled. Site initiation and enrollment is ongoing. ICE-AFIB.
Removed
The HEAL-IST clinical trial is designed to study the safety and efficacy of a hybrid sinus node sparing ablation procedure using the Isolator Synergy Surgical Ablation System for the treatment of symptomatic, drug refractory or drug intolerant IST.
Added
Trial enrollment was completed in the second quarter of 2023 for the ICE-AFIB clinical trial, which is designed to study the safety and efficacy of our cryoICE ® system for persistent and long-standing persistent Afib treatment during concomitant on-pump cardiac surgery. The trial provided for enrollment of up to 150 patients at up to 20 sites in the United States.
Removed
The trial is a 35 Table of Contents prospective, multicenter, single arm trial that evaluates safety 30 days post-procedure and evaluates primary effectiveness of freedom from IST (as specified) at 12 months post-procedure. The trial provides for enrollment of up to 142 patients at up to 40 sites in the United States, United Kingdom and European Union.
Added
Patient follow-up for twelve months post ablation required by the study protocol remains ongoing. 36 Table of Contents CEASE-AF. During the second quarter of 2023, results from our CEASE-AF trial were presented at the European Heart Rhythm Association meeting.
Removed
The first patient enrollment in the trial occurred in June 2022; site initiation and enrollment is ongoing. LeAAPS. In April 2022, FDA approved the protocol for the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial.
Added
CEASE-AF is a prospective, multi-center randomized control trial for persistent and long-standing persistent Afib treatment that demonstrated superior freedom from atrial arrhythmias for staged hybrid ablation compared to endocardial catheter ablation. DEEP AF. During the fourth quarter of 2023, 12-month follow-up results of enrolled patients from our DEEP AF IDE trial were presented at the American Heart Association meeting.
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In January 2023, we announced first patient enrollment in the trial; site initiation and enrollment is ongoing. TRAINING. Our professional education and marketing teams conduct virtual, in-person and mobile training for physicians and healthcare professionals, as well as our sales teams. Our training methods ensure invaluable access to continuing education and awareness of our products and related procedures.
Added
The DEEP AF IDE pivotal trial evaluated the safety and efficacy of the AtriCure Bipolar System when used in a staged approach where a minimally invasive surgical ablation procedure is first performed. The patient undergoes the endocardial catheter procedure approximately 91-120 days later.
Removed
The 2021 FDA approval of the EPi-Sense System has enabled us to educate and train physicians on the benefits of Hybrid AF therapy in treating long-standing persistent Afib patients. Our Advanced Hybrid Ablation Training Courses are co-sponsored by the Heart Rhythm Society (HRS).
Added
The results from this single arm study for persistent and long-standing persistent Afib treatment demonstrated superior freedom from atrial arrhythmias for staged hybrid ablation compared to a pre-specified performance goal. TRAINING. Our professional education and marketing teams conduct virtual and in-person training programs for physicians and healthcare professionals.
Removed
Throughout the United States market, cardiac surgery volumes recovered and product adoption continued. Our Isolator Synergy System continued to generate the majority of our ablation-related revenue. Key drivers of growth included the AtriClip ® Flex-V ® device within the appendage management franchise, the cryoSPHERE ® probe for pain management, and the 2022 launch of the EnCompass clamp in open ablation.
Added
These training methods ensure invaluable access to continuing education and awareness of our products and related procedures. During 2023, we launched new training courses for Advanced Practice Providers, pain management in pectus procedures, as well as a best practice course for developing arrhythmia programs, with a primary focus on Hybrid therapies.
Removed
Minimally invasive ablation sales decreased as declines in legacy product sales outpaced growth in Hybrid AF therapy procedures using the EPi-Sense system. International revenue increased 17.7% (25.7% on a constant currency basis) throughout our major European and Asia markets.
Added
These trainings allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals. Additionally, our professional education courses continue to benefit from use of inanimate models or synthetic cadavers, known as CADets. These reusable CADets provide a sustainable alternative to the use of animals or cadavers, in addition to reducing spend on training programs. SOCIETY GUIDELINES.
Removed
The gross margin decrease of approximately 60 basis points was driven by inflationary and supply chain pressures and a shift in product mix to lower margin products, partially offsetting the benefit from higher volume. Research and development expenses. Research and development expenses increased $8,831, or 18.2%.
Added
In 2023, the American College of Cardiology (ACC), American Heart Association (AHA), American College of Clinical Pharmacy (ACCP), and HRS released Guidelines for Diagnosis and Management of Atrial Fibrillation, and they upgraded Left Atrial Appendage Management to the highest recommendation of Class 1 and now include Hybrid AF™ Therapy as a Class 2 recommendation.
Removed
We expanded our product development, regulatory and clinical teams throughout 2022, resulting in additional $4,551 personnel costs including variable compensation, travel and share-based compensation. Product development project spend increased $1,053 as we continue to evolve our product pipeline.
Added
These societal guidelines are reflective of the scientific evidence suggesting that surgical and hybrid ablation is safe and effective for patients who have Afib.
Removed
Clinical activities, regulatory submissions and consulting expenses, including compliance with EU MDR, drove $1,944 incremental costs, while amortization expense increased $820 following the April 2021 PMA of the CONVERGE IDE clinical trial. See Note 4 of the Consolidated Financial Statements for further discussion. Selling, general and administrative expenses. Selling, general and administrative expenses increased $26,623, or 13.0%.
Added
In the United States, we experienced growth in all key product lines as a result of deepening market penetration and expanding physician adoption.
Removed
Higher headcount and rising travel expenses contributed $18,575 increase in personnel costs. Our commitment to physician training and return to in-person meetings, trade shows and marketing activities drove a $5,007 increase in expenses as compared to the prior year. Other administrative and operating expenses increased $3,114, largely for legal activity and information technology costs.
Added
Cost of revenue and gross margin. Cost of revenue increased $14,436 primarily reflecting higher sales volumes. The gross margin increase of 80 basis points was driven by favorable production efficiencies, partially offset by less favorable geographic and product mix. Research and development expenses. Research and development expenses increased $16,578, or 28.9%.
Removed
Change in fair value of contingent consideration. The credit to operating expenses during the year ended December 31, 2021 reflects a change in the forecasted timing and probability of achievement of the regulatory and reimbursement milestones related to the aMAZE clinical trial.
Added
Expansion of product development, regulatory and clinical teams resulted in $7,413 of additional personnel costs, including variable compensation and share-based compensation. Clinical trial expenses increased $6,667 due to strong enrollment activity in the LeAAPS clinical trial throughout the year. Additionally, our expanding product pipeline and domestic and international regulatory submissions drove a $2,389 increase in spending.
Removed
See Note 2 of the Consolidated Financial Statements for further discussion. 37 Table of Contents Impairment of intangible assets. During the year ended December 31, 2021, the Company recorded an impairment charge for the IPR&D asset associated with the aMAZE PMA. See Note 4 of the Consolidated Financial Statements for further discussion. Other income and expense.
Added
Selling, general and administrative expenses. Selling, general and administrative expenses increased $21,866, or 9.5%. Personnel costs increased $26,971 as a result of growth in headcount, variable compensation and share-based compensation. Trade shows and marketing activities increased $1,538 and other administrative and operating expenses increased $2,274 as compared to the prior year.
Removed
Other income and expense consists primarily of net interest expense and foreign currency transaction gains and losses. Net interest expense was $2,992 for 2022 and $4,452 for 2021. The decrease in net interest expense was driven by higher interest income from funds received for interest on past due trade receivables.
Added
This increase was offset by a $4,019 decrease in training costs as a result of growing efficiencies and enhancements to our global training programs and a net gain of $4,412 from non-recurring legal settlements during the first half of 2023.
Removed
At the option of the Company, the commencement of term loan principal payments may be extended an additional twelve months. As of December 31, 2022, our outstanding debt was $60,000, of which $3,333 is classified as current and $56,667 is classified as noncurrent. We had unused borrowing capacity of approximately $28,750 under our revolving credit facility.
Added
Legal settlement activity included a $7,500 gain from proceeds on a legal matter settled during the first quarter of 2023, partially offset by a $3,088 charge for settlement of an intellectual property matter during the second quarter of 2023. See Note 10 – Commitments and Contingencies for further information. Other income and expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor 2022 and 2021, foreign currency transaction gains of $559 and $387 were recorded primarily in connection with settlements of the intercompany balances and invoices transacted in British Pounds. For revenue denominated in Euros, if there is an increase in the rate at which Euros are exchanged for U.S.
Biggest changeTo a lesser extent, the Company is also exposed to exchange rate fluctuations between the Australian and Canadian Dollars to the U.S. Dollar. For 2023 and 2022, foreign currency transaction losses of $(101) and $(559) were recorded primarily in connection with settlements of the intercompany balances and invoices transacted in British Pounds.
Dollar to the Canadian Dollar and local currencies of international trial sites may impact the cash outlay required for future milestone payments and variable pass-through costs under the clinical trial management agreement. 41 Table of Contents
Dollar to the Canadian Dollar and local currencies of international trial sites may impact the cash outlay required for future milestone payments and variable pass-through costs under the clinical trial management agreement. 43 Table of Contents
Dollars. Products sold by AtriCure Europe, B.V. are primarily denominated in Euros or British Pounds. Products sold by AtriCure Europe, B.V. accounted for 9.0% and 9.9% of the Company’s total revenue for 2022 and 2021. Accordingly, the Company is exposed to exchange rate fluctuations between the Euro and the U.S. Dollar and between the British Pound and the Euro.
Products sold by AtriCure Europe, B.V. and its subsidiaries are primarily denominated in Euros or British Pounds. European product sales accounted for 9.4% and 9.0% of the Company’s total revenue for 2023 and 2022. Accordingly, the Company is exposed to exchange rate fluctuations between the Euro and the U.S. Dollar and between the British Pound and the Euro.
We also sell our products to distributors who in turn sell our products to medical centers in Japan, China and other international markets. Our business is primarily transacted in U.S. Dollars; direct sales transactions outside the United States are transacted in Euros, British Pounds or Australian Dollars.
We also sell our products to distributors who in turn sell our products to medical centers in Japan, China and other international markets. Our business is primarily transacted in U.S. Dollars; direct international sales transactions are transacted in Euros, British Pounds, Australian Dollars or Canadian Dollars. Sales to international distributors outside of Europe are under agreements primarily denominated in U.S.
Additional variable costs, including pass through costs incurred at clinical trial sites, will be billed to us by the contracted party. Fixed milestone payments are denominated in Canadian Dollars, while variable pass-through fees incurred at clinical trial sites outside the United States may be billed in U.S. Dollars or other local currencies. Fluctuations in the conversation rates of the U.S.
Fixed milestone payments are denominated in Canadian Dollars, while variable pass-through fees incurred at clinical trial sites outside the United States may be billed in U.S. Dollars or other local currencies. Fluctuations in the conversation rates of the U.S.
Sales to international distributors outside of Europe are under agreements primarily denominated in U.S. dollars. If products are priced in U.S. Dollars and competitors price their products in the local currency, an increase in the relative strength of the U.S. Dollar could result in the Company’s price not being competitive in a market where business is not transacted in U.S.
Dollars. If products are priced in U.S. Dollars and competitors price their products in the local currency, an increase in the relative strength of the U.S. Dollar could result in the Company’s price not being competitive in a market where business is not transacted in U.S. Dollars.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Amounts referenced in this Item 7A are in thousands, except per share amounts.) The Company is exposed to various market risks, which include potential losses arising from adverse changes in market rates and prices, such as foreign exchange fluctuations and changes in interest rates. 40 Table of Contents Credit and Interest Rate Risk The Company invests its cash primarily in money market accounts, repurchase agreements, U.S. government and agency obligations, corporate bonds, asset-backed securities and commercial paper.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Amounts referenced in this Item 7A are in thousands, except per share amounts.) The Company is exposed to various market risks, which include potential losses arising from adverse changes in market rates and prices, such as foreign exchange fluctuations and changes in interest rates.
Dollars, it will require more Euros to equal a specified amount of U.S. Dollars than before the rate increase. In such cases, the Company will receive less in U.S. Dollars than was received before the rate increase went into effect. The Euro to U.S. Dollar conversion rate fluctuations may impact our reported revenue and expenses.
Dollars than was received before the rate increase went into effect. The Euro to U.S. Dollar conversion rate fluctuations may impact our reported revenue and expenses. In 2022, we entered into a clinical trial management agreement for the LeAAPS clinical trial.
In December 2022, we entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require we make fixed milestone payments upon achievement of various enrollment and project milestones over the estimated ten year term.
The terms of the agreement require we make fixed milestone payments upon achievement of various enrollment and project milestones over the estimated ten-year term. Additional variable costs, including pass through costs incurred at clinical trial sites, will be billed to us by the contracted party.
As of December 31, 2022, $57,849 of the cash and cash equivalents balance was in excess of FDIC limits. Foreign Currency Exchange Rate Risk We sell our products to medical centers through our direct sales force in the United States and in certain international markets, such as Germany, France, the United Kingdom, Australia and the Benelux region.
Interest rate risk is highly sensitive due to many factors, including United States monetary and tax policies and United states and international economic factors beyond our control. Foreign Currency Exchange Rate Risk We sell our products to medical centers through our direct sales force in the United States, Germany, France, the United Kingdom, Australia and Canada.
This risk is managed by investing in high quality investment grade securities to maintain liquidity and preserve principal without significantly increasing risk. We are subject to interest rate risk as rate fluctuations impact cash payments for our term loan and revolving credit facility.
This risk is managed by investing in high quality investment grade securities to maintain liquidity and preserve principal without significantly increasing risk. Financial instruments that potentially subject the Company to credit risk consist of cash equivalents and investments in corporate bonds. The Company maintains deposit accounts in federally insured financial institutions in excess of federally insured limits.
Removed
The term loan accrues interest at a variable rate based on the Prime Rate plus 1.25% and any borrowings under the revolving credit facility bear interest at the Prime Rate. Financial instruments that potentially subject the Company to credit risk consist of cash equivalents and investments in corporate bonds.
Added
Credit and Interest Rate Risk The Company invests its cash primarily in money market accounts, U.S. government and agency obligations, corporate bonds, and asset-backed securities.
Removed
Certain of AtriCure’s cash and cash equivalents exceed FDIC insured limits or are invested in money market accounts with investment banks that are not FDIC-insured. The Company places its cash and cash equivalents in what it believes to be credit-worthy financial institutions.
Added
Cash held in financial institutions in foreign countries is not significant. Although these depository accounts may exceed government insured depository limits, we have evaluated the credit worthiness of these applicable financial institutions and determined the risk of material financial loss due to the exposure of such credit risk to be minimal.
Added
The Company also maintains investments in money market funds that are not federally insured. We are subject to interest rate risk as rate fluctuations impact cash payments for outstanding borrowings.
Added
Outstanding amounts under the Credit Agreement bear interest at a rate per annum equal to, at the Company's election: (i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin.
Added
Alternate base rate is equal to the greatest of Prime, the NYFRB Rate plus 0.50% and Adjusted Term SOFR Rate plus 1.00%. The applicable margin spread is 1.50% to 2.75%, as determined by the average excess availability of the aggregate revolving commitment.
Added
All swingline loans bear interest at a rate per annum equal to the ABR plus the applicable margin under the Credit Agreement. Interest periods for SOFR Term Benchmark borrowings range from one month, three months or six months, at the Company's election.
Added
For revenue denominated in Euros, if there is an increase in the rate at which Euros are exchanged for U.S. Dollars, it will 42 Table of Contents require more Euros to equal a specified amount of U.S. Dollars than before the rate increase. In such cases, the Company will receive less in U.S.

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