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What changed in Envoy Medical, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Envoy Medical, Inc.'s 2023 and 2024 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 2024 report.

+261 added−269 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-01)

Top changes in Envoy Medical, Inc.'s 2024 10-K

261 paragraphs added · 269 removed · 200 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNew implantations of the Esteem FI-AMEI are not expected to be more than a few per year until, and if, the reimbursement policy changes. Absent a change in reimbursement policy, there only will be nominal revenue from replacement of sound processors for existing patients who need a new battery.
Biggest changeIt is not only important for the market to know our strategy for supporting patients for life, but it is the right thing to do for the patients. New implantations of the Esteem FI-AMEI are not expected to be more than a few per year until, and if, the reimbursement policy changes.
This capability will support audibility of alarms, sirens, telephones, and other people for an added sense of security while they sleep. ● Hearing in and around water. Patients using the Acclaim CI will not need to worry about removing their device when showering, at the beach, or swimming laps.
This capability may support audibility of alarms, sirens, telephones, and other people for an added sense of security while they sleep. ● Hearing in and around water. Patients using the Acclaim CI will not need to worry about removing their device when showering, at the beach, or swimming laps.
However, we will be unable to train, educate, and develop these relationships until we are able to obtain FDA approval for the Acclaim CI. 10 Commercial Activities Outside of the United States We anticipate pursuing the Conformité Européenne mark (“ CE Mark ”) in the European Union shortly after FDA approval.
However, we will be unable to train, educate, and develop these relationships until we are able to obtain FDA approval for the Acclaim CI. Commercial Activities Outside of the United States We anticipate pursuing the Conformité Européenne mark (“ CE Mark ”) in the European Union shortly after FDA approval.
The Esteem FI-AMEI remains the only FDA approved fully implanted active hearing device on the market. The Esteem FI-AMEI failed to gain commercial traction, primarily because the Centers for Medicaid and Medicare Services classified it as a hearing aid and therefore not eligible for coverage.
The Esteem FI-AMEI remains the only FDA approved fully implanted active hearing device on the market. The Esteem FI-AMEI failed to gain commercial traction, primarily because the Centers for Medicaid and Medicare Services (“CMS”) classified it as a hearing aid and therefore not eligible for coverage.
As contemplated by the Business Combination Agreement, on the Closing Date the following occurred: (a) each share of Legacy Envoy Preferred Stock issued and outstanding immediately prior to the Effective Time was converted into shares of Legacy Envoy Common Stock; (b) each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time was converted into and exchanged for one share of Legacy Envoy Common Stock; (c) each outstanding option to purchase shares of Legacy Envoy Common Stock outstanding as of immediately prior to the Effective Time was cancelled in exchange for nominal consideration; (d) each outstanding warrant to purchase shares of Legacy Envoy Common Stock outstanding as of immediately prior to the Effective Time automatically, depending on the applicable exercise price, was cancelled or exercised on a net exercise basis and converted into shares of Legacy Envoy Common Stock in accordance with its terms; (e) each outstanding Legacy Envoy convertible promissory note was automatically converted into shares of Legacy Envoy Common Stock in accordance with its terms; (f) each share of Legacy Envoy Common Stock issued and outstanding immediately prior the Effective Time was cancelled and converted into the right to receive a number of shares of our Class A Common Stock equal to the Exchange Ratio; (g) the Sponsor forfeited 5,510,000 shares of Anzu Class B Common Stock and all 12,500,000 private warrants pursuant to the Sponsor Support Agreement; (h) the Sponsor exchanged 2,500,000 shares of Anzu Class B Common Stock for 2,500,000 shares of our Series A Preferred Stock; (i) an aggregate of 2,615,000 shares of Anzu Class B Common Stock held by the Sponsor and Anzu’s former independent directors automatically converted into our Class A Common Stock; (j) the Sponsor transferred an aggregate of 490,000 shares of our Class A Common Stock to the Legacy Forward Purchasers and the Extension Support Parties pursuant to the Side Letter Agreements and Extension Support Agreements, respectively; and (k) the Company issued an aggregate of 8,512 shares of Class A Common Stock to the Meteora FPA Parties pursuant to the Forward Purchase Agreement. 1 As of the open of trading on October 2, 2023, the Class A Common Stock and Public Warrants of the Company, formerly those of Anzu, began trading on Nasdaq as “COCH” and “COCHW,” respectively.
As contemplated by the Business Combination Agreement: (a) each share of Legacy Envoy Preferred Stock issued and outstanding immediately prior to the Closing was converted into shares of Legacy Envoy Common Stock; (b) each share of Merger Sub Common Stock issued and outstanding immediately prior to the Closing was converted into and exchanged for one share of Legacy Envoy Common Stock; (c) each outstanding option to purchase shares of Legacy Envoy Common Stock outstanding as of immediately prior to the Closing was cancelled in exchange for nominal consideration; (d) each outstanding warrant to purchase shares of Legacy Envoy Common Stock outstanding as of immediately prior to the Closing automatically, depending on the applicable exercise price, was cancelled or exercised on a net exercise basis and converted into shares of Legacy Envoy Common Stock in accordance with its terms; (e) each outstanding Legacy Envoy convertible promissory note was automatically converted into shares of Legacy Envoy Common Stock in accordance with its terms; (f) each share of Legacy Envoy Common Stock issued and outstanding immediately prior to the Closing was cancelled and converted into the right to receive a number of shares of our Class A Common Stock equal to the Exchange Ratio; (g) the Sponsor forfeited 5,510,000 shares of Anzu Class B Common Stock and all 12,500,000 private warrants pursuant to the Sponsor Support Agreement; (h) the Sponsor exchanged 2,500,000 shares of Anzu Class B Common Stock for 2,500,000 shares of our Series A Preferred Stock; (i) an aggregate of 2,615,000 shares of Anzu Class B Common Stock held by the Sponsor and Anzu’s former independent directors automatically converted into our Class A Common Stock; (j) the Sponsor transferred an aggregate of 490,000 shares of our Class A Common Stock to the Legacy Forward Purchasers and the Extension Support Parties pursuant to the Side Letter Agreements and Extension Support Agreements, respectively; and (k) the Company issued an aggregate of 8,512 shares of Class A Common Stock to the Meteora FPA Parties pursuant to the Forward Purchase Agreement. 1 As of the open of trading on October 2, 2023, the Class A Common Stock and Public Warrants of the Company, formerly those of Anzu, began trading on Nasdaq as “COCH” and “COCHW,” respectively.
A four-week waiting period is required before the Acclaim CI can be activated to allow the middle ear to heal and fluid from surgery to dissipate.
A four to eight week waiting period is required before the Acclaim CI can be activated to allow the middle ear to heal and fluid from surgery to dissipate.
However, this strategy will require significant investments in the development of our management team, corporate infrastructure, and manufacturing capabilities, as well as expansion of our sales, distribution, and training network. We do not anticipate offering the Acclaim CI at every cochlear implant center in the country. The other key professional group is audiologists.
However, this strategy will require significant investments in the development of our management team, corporate infrastructure, and manufacturing capabilities, as well as expansion of our sales, distribution, and training network. We do not anticipate offering the Acclaim CI at every cochlear implant center. 10 The other key professional group is audiologists.
An article published in the journal Acta Otorhinolaryngol Italica in June 2016 suggests that untreated or undertreated moderate to profound hearing loss correlates with earlier loss of cognitive function and poorer cardiovascular health. 2 While some solutions for hearing loss already exist (e.g., hearing aids, traditional cochlear implants) these have inherent limitations in being fully or partially external, which limit patients in initial time to adoption, hours of use during the day (inherent compliance restrictions), lifestyle, and quality of life.
An article published in the journal Acta Otorhinolaryngol Italica in June 2016 suggests that untreated or undertreated hearing loss correlates with earlier loss of cognitive function and poorer cardiovascular health. 2 While some solutions for hearing loss already exist (e.g., hearing aids, traditional cochlear implants) these have inherent limitations in being fully or partially external, which may limit patients in initial time to adoption, hours of use during the day (inherent compliance restrictions), lifestyle, or quality of life.
These 30 sites are expected to be spread throughout the country and focus on quality of surgical care and capacity to serve a sufficient number of qualified patients. Following the initial 30 sites, we intend to add an additional 30 sites every year until there are roughly 150 sites actively implanting the Acclaim CI.
These 30 sites are expected to be spread throughout the country and focus on quality of surgical care and capacity to serve a sufficient number of qualified patients. Following the initial 30 sites, we intend to add additional sites every year until there are roughly 120-150 sites actively implanting the Acclaim CI.
There is also reason to believe that increasing compliance and use of cochlear implants, reducing time to adoption for candidates, and increasing safety and security by providing the ability for true all-day hearing may improve the net healthcare outcome for society over time.
There is also reason to believe that increasing compliance and use of cochlear implants, reducing time to adoption for candidates, and helping to support safety and security by providing the ability for true all-day hearing may improve the net healthcare outcome for society over time.
We believe that the fully implanted nature of the Acclaim CI will facilitate an increase in daily usage over other types of cochlear implants because the device can be used 24-hours a day. ● Hearing at night. Unlike other types of available cochlear implants, the Acclaim CI can be used at night.
We believe that the fully implanted nature of the Acclaim CI may facilitate an increase in daily usage over other types of cochlear implants because the device can be used 24-hours a day. ● Hearing at night. Unlike other types of available cochlear implants, the Acclaim CI can be used at night.
We believe a fully implanted cochlear implant should reduce cochlear implant costs over time by eliminating costly external components that are frequently replaced at the expense of the patient, the insurer, Medicare, or other third-party payor.
We believe a fully implanted cochlear implant could reduce cochlear implant costs over time by eliminating costly external components that are frequently replaced at the expense of the patient, the insurer, Medicare, or other third-party payor.
The sensor absorbs the mechanical energy from ossicular chain and turns it into a signal that can be processed, improved, and increased for a patient’s particular hearing needs. Our first product, the Esteem Fully Implanted Active Middle Ear Implant (“Esteem FI-AMEI”), was created in 2006 and received FDA approval in 2010.
The sensor absorbs the mechanical energy from ossicular chain and turns it into a signal that can be processed, improved, and increased for a patient’s particular hearing needs. Our first product, the Esteem Fully Implanted Active Middle Ear Implant (“Esteem FI-AMEI”), received FDA approval in 2010.
Despite the commercial challenges of the Esteem FI-AMEI, roughly 1,000 devices were implanted globally. Some devices were implanted in the early 2000s during clinical trials, providing us with nearly two decades of experience with its implantable sensor technology. Throughout our experience, our sensor technology proved a viable alternative and robust option to external or implanted microphones.
Despite the commercial challenges of the Esteem FI-AMEI, roughly 1,000 devices were implanted globally. Some devices were implanted in the early 2000s during clinical trials, providing us with nearly two decades of experience with its implantable sensor technology. Throughout our experience, our sensor technology proved a viable alternative to external or implanted microphones.
However, the process of medical device development is inherently uncertain and there is no guarantee that this designation will accelerate the timeline for approval or make it more likely that the Acclaim CI will be approved. Moderate to profound hearing loss is currently an irreversible and debilitating human condition.
However, the process of medical device development is inherently uncertain and there is no guarantee that this designation will accelerate the timeline for approval or make it more likely that the Acclaim CI will be approved. Hearing loss is currently an irreversible and debilitating human condition.
(ASX: COH) is the leading cochlear implant device manufacturer with approximately 60% of global market share and a market capitalization of approximately $13 billion (US Dollars) as of December 31, 2023.
(ASX: COH) is the leading cochlear implant device manufacturer with approximately 60% of global market share and a market capitalization of approximately $12 billion (US Dollars) as of December 31, 2024.
Two major shifts in clinical candidacy have likely increased the market sizes: (a) the Centers for Medicare & Medicaid Services (“CMS”) has expanded coverage from 40% word recognition scores to 60% word recognition scores and (b) there is more acceptance of treating single sided deafness with a cochlear implant.
Two major shifts in clinical candidacy have likely increased the market sizes: (a) the CMS has expanded coverage from 40% word recognition scores to 60% word recognition scores and (b) there is more acceptance of treating single sided deafness with a cochlear implant.
The Acclaim CI is implanted by a surgeon through a procedure that we believe will average around two and a half to three hours under general anesthesia. We expect that patients will experience mild to moderate discomfort after the procedure and benefit from several days of rest after surgery.
The Acclaim CI is implanted by a surgeon through a procedure that we believe will average around two and a half to three hours under general anesthesia. We expect that patients may experience mild to moderate discomfort after the procedure.
We do not plan to market the Acclaim CI to patients under age 18. 7 If we are able to obtain regulatory approval of the Acclaim CI, we believe physicians and patients will be receptive to its competitive advantage as a fully implanted cochlear implant.
We do not plan to market the Acclaim CI to patients under age 18. 7 If we are able to obtain regulatory approval of the Acclaim CI, we believe physicians and patients may be receptive to it being a fully implanted cochlear implant.
The study is essentially designed to elicit patient and professional feedback regarding their experience using the device and inform any necessary design changes prior to beginning the pivotal clinical study. 9 We believe that the initial results of the EFS were primarily promising. A few design shortcomings have been identified and will be addressed.
The study is essentially designed to elicit patient and professional feedback regarding their experience using the device and inform any necessary design changes prior to beginning the pivotal clinical study. We believe that the initial results of the EFS were promising. A few device shortcomings have been identified and are in process of being addressed or appropriately mitigated.
The Acclaim CI processor is implanted and therefore not susceptible to damage, discomfort or issues associated with moisture, germs, dirt, or other external causes of loss or physical damage due to having an externally worn processor. ● No interference with equipment designed for non-hearing impaired.
The Acclaim CI processor is implanted and therefore not susceptible to damage, discomfort or issues associated with moisture, germs, dirt, or other external causes of loss or physical damage due to having an externally worn processor. ● Use of equipment and accessories.
In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage the proven sensor technology and incorporate it into a cochlear implant.
In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage our sensor technology and incorporate it into a cochlear implant. As a result, we have developed the investigational fully implanted Acclaim CI.
The purpose of this early feasibility study was to demonstrate that the Acclaim CI is capable of operating as it was designed. In other words, there are no safety or efficacy endpoints.
There were three patients enrolled, implanted, and activated in the fourth quarter of 2022. The purpose of this early feasibility study was to demonstrate that the Acclaim CI is capable of operating as it was designed. In other words, there are no safety or efficacy endpoints.
If the bill is successful clarifying that fully implanted active middle ear implants (FI-AMEIs) are eligible for coverage and then a change does happen to reimbursement policy for fully implanted active middle ear implants, the Esteem FI-AMEI is an existing FDA approved product ready to capitalize on such a change.
If these bills are successful in clarifying that FI-AMEIs are eligible for coverage and a change does happen to reimbursement policy for fully implanted active middle ear implants, the Esteem FI-AMEI is an existing FDA approved product ready to capitalize on such a change. 11 Existing Esteem FI-AMEI patients and professionals who work with those patients will continue to be supported.
Some of the pending foreign and international patent applications preserve an opportunity to pursue patent rights in multiple countries. 11 Our pending patent applications may not result in issued patents, and we cannot assure you that any current or subsequently issued patents will protect our intellectual property rights or provide us with any competitive advantage.
Our pending patent applications may not result in issued patents, and we cannot assure you that any current or subsequently issued patents will protect our intellectual property rights or provide us with any competitive advantage.
We currently anticipate obtaining FDA approval in 2026, although the process of obtaining FDA approval is uncertain, and we may not obtain approval on that timeline or at all. A large component of our PMA will be a successful pivotal clinical study of approximately 50 to 60 patients. The pivotal clinical study will have several safety and efficacy endpoints.
We currently anticipate obtaining FDA approval in late 2027 or early 2028, although the process of obtaining FDA approval is uncertain, and we may not obtain approval on that timeline or at all. A large component of our PMA will be a successful pivotal clinical study.
Because the Acclaim CI is currently our only product candidate that we believe can be commercialized, we would be unable to continue operations if it were determined that we could not obtain FDA approval for the Acclaim CI.
Because the Acclaim CI is currently our only product candidate that we believe can be commercialized, we would be unable to continue operations if it were determined that we could not obtain FDA approval for the Acclaim CI. Early Feasibility Study The Acclaim CI has undergone extensive benchtop and laboratory testing throughout the design and development process.
Cochlear implants use electronic signals to stimulate the auditory nerve. Partially implanted cochlear implants have two main components: a large external component that sits on or behind the patient’s ear and a surgically implanted internal component. The external component contains a microphone, sound processer, and batteries.
Partially implanted cochlear implants have two main components: a large external component that sits on or behind the patient’s ear and a surgically implanted internal component. The external component contains a microphone, sound processer, and batteries. A magnetic coil on the external component lines up with an internal magnetic coil in the internal component.
However, we will be unable to expand into international markets if we are unable to obtain these regulatory approvals. Market Competition There are currently three major cochlear implant manufacturers - Cochlear Ltd., Advanced Bionics (Sonova), and Med-El.
However, we will be unable to expand into international markets if we are unable to obtain these regulatory approvals. Market Competition There are currently three major cochlear implant manufacturers - Cochlear Ltd., Advanced Bionics (Sonova), and Med-El. There are a few other minor regional players, such as Nurotron in China, which appears to be focused on developing countries. Cochlear Ltd.
As of February 29, 2024, we had rights to 30 issued U.S. patents, which are estimated to expire between 2025 and 2042 assuming all required fees are paid, 16 pending U.S. patent applications, 12 issued foreign patents and 28 pending foreign and international patent applications.
As of March 10, 2025, we had rights to 35 issued U.S. patents, which are estimated to expire between 2025 and 2043 assuming all required fees are paid, 13 pending U.S. patent applications, 33 issued foreign patents and 32 pending foreign and international patent applications.
In the third quarter of 2022, we received an IDE to undergo a small Early Feasibility Study (“ EFS ”) at Mayo Clinic in Rochester, Minnesota. The principal investigator is Dr. Colin Driscoll, a respected veteran in the global cochlear implant industry. There were three patients enrolled, implanted, and activated in the fourth quarter of 2022.
Animal testing was done to demonstrate the reliability of the Acclaim CI’s rechargeable battery and charging safety algorithm. In the third quarter of 2022, we received an IDE to undergo a small Early Feasibility Study (“ EFS ”) at Mayo Clinic in Rochester, Minnesota. The principal investigator is Dr. Colin Driscoll, a respected veteran in the global cochlear implant industry.
The disclosure in this section gives effect to the Business Combination and includes the operations of Legacy Envoy prior to the Business Combination. Our Product Cochlear Implants - Fully Implanted vs. Partially Implanted The cochlea converts vibrations from the ossicular chain into nerve signals that are transmitted through the auditory nerve for processing by the brain.
Our Product Cochlear Implants - Fully Implanted vs. Partially Implanted The cochlea converts vibrations from the ossicular chain into nerve signals that are transmitted through the auditory nerve for processing by the brain. Cochlear implants use electronic signals to stimulate the auditory nerve.
We believe that the trend over the next decade will be a continuation of the focus on usability, connectivity, lifestyle, and miniaturization. As cochlear implants become more accepted as a therapy for individuals with moderate to profound sensorineural hearing loss, manufacturers will pay attention to ways of making patients interested in their device over a similarly performing competing device.
As cochlear implants become more accepted as a therapy for individuals with moderate to profound sensorineural hearing loss, manufacturers will pay attention to ways of making patients interested in their device over a similarly performing competing device. Another major trend within the industry is a loosening of the clinical candidacy requirements.
Both Med El (in 2019) and Cochlear (in 2021) achieved FDA approval for treatment of those with SSD and asymmetric hearing loss. As a result, more patients are eligible for cochlear implants than ever before. Finally, industry participants have made material investments to inform more adult candidates about cochlear implants to increase usage.
As a result, more patients are eligible for cochlear implants than ever before. Finally, industry participants have made material investments to inform more adult candidates about cochlear implants to increase usage.
Another major trend within the industry is a loosening of the clinical candidacy requirements. In addition to people with “better” hearing levels being considered for cochlear implants (e.g., people with moderate hearing in the lower frequencies) there has also been a movement to implant people with “single sided deafness” (“ SSD ”).
In addition to people with “better” hearing levels being considered for cochlear implants (e.g., people with moderate hearing in the lower frequencies) there has also been a movement to implant people with “single sided deafness” (“ SSD ”). Both Med El (in 2019) and Cochlear (in 2021) achieved FDA approval for treatment of those with SSD and asymmetric hearing loss.
The sound processor and power source are also implanted. 2 CAUTION: Investigational Device – Limited by Federal Law to Investigational Use. Acclaim CI - A Breakthrough Device The fully implanted Acclaim CI received the Breakthrough Device Designation from the U.S. Food and Drug Administration (FDA) in 2019.
Acclaim CI - A Breakthrough Device The fully implanted Acclaim CI received the Breakthrough Device Designation from the U.S. Food and Drug Administration (FDA) in 2019.
Moreover, if FDA approval is delayed beyond our current plan or if delay is based on safety or efficacy concerns that require product redesign, we will be required to raise significant additional capital to continue our operations.
Regulatory delays would also put us further behind our established competitors in the market and may allow additional competitors into the market with products that have competitive advantages over ours. 9 Moreover, if FDA approval is delayed beyond our current plan or if delay is based on safety or efficacy concerns that require product redesign, we will be required to raise significant additional capital to continue our operations.
A magnetic coil on the external component lines up with an internal magnetic coil in the internal component. The signal from the external component is transferred to the internal coil where it is delivered to the electrode array, which is implanted in the cochlea, to electrically stimulate the cochlea.
The signal from the external component is transferred to the internal coil where it is delivered to the electrode array, which is implanted in the cochlea, to electrically stimulate the cochlea. The Acclaim CI is fully implanted and does not have the need for any external component to be worn on the ear.
As a result, we have developed the investigational fully implanted Acclaim CI and the possibility to disrupt a cochlear implant market that we believe to be a large opportunity currently dominated by complacent incumbents. Business Combination On the Closing Date, we completed the Business Combination pursuant to the Business Combination Agreement between Anzu and Legacy Envoy.
We now believe we have the possibility to disrupt the cochlear implant market currently dominated by a small number of incumbents. Business Combination In September 2023, we completed the Business Combination pursuant to the Business Combination Agreement between Anzu and Legacy Envoy.
Our patents cover, among other things, aspects of our current Acclaim CI system and future product concepts.
Our patents cover, among other things, aspects of our current Acclaim CI system and future product concepts. Some of the pending foreign and international patent applications preserve an opportunity to pursue patent rights in multiple countries.
Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality and invention assignment agreements to protect our intellectual property rights.
Absent a change in reimbursement policy, there only will be nominal revenue from replacement of the sound processor / battery assembly (the “Battery”) for existing patients who need a new Battery. Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality and invention assignment agreements to protect our intellectual property rights.
The primary concern is a signal to noise issue in which a component of the Acclaim CI is introducing an unintended noise into the signal path, creating an artifact that subjects identify as a gurgling or sizzling background noise. Mitigation and resolution strategies are ongoing.
The primary concern is a signal to noise issue that subjects identify as a gurgling or sizzling background noise. Mitigation and resolution strategies have been implemented and further work is ongoing. We believe we have identified strategies to improve the signal to noise ratio.
Although efforts to change that categorization have been unsuccessful to date, recently, a new bipartisan Congressional bill, titled the Hearing Device Coverage Clarification Act was introduced in February 2024. The bill seeks to clarify that fully implanted active middle ear hearing devices (FI-AMEIs) are prosthetics and not subject to the current Medicare hearing aid coverage exclusion.
These bills seek to clarify that fully implanted active middle ear hearing devices (FI-AMEIs) are prosthetics and not subject to the current Medicare hearing aid coverage exclusion.
The Acclaim CI is fully implanted and does not have the need for any external component to be worn on the ear. Unlike partially implanted devices, the fully implanted Acclaim CI uses the ear to capture sound via a piezoelectric sensor that is implanted in the middle ear.
Unlike partially implanted devices, the fully implanted Acclaim CI uses the ear to capture sound via a piezoelectric sensor that is implanted in the middle ear. The sound processor and power source are also implanted. 2 CAUTION: Investigational Device – Limited by Federal (or United States) Law to Investigational Use.
We believe we have identified some of the sources of the unintended noise and strategies to mitigate that noise. We will not know if we have identified all of the sources of the unintended noise until implanted into another patient with an improved device.
We have tested and implemented some of these strategies in EFS patients and they have shown improvement. We will not know the extent of signal to noise improvement of these strategies until they have been developed, tested, implemented and implanted into patients with a new or improved device. The EFS patients have been implanted for over two years.
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Oticon Medical (Demant) was set to become the fourth global cochlear implant player, but Cochlear Ltd has agreed in principle to purchase the cochlear implant business portion of Oticon Medical from Demant. There are a few other minor regional players, such as Nurotron in China, which appears to be focused on developing countries. Cochlear Ltd.
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We believe that the trend over the next decade will be a continuation of the focus on usability, connectivity, lifestyle, and miniaturization. Artificial Intelligence and Machine Learning may also come into play as those technologies evolve.
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Study design, including the clinical protocol, have not been finalized and are pending discussions with the FDA. In order to start a pivotal clinical study, we will need to obtain an Investigational Device Designation (“IDE”) from the FDA.
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In order to begin a pivotal clinical study, you must have an Investigational Device Designation (“IDE”) approved by the FDA. We received approval for our IDE on October 31, 2024. However, FDA approved our IDE based on a staged clinical study that will require approval from the FDA to move from the first stage to the second stage.
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The submission for an IDE is a large collection of a significant amount of information required by the rule and regulations governing Class III medical devices. We submitted our IDE for approval in Q1 of 2024 with approval anticipated by end of Q2 2024 or beginning of Q3 2024.
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The objective of this pivotal clinical study is to demonstrate the safety and efficacy of the fully implanted Acclaim cochlear implant for the treatment of severe to profound sensorineural hearing loss and is designed as a prospective, multicenter, non-randomized, open label clinical trial to evaluate the safety and efficacy of the Acclaim CI.
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However, FDA approval of the IDE is not guaranteed and each step of the process may take longer than we have planned.
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The pivotal clinical study protocol currently requires 56 total patients enrolled and followed for 12 months. The first stage will have 10 patients enrolled. We will then provide a summary of effectiveness outcomes for these 10 patients to the FDA and request approval from the FDA to proceed to the second stage to implant the remaining 46 patients.
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Regulatory delays would also put us further behind our established competitors in the market and may allow additional competitors into the market with products that have competitive advantages over ours.
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There is no guarantee that the FDA will approve expansion to the second stage or that eventual PMA approval will be obtained. The pivotal clinical study has a primary efficacy endpoint, a safety endpoint, many secondary endpoints and a couple of exploratory endpoints.
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Early Feasibility Study Part of applying for a pivotal clinical study IDE is informing the FDA of any preclinical or clinical work that has been done. The Acclaim CI has undergone extensive benchtop and laboratory testing throughout the design and development process. Animal testing was done to demonstrate the reliability of the Acclaim CI’s rechargeable battery and charging safety algorithm.
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The primary efficacy endpoint will compare speech perception (CNC words) from baseline to twelve-month follow-up and the safety endpoint will characterize incidence and frequency of adverse events. The total pivotal clinical study duration is estimated to be approximately two and a half years.
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We believe we may be able to correct the issue without material delay, but there remains the possibility that once one noise source is corrected another will be uncovered and the timelines may be extended in a material way.
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There is no guarantee that we will meet any of the safety, efficacy, secondary, or exploratory endpoints or that the clinical study will proceed to the second stage or enroll all patients. Once the pivotal study is completed, the data will be analyzed and sent to the FDA with the PMA submission.
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The patients use their devices daily, but if the noise issue cannot be resolved in a timely manner, one or more of the patients may stop using the device or elect to remove the implanted device.
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The FDA review may take 6-12 months depending on what comes up during the review and if the FDA review team recommends the device for a Panel Track review. There is no guarantee that PMA approval will be obtained.
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From the outset of the trial, all EFS subjects have achieved hearing percepts through activation of the implant stimulator and achieve unique pitch percepts on each electrode, typical of all other cochlear implant recipients. The patients use their devices daily. Two of the three patients choose to wear a hearing aid on top of their Acclaim CI.
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They all have made it passed their 24 month follow-up appointments. They all use their devices daily. There have been reported adverse events, but no serious or unanticipated device effects. Two of the three patients choose to wear a hearing aid on top of their Acclaim CI.
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Were the change in reimbursement policy to occur and we were to focus on marketing the Esteem FI-AMEI, it would benefit from upgrades to its power source and chip design. Such upgrades are not currently a priority of the organization as we view pursuing the commercialization of the Acclaim CI as the appropriate focus and best use of resources.
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Although efforts to change that categorization have been unsuccessful to date, two bipartisan Congressional bills, both titled the Hearing Device Coverage Clarification Act were introduced in the House and the Senate in the 118 th Congress. It is anticipated, although not guaranteed, that the bills will be reintroduced into the 119 th Congress.
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Existing Esteem FI-AMEI patients and professionals who work with those patients will continue to be supported. It is not only important for the market to know we support our patients for life, but it is the right thing to do for the patients.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

34 edited+9 added−4 removed124 unchanged
Biggest changeExpiration Date Title U.S. 7297101 01/17/2026 Method and apparatus for minimally invasive placement of sensing and driver assemblies to improve hearing loss U.S. 9782600 05/17/2033 Self-regulating transcutaneous energy transfer U.S. 7524278 08/15/2025 Hearing aid system and transducer with hermetically sealed housing U.S. 9497555 01/30/2035 Implantable middle ear transducer having improved frequency response U.S. 10129660 10/27/2028 Implantable middle ear transducer having improved frequency response U.S. 9036824 12/30/2033 Transducer impedance measurement for hearing aid U.S. 9521493 05/03/2032 Transducer impedance measurement for hearing aid U.S. 9682226 12/06/2033 Electronic lead connection and related devices U.S. 10549090 10/20/2037 Communication system and methods for fully implantable modular cochlear implant system U.S. 10646709 04/09/2038 Fully implantable modular cochlear implant system U.S. 10569079 09/04/2037 Communication system and methods for fully implantable modular cochlear implant system U.S. 10743812 03/25/2035 Implantable middle ear diagnostic transducer U.S. 11260220 02/28/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11266831 06/13/2040 Implantable cochlear system with integrated components and lead characterization U.S. 9525949 03/16/2034 Implantable middle ear transducer having diagnostic detection sensor U.S. 11051116 10/11/2032 Implantable middle ear transducer having diagnostic detection sensor U.S. 11471689 04/14/2041 Cochlear implant stimulation calibration U.S. 11564046 07/17/2041 Programming of cochlear implant accessories U.S. 9313590 03/13/2033 Hearing aid amplifier having feed forward bias control based on signal amplitude and frequency for reduced power consumption U.S. 9635478 03/09/2034 Coulomb counter and battery management for hearing aid U.S. 11672970 02/21/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11697019 12/02/2040 Combination hearing aid and cochlear implant system U.S. 11711658 10/11/2032 Implantable middle ear transducer having diagnostic detection sensor EP 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network DE 602017036854 08/17/2037 Implantable modular cochlear implant system with communication system and network DK 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network AT 1381751 08/17/2037 Implantable modular cochlear implant system with communication system and network EP 3927420 2/21/2040 Implantable cochlear system with integrated components and lead characterization DE 602020024229 2/21/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11633591 8/3/2041 Combination implant system with removable earplug sensor and implanted battery U.S. 11806531 4/11/2041 Implantable cochlear system with inner ear sensor U.S. 11839765 1/23/2042 Cochlear implant system with integrated signal analysis functionality U.S. 11865339 6/22/2042 Cochlear implant system with electrode impedance diagnostics 12 Trademarks As of December 31, 2023, we had trademark registrations, covering “Acclaim”, “Envoy”, “Envoy Medical”, “EnvoyCEM”, “Esteem”, “Invisible Hearing”, and “MEDCEM.” Our U.S. trademarks have registration dates between 2002 and 2021 and have upcoming renewal dates between 2027 and 2033.
Biggest changeExpiration Date Title U.S. 7297101 01/17/2026 Method and apparatus for minimally invasive placement of sensing and driver assemblies to improve hearing loss U.S. 9782600 05/17/2033 Self-regulating transcutaneous energy transfer U.S. 7524278 08/15/2025 Hearing aid system and transducer with hermetically sealed housing U.S. 9497555 01/30/2035 Implantable middle ear transducer having improved frequency response U.S. 10129660 10/27/2028 Implantable middle ear transducer having improved frequency response U.S. 9036824 12/30/2033 Transducer impedance measurement for hearing aid U.S. 9521493 05/03/2032 Transducer impedance measurement for hearing aid U.S. 9682226 12/06/2033 Electronic lead connection and related devices U.S. 10549090 10/20/2037 Communication system and methods for fully implantable modular cochlear implant system U.S. 10646709 04/09/2038 Fully implantable modular cochlear implant system U.S. 10569079 09/04/2037 Communication system and methods for fully implantable modular cochlear implant system U.S. 10743812 03/25/2035 Implantable middle ear diagnostic transducer U.S. 11260220 02/28/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11266831 06/13/2040 Implantable cochlear system with integrated components and lead characterization U.S. 9525949 03/16/2034 Implantable middle ear transducer having diagnostic detection sensor 12 Jurisdiction Patent No.
These include: ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; ● labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● the federal Physician Sunshine Act and various state and foreign laws on reporting remunerative relationships with health care customers; ● the federal Anti-Kickback Statute (and similar state laws) prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare or Medicaid.
These include: ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; 17 ● labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● the federal Physician Sunshine Act and various state and foreign laws on reporting remunerative relationships with health care customers; ● the federal Anti-Kickback Statute (and similar state laws) prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare or Medicaid.
Additionally, the ACA expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
Additionally, the ACA expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. 24 Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. 13 FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the U.S. requires either FDA clearance of a 510(k) premarket notification or PMA.
The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the U.S. requires either FDA clearance of a 510(k) premarket notification or PMA.
Similarly, we are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: ● design, development, manufacturing, and testing; ● product standards; ● product safety; ● product safety reporting; ● marketing, sales, and distribution; ● packaging and storage requirements; ● labeling requirements; ● content and language of instructions for use; ● clinical studies; ● record keeping procedures; ● advertising and promotion; ● recalls and field corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; 19 ● import and export restrictions; ● tariff regulations, duties, and tax requirements; ● registration for reimbursement; and ● necessity of testing performed in country by distributors for licensees.
Similarly, we are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: ● design, development, manufacturing, and testing; ● product standards; ● product safety; ● product safety reporting; ● marketing, sales, and distribution; 21 ● packaging and storage requirements; ● labeling requirements; ● content and language of instructions for use; ● clinical studies; ● record keeping procedures; ● advertising and promotion; ● recalls and field corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; ● import and export restrictions; ● tariff regulations, duties, and tax requirements; ● registration for reimbursement; and ● necessity of testing performed in country by distributors for licensees.
Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the U.S., as well as comparable authorities in the European Economic Area (“ EEA ”) and other countries in which we may sell our products.
Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the U.S., as well as comparable authorities in the European Economic Area (“ EEA ”) and other countries in which we may sell our products.
Our failure to maintain compliance with the QSR or other applicable regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products. 16 The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
Our failure to maintain compliance with the QSR or other applicable regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products. 18 The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The Acclaim CI received Breakthrough Device designation in March 2019. 15 Post-market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.
The Acclaim CI received Breakthrough Device designation in March 2019. Post-market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.
We believe that our existing facility is sufficient to meet our needs for the foreseeable future. We also lease 1,100 square feet of office space in Ausbach, Germany pursuant to a lease that automatically renews each year for a successive one year period, unless the we notify the landlord 6 months prior to the annual renewal.
We believe that our existing facility is sufficient to meet our needs for the foreseeable future. 25 We also lease 1,100 square feet of office space in Ausbach, Germany pursuant to a lease that automatically renews each year for a successive one year period, unless the we notify the landlord six (6) months prior to the annual renewal.
We view our investment in human capital to be crucial to our success, and we are committed to ensuring an inclusive culture in which employees feel they are part of achieving a common goal. Our work environment is highly collaborative and one that is based on trust and mutual respect.
We view our investment in human capital to be crucial to our success, and we are committed to ensuring a culture in which employees feel they are part of achieving a common goal. Our work environment is highly collaborative and one that is based on trust and mutual respect.
The information on our website is not, and shall not be deemed to be, part of this Report or incorporated into any other filings we make with the SEC, except as shall be expressly set forth by specific reference in any such filings. 23 ITEM 1A.
The information on our website is not, and shall not be deemed to be, part of this Report or incorporated into any other filings we make with the SEC, except as shall be expressly set forth by specific reference in any such filings. 26 ITEM 1A.
In addition, the device must achieve the performance intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner. 17 Compliance with the essential requirements is a prerequisite for the CE Mark without which medical devices cannot be marketed or sold in the EU.
In addition, the device must achieve the performance intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner. 19 Compliance with the essential requirements is a prerequisite for the CE Mark without which medical devices cannot be marketed or sold in the EU.
This lease renewed automatically on January 1, 2023 and again on January 1, 2024. Employees and Human Capital As of December 31, 2023, we had approximately 34 employees. A significant number of our employees have a technical background and hold advanced engineering or scientific degrees.
This lease renewed automatically on January 1, 2024 and again on January 1, 2025. Employees and Human Capital As of December 31, 2024, we had approximately 42 employees. A significant number of our employees have a technical background and hold advanced engineering or scientific degrees.
Item 1A. Risk Factors - Risks Relating to our Intellectual Property for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us. Material Patents Our material patents, their jurisdiction, patent number, and expiration date are listed in the tables below: Jurisdiction Patent No.
Item 1A. Risk Factors - Risks Relating to our Intellectual Property for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us. Material Patents As of March 10, 2025, our material patents, their jurisdiction, patent number, and expiration date are listed in the tables below: Jurisdiction Patent No.
Segment information is consistent with how management reviews our business, makes investing and resource allocation decisions, and assesses our operating performance. Facilities Our principal office is located at 4875 White Bear Lake, Minnesota, where we lease approximately 10,000 square feet of office space. We lease this space under a lease that terminates on December 31, 2027.
Segment information is consistent with how management reviews our business, makes investing and resource allocation decisions, and assesses our operating performance. Facilities Our principal office is located at 4875 White Bear Lake, Minnesota, where we lease approximately 11,540 square feet of office space. We lease this space under a lease that terminates on December 31, 2030.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
We intend to maintain sufficient levels of inventory to enable us to continue our operations while we qualify additional potential suppliers in the event that one or more of our single-source suppliers were to encounter a delay in supply or end supply.
Our suppliers manufacture the components they produce for us and test our components and devices to our specifications. We intend to maintain sufficient levels of inventory to enable us to continue our operations while we qualify additional potential suppliers in the event that one or more of our single-source suppliers were to encounter a delay in supply or end supply.
The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious or fraudulent and, unlike the federal civil False Claims Act, requires proof of intent to submit a false claim. 20 The Civil Monetary Penalties Law imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.
The Civil Monetary Penalties Law imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier.
Violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to device manufacturers may result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations. 21 Data Privacy and Security Laws Numerous state, federal and foreign laws, regulations, and standards govern the collection, use, access to, confidentiality and security of health-related and other personal information and could apply now or in the future to our operations or the operations of our partners.
Violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to device manufacturers may result in significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if the entity becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of operations.
We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
Anti-Bribery and Corruption Laws Our U.S. operations are subject to the Foreign Corrupt Practices Act (“FCPA”). We are required to comply with the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits.
We expect additional state, federal, and foreign healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal, state, and foreign governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure. 22 Anti-Bribery and Corruption Laws Our U.S. operations are subject to the Foreign Corrupt Practices Act (“FCPA”).
We expect additional state, federal, and foreign healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal, state, and foreign governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.
An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.
An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects. 16 In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (“ IRB ”) for each clinical site.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval. 14 Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement.
Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement.
The majority of states also have anti-kickback laws which establish similar prohibitions and in some cases may apply more broadly to items or services covered by any third-party payor, including commercial insurers and self-pay patients.
In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. 22 The majority of states also have anti-kickback laws which establish similar prohibitions and in some cases may apply more broadly to items or services covered by any third-party payor, including commercial insurers and self-pay patients.
We rely on a limited number of technicians and have some critical equipment that would be difficult to replace in a timely manner. In order to scale quickly, we will need to expand our manufacturing capacity and add additional shifts. We rely on third-party suppliers to manufacture some of our critical sub-assemblies.
Manufacturing and Supply We currently do all final manufacturing at our facility in White Bear Lake, Minnesota. We rely on a limited number of technicians and have some critical equipment that would be difficult to replace in a timely manner. In order to scale quickly, we will need to expand our manufacturing capacity and add additional shifts.
Certain components used in our products are supplied by single-source suppliers, but we believe that we are able to plan supply in a manner that would minimize the effect of losing any of our existing suppliers. Our suppliers manufacture the components they produce for us and test our components and devices to our specifications.
Our quality assurance process monitors and maintains supplier performance through qualification and periodic supplier reviews and audits. Certain components used in our products are supplied by single-source suppliers, but we believe that we are able to plan supply in a manner that would minimize the effect of losing any of our existing suppliers.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.
Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another legally marketed device that was cleared through the 510(k) process. 15 Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.
Outsourcing sub-assemblies manufacturing reduces our need for additional capital investment. We select our suppliers carefully and require they adhere to all applicable regulations. We monitor our suppliers and always inspect all components received. Our quality assurance process monitors and maintains supplier performance through qualification and periodic supplier reviews and audits.
We rely on third-party suppliers to manufacture some of our critical sub-assemblies. Outsourcing sub-assemblies manufacturing reduces our need for additional capital investment. We select our suppliers carefully and require they adhere to all applicable regulations. We monitor our suppliers and always inspect all components received.
Certain countries also mandate implementation of commercial compliance programs. Also, many U.S. states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs.
Also, many U.S. states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. 23 Additionally, there has been a recent trend of increased foreign, federal, and state regulation of payments and transfers of value provided to healthcare professionals or entities.
The aforementioned EU rules are generally applicable in the EEA, which consists of the 27 EU member states plus Norway, Liechtenstein, and Iceland. 18 Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“ MHRA ”) has become the sovereign regulatory authority responsible for Great Britain (i.e.
Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“ MHRA ”) has become the sovereign regulatory authority responsible for Great Britain (i.e.
In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (“ IRB ”) for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study.
The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study.
Due to our current limited production numbers, we order components and sub-assemblies on a purchase order basis and do not have supply agreements with any of our suppliers.
Due to our current limited production numbers, we order components and sub-assemblies on a purchase order basis and do not have supply agreements with any of our suppliers. 14 Government Regulation The FDA’s policies may change and additional government laws and regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates, that could limit the marketability of our product candidates, or that could impose additional regulatory obligations on us.
All of our trademarks are in current use, and we expect that they will remain in use for the foreseeable future. We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position.
We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and may in the future rely upon licensing opportunities, to develop and maintain our competitive position. We protect our proprietary rights through a variety of methods, including confidentiality and assignment agreements with suppliers, employees, consultants and others who may have access to our proprietary information.
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We protect our proprietary rights through a variety of methods, including confidentiality and assignment agreements with suppliers, employees, consultants and others who may have access to our proprietary information. Manufacturing and Supply We currently do all final manufacturing at our facility in White Bear Lake, Minnesota.
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Expiration Date Title U.S. 11051116 10/11/2032 Implantable middle ear transducer having diagnostic detection sensor U.S. 11471689 04/14/2041 Cochlear implant stimulation calibration U.S. 11564046 07/17/2041 Programming of cochlear implant accessories U.S. 9313590 03/13/2033 Hearing aid amplifier having feed forward bias control based on signal amplitude and frequency for reduced power consumption U.S. 9635478 03/09/2034 Coulomb counter and battery management for hearing aid U.S. 11672970 02/21/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11697019 12/02/2040 Combination hearing aid and cochlear implant system U.S. 11711658 10/11/2032 Implantable middle ear transducer having diagnostic detection sensor EP 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network DE 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network DK 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network AT 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network GB 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network BE 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network FR 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network IT 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network SE 3500337 08/17/2037 Implantable modular cochlear implant system with communication system and network MX 421017 2/21/20240 Implantable cochlear system with integrated components and lead characterization EP 3927420 2/21/2040 Implantable cochlear system with integrated components and lead characterization UP 3927420 2/21/2040 Implantable cochlear system with integrated components and lead characterization GB 3927420 2/21/2040 Implantable cochlear system with integrated components and lead characterization U.S. 11633591 8/3/2041 Combination implant system with removable earplug sensor and implanted battery U.S. 11806531 4/11/2041 Implantable cochlear system with inner ear sensor U.S. 11839765 1/23/2042 Cochlear implant system with integrated signal analysis functionality U.S. 11865339 6/22/2042 Cochlear implant system with electrode impedance diagnostics EP 3858425 08/17/2037 Implantable Modular Cochlear Implant System with Communication System and Network GB 3858425 08/17/2037 Implantable Modular Cochlear Implant System with Communication System and Network UP 3858425 08/17/2037 Implantable Modular Cochlear Implant System with Communication System and Network U.S. 12090318 02/21/2040 Implantable Cochlear System with Integrated Components and Lead Characterization U.S. 12233256 10/09/2040 Implantable Cochlear System with Integrated Components and Lead Characterization 13 Jurisdiction Patent No.
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Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another legally marketed device that was cleared through the 510(k) process.
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Expiration Date Title HK HK40066136 02/21/2040 Implantable Cochlear System with Integrated Components and Lead Characterization JP 7598401 02/21/2040 Implantable Cochlear System with Integrated Components and Lead Characterization JP 7597846 02/21/2040 Implantable Cochlear System with Integrated Components and Lead Characterization JP 7598327 02/21/2040 Implantable Cochlear System with Integrated Components and Lead Characterization U.S. 12081061 02/07/2043 Recharge System For Implantable Battery U.S. 12214195 12/02/2040 Implantable Cochlear System with Inner Ear Sensor EP 4204071 08/27/2041 Programming Of Cochlear Implant Accessories GB 4204071 08/27/2041 Programming Of Cochlear Implant Accessories HK HK40097814 08/27/2041 Programming Of Cochlear Implant Accessories UP 4204071 08/27/2041 Programming Of Cochlear Implant Accessories U.S. 12151102 12/02/2040 Combination Hearing Aid and Cochlear Implant System EP 4255554 11/24/2041 Combination Hearing Aid and Cochlear Implant System GB 4255554 11/24/2041 Combination Hearing Aid and Cochlear Implant System UP 4255554 11/24/2041 Combination Hearing Aid and Cochlear Implant System EP 4255555 11/24/2041 Cochlear Implant Stimulation Calibration GB 4255555 11/24/2041 Cochlear Implant Stimulation Calibration UP 4255555 11/24/2041 Cochlear Implant Stimulation Calibration EP 4319866 04/01/2042 Cochlear Implant System with Electrode Impedance Diagnostics GB 4319866 04/01/2042 Cochlear Implant System with Electrode Impedance Diagnostics UP 4319866 04/01/2042 Cochlear Implant System with Electrode Impedance Diagnostics Trademarks As of February 28, 2025, we had trademark registrations, covering “Acclaim”, “Envoy”, “Envoy Medical”, “EnvoyCEM”, “Esteem”, “Invisible Hearing”, and “MEDCEM.” Our U.S. trademarks have registration dates between 2002 and 2021 and have upcoming renewal dates between 2027 and 2033.
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In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
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All of our trademarks are in current use, and we expect that they will remain in use for the foreseeable future. We also have pending trademark applications covering “Nature’s Microphone” and “Naturemic” with application dates in 2024 for use in 2025.
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Additionally, there has been a recent trend of increased foreign, federal, and state regulation of payments and transfers of value provided to healthcare professionals or entities.
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For example, the current administration may implement new or revised laws, regulatory requirements, and associated compliance obligations, as well as postponed or frozen regulatory requirements. Changes in medical practice and standard of care may also impact the marketability of our product candidates.
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If we are slow or unable to adapt to changes in existing requirements, standards of care, or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and be subject to regulatory enforcement action.
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An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. 20 The aforementioned EU rules are generally applicable in the EEA, which consists of the 27 EU member states plus Norway, Liechtenstein, and Iceland.
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The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious or fraudulent and, unlike the federal civil False Claims Act, requires proof of intent to submit a false claim.
Added
Certain countries also mandate implementation of commercial compliance programs.
Added
Data Privacy and Security Laws Numerous state, federal and foreign laws, regulations, and standards govern the collection, use, access to, confidentiality and security of health-related and other personal information and could apply now or in the future to our operations or the operations of our partners.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeITEM 1C. Cybersecurity Risk Management and Strategy We have certain processes for the identification, assessment, and mitigation of cybersecurity risks which are incorporated into our overall risk management processes in coordination with our information technology function, which we rely on a third-party vendor who is associated with a Related Party.
Biggest changeITEM 1C. Cybersecurity Risk Management and Strategy We have certain processes for the identification, assessment, and mitigation of cybersecurity risks which are incorporated into our overall risk management processes in coordination with our information technology function, which we rely on a third-party vendor who is associated with a Related Party to provide.
The audit committee of the board of directors intends to provide oversight of our cybersecurity risk as part of its periodic review of enterprise risk management. Additionally, the board of directors intends to review our enterprise risk management processes and will be notified by management between management updates regarding significant new cybersecurity threats or incidents.
The audit committee of the board of directors intends to provide oversight of our cybersecurity risk as part of its periodic review of enterprise risk management. Additionally, the board of directors intends to review our enterprise risk management processes and will be notified by management between management updates regarding significant new cybersecurity threats or incidents. 51

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease 1,100 square feet of office space in Ausbach, Germany pursuant to a lease that automatically renews each year for a successive one year period, unless the we notify the landlord six (6) months prior to the annual renewal. This lease renewed automatically on January 1, 2023 and again on January 1, 2024. 46
Biggest changeWe also lease 1,100 square feet of office space in Ausbach, Germany pursuant to a lease that automatically renews each year for a successive one year period, unless the we notify the landlord six (6) months prior to the annual renewal. This lease renewed automatically on January 1, 2024 and again on January 1, 2025.
ITEM 2. Properties Our principal office is located at 4875 White Bear Lake, Minnesota, where we lease approximately 10,000 square feet of office space. We lease this space under a lease that terminates on December 31, 2027. We believe that our existing facility is sufficient to meet our needs for the foreseeable future.
ITEM 2. Properties Our principal office is located at 4875 White Bear Lake, Minnesota, where we lease approximately 11,540 square feet of office space. We lease this space under a lease that terminates on December 31, 2030. We believe that our existing facility is sufficient to meet our needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAtlas seeks redemption of the shares of Company Class A common stock in the amount of approximately $9,400,000, pre- and post-judgment interest, costs, and reasonable attorneys’ fees. The Company has standard indemnification obligations to Dr. Haring-Smith and Mr. Hirsch. The Company believes that the lawsuit is meritless and has been defending this matter vigorously.
Biggest changeAtlas asserts damages in the amount of approximately $9.4 million, pre- and post-judgment interest, costs, and reasonable attorneys’ fees. The Company has standard indemnification obligations to Dr. Haring-Smith and Mr. Hirsch. The Company believes that the lawsuit is meritless and has been defending this matter vigorously. The Company is unable to predict the outcome of this legal proceeding. ITEM 4.
On November 14, 2023, the Company, Whitney Haring-Smith (the former chief executive officer and a current director of the Company), Daniel Hirsch (the former chief financial officer of the Company), and Anzu SPAC GP I LLC were named as defendants in a complaint filed by Atlas Merchant Capital SPAC Fund I LP (“Atlas”) in the Delaware Court of Chancery (the “Atlas Complaint”).
On November 14, 2023, the Company, Whitney Haring-Smith (the former chief executive officer and a former director of the Company), Daniel Hirsch (the former chief financial officer of the Company), and Anzu SPAC GP I LLC were named as defendants in a complaint filed by Atlas Merchant Capital SPAC Fund I LP (“Atlas”) in the Delaware Court of Chancery.
Removed
As previously disclosed, in January 2020, Patrick Spearman, a shareholder of Legacy Envoy, and certain other Legacy Envoy shareholders (collectively, the “ Initial Spearman Plaintiffs ”) filed a lawsuit in the District Court of Ramsey County, Minnesota (Case No. 62-CV-20-790) against each current and certain former members of the Legacy Envoy board of directors, including Glen A.
Added
Atlas alleges that it was not allowed to redeem its shares of the Company’s Common Stock and that Defendants acted to prevent Atlas’s attempt to redeem its shares. Defendants assert that Atlas did not comply with the requirements for redeeming shares set forth in the Company’s organizational documents.
Removed
Taylor, as well as GAT, an entity affiliated with Mr. Taylor, Franz Altpeter, Chuck Brynelsen, David Fabry, Ed Flaherty, Allen Lenzmeier, Brent T. Lucas, Roger Lucas, Randy Nitzsche and Paul Waldon (collectively, the “ Legacy Envoy Defendants ”). The Initial Spearman Plaintiffs alleged that the terms of financing transactions between GAT and Mr.
Added
Mine Safety Disclosures Not applicable. 52 PART II
Removed
Taylor on the one hand and Legacy Envoy on the other hand were unreasonably favorable to GAT and Mr. Taylor, that Mr.
Removed
Taylor breached his fiduciary duty as a shareholder, that each defendant breached his fiduciary duty as a director in approving such transactions and engaged in common law fraud in not sufficiently disclosing the transactions, a claim of unjust enrichment against GAT and Mr.
Removed
Taylor, and claims against the other directors for aiding and abetting and conspiracy in relation to the claims against GAT and Mr. Taylor. The Legacy Envoy directors asserted a defamation counterclaim, through which the directors sought damages against certain of the plaintiffs.
Removed
In June 2023, Legacy Envoy received an additional complaint from additional shareholders affiliated or associated with the Initial Spearman Plaintiffs (the “ Additional Spearman Plaintiffs ” and, together with the Initial Spearman Plaintiffs, the “ Spearman Plaintiffs ”) raising claims that were substantially the same as the claims raised in the existing Initial Spearman Plaintiffs’ litigation.
Removed
On August 25, 2023, the parties entered into a binding agreement in principle to settle all claims and counterclaims in the lawsuit, which agreement in principle was formalized in a settlement agreement dated September 15, 2023 (the “Settlement Agreement”). Under the terms of the Settlement Agreement, (i) an entity affiliated with Mr.
Removed
Taylor purchased approximately 39 million shares of Legacy Envoy Common Stock held by the Spearman Plaintiffs, constituting all of the shares of Legacy Envoy owned by the Spearman Plaintiffs, which purchase was completed on September 28, 2023, (ii) the Spearman Plaintiffs and the Legacy Envoy Defendants fully released all claims and counterclaims and dismissed the related litigation, and (iii) the Spearman Plaintiffs agreed to vote in favor of the Business Combination and related matters submitted to a vote of the Legacy Envoy shareholders at Legacy Envoy’s special meeting of shareholders held September 29, 2023.
Removed
Legacy Envoy was not required to make any cash payment pursuant to the terms of the Settlement Agreement. Both the Spearman Plaintiffs and the Legacy Envoy Defendants denied any wrongdoing or liability pursuant to the terms of the Settlement Agreement.
Removed
The Atlas Complaint alleges that Atlas properly requested redemption of its shares of the Company’s Class A Common Stock in connection with the Company’s business combination transaction and was prevented from redeeming such shares by the Company and the other defendants.
Removed
The Company is unable to predict the outcome of this legal proceeding.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Information regarding the equity compensation plans of the Company is set forth in Item 11. Executive Compensation .
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Information regarding the equity compensation plans of the Company is set forth in
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock and Public Warrants are currently listed on Nasdaq under the symbols “COCH” and “COCHW,” respectively.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock and Public Warrants are listed on Nasdaq under the symbols “COCH” and “COCHW,” respectively.
As of March 27, 2024, there were 244 holders of record of Class A Common Stock and one holder of record of Public Warrants.
As of March 10, 2025, there were 397 holders of record of Class A Common Stock and one holder of record of Public Warrants.
Removed
Prior to the consummation of the Business Combination, Anzu’s units, Anzu’s Class A common stock and Anzu’s public warrants were listed on Nasdaq under the symbols “ANZUU”, “ANZU” and “ANZUW,” respectively.
Removed
Upon consummation of the Business Combination, Anzu’s units automatically separated into the component securities, Anzu’s Class A common stock was reclassified as our Class A Common Stock and Anzu’s public warrants were reclassified as our Public Warrants.
Removed
Recent Sales of Unregistered Securities, Use of Proceeds from Registered Public Offering During the year ended December 31, 2023, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no repurchases of our equity securities during the three months ended December 31, 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOther expense Our other expense consists of changes in fair value of our warrant liability (related party) and gains and losses on sales of fixed assets. 53 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 Years Ended December 31, Change in (In thousands, except percentages) 2023 2022 $ % Net revenues $ 316 $ 237 $ 79 33 % Costs and operating expenses: Cost of goods sold 789 498 291 58 % Research and development 8,956 4,975 3,981 80 % Sales and marketing 1,666 885 781 88 % General and administrative 7,276 2,585 4,691 181 % Total costs and operating expenses 18,687 8,943 9,744 109 % Operating loss (18,371 ) (8,706 ) (9,665 ) 111 % Other income (expense): Loss from changes in fair value of convertible notes payable (related party) (13,332 ) (7,090 ) (6,242 ) 88 % Change in fair value of Forward purchase agreement put option liability (69 ) - (69 ) n/a Change in fair value of Forward purchase agreement warrant liability 842 - 842 n/a Change in fair value of warrant liability 942 - 942 n/a Other income (expense) 80 (127 ) 207 (163 )% Total other expense, net (11,537 ) (7,217 ) (4,460 ) 60 % Net loss (29,908 ) (15,923 ) (13,985 ) 88 % Revenue Revenue increased $79 thousand for the year ended December 31, 2023, compared to the year ended December 31, 2022, due to supply chain issues in 2022.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2024 and 2023 Year ended December 31, Change in (In thousands, except percentages) 2024 2023 $ % Net revenues $ 225 $ 316 $ (91 ) (28.8 )% Costs and operating expenses: Cost of goods sold 742 789 (47 ) (6.0 )% Research and development 10,179 8,956 1,223 13.7 % Sales and marketing 1,734 1,666 68 4.1 % General and administrative 6,826 7,264 (438 ) (6.0 )% Total costs and operating expenses 19,481 18,675 806 4.3 % Operating loss (19,256 ) (18,359 ) (897 ) 4.9 % Other income (expense): Change in fair value of convertible notes payable (related party) — (13,332 ) 13,332 (100.0 )% Change in fair value of forward purchase agreement put option liability 103 (69 ) 172 (249.3 )% Change in fair value of forward purchase agreement warrant liability 411 842 (431 ) (51.2 )% Change in fair value of forward purchase agreement warrant liability due to modification (881 ) — (881 ) N/M Change in fair value of publicly traded warrant liability (330 ) 942 (1,272 ) (135.0 )% Interest expense, related party (816 ) — (816 ) N/M Other income (26 ) 54 (80 ) (148.1 )% Total other expense, net (1,539 ) (11,563 ) 10,024 (86.7 )% Net loss $ (20,795 ) $ (29,922 ) $ 9,127 (30.5 )% 59 N/M - not meaningful Net Revenues Net revenues decreased $91 thousand for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the decrease in the number of Battery replacement sales due to supply chain limitations.
We expect to continue to incur net losses for the foreseeable future, and expect our research and development expenses, sales and marketing expenses, and general and administrative expenses, and capital expenditures will continue to increase.
We expect to continue to incur net losses for the foreseeable future, and expect our research and development expenses, sales and marketing expenses, general and administrative expenses, and capital expenditures will continue to increase.
A change in the outcome of any of these variables with respect to the development of our Acclaim CI implant product could mean a significant change in the costs and timing associated with the development of that implant.
A change in the outcome of any of these variables with respect to the development of our Acclaim CI product could mean a significant change in the costs and timing associated with the development of that implant.
If we are unable to raise sufficient financing when needed or events or circumstances occur such that we do not meet our strategic plans, we may be required to reduce certain discretionary spending, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures, which could have a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve its intended business objectives.
If we are unable to raise sufficient financing when needed or events or circumstances occur such that we do not meet our strategic plans, we may be required to reduce certain discretionary spending, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures, which could have a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve our intended business objectives.
There are numerous factors associated with the successful commercialization of the Acclaim CI implant product or any products we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
There are numerous factors associated with the successful commercialization of the Acclaim CI product or any products we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
To the extent that we raise additional capital through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our Acclaim CI implant, future revenue streams, research programs or to grant licenses on terms that may not be favorable to us.
To the extent that we raise additional capital through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our Acclaim CI, future revenue streams, research programs or to grant licenses on terms that may not be favorable to us.
We record the estimated costs of R&D activities based upon the estimated amount of services provided but not yet invoiced and include these costs in the accrued expenses or prepaid expenses on the balance sheets and within R&D expense on the statements of operations and comprehensive loss.
We record the estimated costs of R&D activities based upon the estimated amount of services provided but not yet invoiced and include these costs in accrued expenses or prepaid expenses on the consolidated balance sheets and within R&D expense on the consolidated statements of operations and comprehensive loss.
Cost of goods sold Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of the Esteem FI-AMEI implants, including materials, labor costs for personnel involved in the manufacturing process, distribution-related services, indirect overhead costs, and charges for excess and obsolete inventory reserves and inventory write-offs.
Cost of Goods Sold Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of the Esteem FI-AMEI, including materials, labor costs for personnel involved in the manufacturing process, distribution-related services, indirect overhead costs, and charges for excess and obsolete inventory reserves and inventory write-offs.
We expect that our R&D expenses will continue to increase for the foreseeable future as we initiate clinical trials for the Acclaim CI implant product and prepare the product for possible commercialization, should it gain regulatory approval(s).
We expect that our R&D expenses will continue to increase for the foreseeable future as we initiate clinical trials for the Acclaim CI product and prepare the product for possible commercialization, should it gain regulatory approval(s).
Cash Flows Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $0.2 million and consisted of purchases of computer equipment due to increased headcount and purchases of lab equipment.
Net cash used in investing activities for the year ended December 31, 2023 was $0.2 million and consisted of purchases of computer equipment due to increased headcount and purchases of lab equipment.
We expect our general and administrative expenses to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth, our costs of expanding our operations and operating as a public company.
We expect our general and administrative expenses to continue to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth, our costs of expanding our operations and operating as a public company.
Fair Value Measurement We determine the fair value of financial assets and liabilities using the fair value hierarchy established in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”).
Fair Value Measurements We determine the fair value of financial assets and liabilities using the fair value hierarchy established in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”).
We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively. Operating expenses Research and development expenses Research and development (“R&D”) expenses consist of costs incurred for our research activities, primarily our discovery efforts and the development of the Acclaim CI implant product.
We expect cost of goods sold to increase or decrease in absolute dollars primarily as, and to the extent, our revenue grows or declines, respectively. 56 Operating Expenses Research and Development Expenses Research and development (“R&D”) expenses consist of costs incurred for our research activities, primarily our discovery efforts and the development of the Acclaim CI product.
The assumptions utilized in developing the liability include an estimated cost per unit of $6 thousand, an average battery life of 5 years, inflationary increases, discount rate, and an average patient life calculated on probabilities outlined in the PRI-2012 mortality tables, published from the Society of Actuaries.
The assumptions utilized in developing the liability include an estimated cost per unit of $6 thousand, an average Battery life of five years, inflationary increases, discount rate, and an average patient life calculated on probabilities outlined in the PRI-2012 mortality tables, published from the Society of Actuaries.
Adverse macroeconomic conditions, other pandemics or international tensions, could also result in significant disruption of global economic conditions and consumer trends, as well as a significant disruption in financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
Adverse macroeconomic conditions, including pandemics or international tensions, could also result in significant disruption of global economic conditions and consumer trends, as well as a significant disruption in financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
We enter arrangements with patients to provide them with the Esteem FI-AMEI device, personal programmer devices, sound processor/battery replacements, and/or an optional Care Plan, each of which are outputs of our ordinary activities in exchange for consideration.
We enter arrangements with patients to provide them with the Esteem FI-AMEI device, personal programmer devices, Battery replacements, and/or an optional Care Plan, each of which are outputs of our ordinary activities in exchange for consideration.
ITEM 6. [ Reserved] 48 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes included elsewhere in this Report, and other filings with the SEC.
ITEM 6. [ Reserved] 53 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes included elsewhere in this Report, and other filings with the SEC.
Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans. 52 Sales and marketing expenses Sales and marketing expenses consist primarily of salaries, benefits, and other related costs for personnel in our sales and marketing functions.
Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans. 57 Sales and Marketing Expenses Sales and marketing expenses consist primarily of salaries, benefits, and other related costs for personnel in our sales and marketing functions.
We have funded our operations to date primarily through the issuance of equity securities and convertible debt and in September 2023, we received $11.7 million proceeds from the Business Combination (see Note 1, “Nature of the Business and Presentation” of the accompanying consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Report).
We have funded our operations to date primarily through the issuance of equity securities, term debt and convertible debt and in September 2023, we received $11.7 million proceeds from the Business Combination (see Note 1, “Nature of the Business and Basis of Presentation” of the accompanying consolidated financial statements for the years ended December 31, 2024 and 2023 included elsewhere in this Report).
General and administrative expenses General and administrative expenses consist primarily of salaries, benefits, and other related costs for personnel in our executive, operations, legal, human resources, finance, and administrative functions.
General and Administrative Expenses General and administrative expenses consist primarily of salaries, benefits, and other related costs for personnel in our executive, operations, legal, human resources, finance, insurance premiums, and administrative functions.
We also incur R&D costs related to continuing to support, and improve upon where possible, our Esteem FI-AMEI product.
We also incur R&D costs related to continuing to support, and improving upon where possible, our Esteem FI-AMEI product.
Certain amounts included in or affecting the consolidated financial statements presented in this Report and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared.
Certain amounts included in or affecting the consolidated financial statements presented in this Form 10-K and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared.
If the Acclaim CI implant product enters later stages of clinical trials and ongoing development, the product will generally have higher R&D costs than those in earlier stages of research and development, primarily due to simultaneously running clinical trials while also iterating the product for commercialization and preparing for the needs of commercialization.
If the Acclaim CI product enters later stages of clinical trials and ongoing development, the product will generally incur higher R&D expenses than those in earlier stages of research and development, primarily due to simultaneously running clinical trials while also iterating the product for commercialization and preparing for the needs of commercialization.
The Acclaim CI has not yet been approved for sale. We do not expect to generate any product sales unless and until we successfully complete development and obtain regulatory approval for our product candidate. If we obtain regulatory approval for the Acclaim CI, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
We do not expect to generate any product sales unless and until we successfully complete development and obtain regulatory approval for our product candidate. If we obtain regulatory approval for the Acclaim CI, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “Envoy Medical,” “we,” “us,” “our” and other similar terms refer (i) prior to the Closing Date, to Anzu Special Acquisition Corp I and (ii) after the Closing Date, to Envoy Medical, Inc.
Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “Envoy Medical,” “we,” “us,” “our” and other similar terms refer (i) prior to the Closing Date, to Envoy Medical Corporation and (ii) after the Closing Date, to Envoy Medical, Inc.
Our sources of capital include sales of the Esteem FI-AMEI implants and replacement components and issuances of our Class A Common Stock, Series A Preferred Stock, warrants, convertible debt, term debt and other financing agreements such as the forward purchase agreement.
Our sources of capital include issuances of our Common Stock, Series A preferred stock (“Preferred Stock”), warrants, convertible debt, term debt and other financing agreements such as the forward purchase agreement, and proceeds from the sales of the Esteem FI-AMEI implants and replacement components.
The fair value of stock-based payment awards is estimated using the Black-Scholes option model with a volatility figure derived from using a determined peer group of other companies’ stock prices since the trading history of our stock is too short to provide accurate data.
The fair value of stock-based payment awards granted through June 30, 2024 is estimated using the Black-Scholes option model with a volatility figure derived from using a determined peer group of other companies’ stock prices since the trading history of our stock was too short to provide accurate data.
We have funded our operations to date primarily with proceeds from raising funds from issuing equity securities, convertible notes and proceeds from the Business Combination. As of December 31, 2023 and December 31, 2022, we had $4.2 million and $0.2 million of cash, respectively. 55 We proactively manage our access to capital to support liquidity and continued growth.
We have funded our operations to date primarily with proceeds from raising funds from issuing equity securities, term loans, convertible notes and proceeds from the Business Combination. As of December 31, 2024 and December 31, 2023, we had $5.5 million and $4.2 million of cash, respectively. We proactively manage our access to capital to support liquidity and continued growth.
These increases will likely include increases related to the hiring of additional personnel and legal, regulatory, and other fees and services associated with maintaining compliance with Nasdaq Marketplace Rules, or the Nasdaq Listing Rules and SEC requirements, director and officer insurance costs and investor relations costs associated with being a public company.
These increases will likely include the hiring of additional personnel and legal, regulatory, and other fees and services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor relations costs associated with being a public company.
The liabilities are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s consolidated statements of operations and comprehensive loss during each reporting period.
The liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in our consolidated statements of operations and comprehensive loss during each reporting period.
Liquidity and Capital Resources Since our inception we have incurred significant operating losses. We expect to incur significant expenses and continuing operating losses for the foreseeable future as we advance the clinical development of our products.
Liquidity and Capital Resources Since inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our products and fund the process of clinical FDA trials.
Related Party Arrangements Our related party arrangements consist of leasing our headquarters office space from a stockholder, receiving loan financings from stockholders until September 29, 2023 at which point they were converted to common stock.
Related Party Arrangements Our related party arrangements consist of receiving term loan financings, leasing our headquarters office space, contracting for IT services from a stockholder, and receiving convertible loan financings from stockholders until September 29, 2023 at which point they were converted to Common Stock.
For further information on the related party arrangements refer to Note 5, “ Cash Available for Dividend Payments” , Note 7, “ Operating Leases” , Note 9, “ Convertible Notes Payable (Related Party)” and Note 14, “ Related Party Transactions’, of the accompanying consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Report. 57 Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States.
For further information on the related party arrangements, refer to Note 7, “ Operating Leases” , Note 9, “ Debt (Related Party)” and Note 15, “ Related Party Transactions”, of the accompanying consolidated financial statements as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report. 63 Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States.
Loss from changes in fair value of convertible notes payable (related party) We elected the fair value option for convertible notes payable (related party), and accordingly, convertible notes payable (related party) are recorded at fair value at each reporting date on the consolidated balance sheets.
Change in Fair Value of Convertible Notes Payable (Related Party) We previously elected the fair value option for convertible notes payable (related party), and accordingly, convertible notes payable (related party) were recorded at fair value at each reporting date on the consolidated balance sheets.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of this Report titled “ Risk factors – Risks Relating to Our Business and Operations .” Cash Flows The following table presents a summary of our cash flow for the periods indicated (in thousands): Years Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ (17,654 ) $ (8,805 ) Investing activities (153 ) (218 ) Financing activities 21,845 8,092 Effect of exchange rate on cash (3 ) (7 ) Net increase (decrease) in cash and cash equivalents $ 4,035 $ (938 ) Cash Flows Used in Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was primarily used to fund a net loss of approximately $29.9 million and approximately $1.0 million of cash outflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in aggregate amount of approximately $13.2 million.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of this Report titled “ Risk Factors - Risks Relating to Our Business and Operations .” Cash Flows The following table presents a summary of our cash flow for the periods indicated (in thousands): Years Ended December 31 2024 2023 Net cash (used in) provided by: Operating activities $ (17,949 ) $ (17,091 ) Investing activities (980 ) (153 ) Financing activities 20,198 21,282 Effect of exchange rate on cash (5 ) (3 ) Net increase in cash $ 1,265 $ 4,035 Cash Flows Used in Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was primarily used to fund a net loss of $20.8 million and $0.6 million of cash outflows from net changes in the levels of operating assets and liabilities, adjusted for non-cash expenses in an aggregate amount of $3.5 million.
We account for the expected term of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in ASC 718, “Share-based payment”. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.
We account for the expected term of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in ASC Topic 718, Share-based Payment . The risk-free interest rate was determined from the implied yields of U.S.
New implantations of the Esteem FI-AMEI are not expected to be more than a few per year and may be as low as zero. Although we believe unlikely, Esteem FI-AMEI implantations could potentially increase with favorable reimbursement policy and coverage changes. We will continue our efforts to pursue positive reimbursement changes for fully implanted active middle ear implants.
New implantations of the Esteem FI-AMEI are not expected to be more than a few per year and may be as low as zero. Although we believe it to be unlikely, Esteem FI-AMEI implantations could potentially increase with favorable reimbursement policy and coverage changes.
The liabilities are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s consolidated statements of operations and comprehensive loss during each reporting period. Gain from changes in fair value of FPA warrant liability We recognized the FPA warrant liability at fair value at each reporting period.
The liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in our consolidated statements of operations and comprehensive loss during each reporting period. 58 Change in Fair Value of Publicly Traded Warrant Liability We recognize the publicly traded warrant liability at fair value at each reporting period.
In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage the proven sensor technology and incorporate it into a cochlear implant.
Throughout our experience, our sensor technology proved a viable alternative and robust option to external or implanted microphones. In late 2015, we made the decision to shift our focus from the Esteem FI-AMEI to a new product that would leverage our sensor technology and incorporate it into a cochlear implant.
Gain from changes in fair value of FPA warrant liability Gain from changes in fair value of FPA warrant liability was $842 thousand for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022.
Change in Fair Value of Forward Purchase Agreement Warrant Liability The gain from changes in the fair value of the forward purchase agreement warrant liability was $411 thousand for the year ended December 31, 2024 compared to $842 thousand for the year ended December 31, 2023.
Gain from changes in fair value of warrant liability Gain from changes in fair value of warrant liability was $942 thousand for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022.
Change in Fair Value of Publicly Traded Warrant Liability The loss from changes in the fair value of the publicly traded warrant liability was $330 thousand for the year ended December 31, 2024 compared to a gain of $942 thousand for the year ended December 31, 2023.
This increase was primarily a result of the $11.7 million net proceeds from the Business Combination and from $10.0 million proceeds from the issuance of convertible notes payable to a related party. Net cash provided by financing activities for the year ended December 31, 2022 was $8.1 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $21.3 million and was primarily a result of the $11.7 million net proceeds from the Business Combination and from $10.0 million of proceeds from the issuance of convertible notes payable to a related party, partially offset by payments made on insurance financing loans of $0.6 million.
Our obligations for leases are described in Note 7, “ Operating Leases” , and for further information on our open litigation matters, see Note 15, “ Commitments and Contingencies” , of the accompanying consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Report.
Our obligations for leases are described in Note 7, “ Operating Leases” , information on our open litigation matter is included in Note 16, “ Commitments and Contingencies” , and details on the term loans are described in Note 9, “ Debt (Related Party) ” of the accompanying consolidated financial statements as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report.
We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in the section of this Report titled “ Risk Factors .” 56 Net cash used in operating activities for the year ended December 31, 2022 was primarily used to fund a net loss of approximately $15.9 million and $0.2 million of cash outflows from net changes in the level of operating assets and liabilities, adjusted for non-cash gains in aggregate amount of approximately $7.3 million.
We will continue to evaluate our capital requirements for both short-term and long-term liquidity needs, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in the section of this Report titled “ Risk Factors .” Net cash used in operating activities for the year ended December 31, 2023 was primarily used to fund a net loss of $29.9 million and $1.0 million of cash outflows from net changes in the level of operating assets and liabilities, adjusted for non-cash gains in an aggregate amount of $13.8 million. 62 The $1.0 million of cash outflows from net changes in the levels of operating assets and liabilities was primarily due to increases of 1) $0.2 million in other receivable related to an income tax receivable, 2) $0.9 million in prepaid expenses and other current assets related to an increase in prepaid insurance and 3) $0.6 million in accounts payable through normal business flows, offset by decreases of 4) $0.2 million in product warranty liability due to expected attrition of this liability over time.
We expense R&D costs as incurred, which include: ● salaries, employee benefits, and other related costs for our personnel engaged in R&D functions; ● service fees incurred under agreements with independent consultants, including their fees and related travel expenses engaged in R&D functions; ● costs of laboratory testing including supplies and acquiring, developing, and manufacturing study materials; and ● facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. 51 Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, service providers and our clinical sites.
We expense R&D costs as incurred, which include: ● salaries, employee benefits, and other related costs for our personnel engaged in R&D functions; ● service fees incurred under agreements with independent consultants, including their fees and related travel expenses engaged in R&D functions; ● costs of laboratory testing including supplies and acquiring, developing, and manufacturing study materials; and ● facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect our sales and marketing expenses to increase in the foreseeable future as we increase our administrative personnel to support our continuing growth, our costs of marketing and selling expenses.
Sales and marketing expenses also include certain indirect costs associated with efforts to secure insurance reimbursement of our products. We expect our sales and marketing expenses to increase in the foreseeable future as we increase our sales and marketing personnel to support our continuing growth.
Loss from changes in fair value of convertible notes payable (related party) Loss from changes in fair value of convertible notes payable increased $6.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Change in Fair Value of Convertible Notes Payable (Related Party) There was a loss from changes in the fair value of convertible notes payable of $13.3 million for the year ended December 31, 2023.
We cannot determine with certainty the size, duration, or completion costs of future clinical trials, or if or when they may be completed. Furthermore, we do not know if the clinical trials will show positive or negative results, or what those results will mean for regulatory approval or commercialization efforts.
Furthermore, we do not know if the clinical trials will show positive or negative results, or what those results will mean for regulatory approval or commercialization efforts.
Global macroeconomic challenges, such as the effects of the ongoing war between Russian and Ukraine, the Middle East conflict, supply chain constraints, market uncertainty, volatility in exchange rates, inflationary trends and evolving dynamics in the global trade environment have impacted our business and financial performance. 50 Furthermore, a recession or market correction resulting from macroeconomic factors could materially affect our business and the value of our Class A Common Stock.
Global macroeconomic challenges, such as the effects of the ongoing war between Russia and Ukraine, the Middle East conflict, supply chain constraints, tariffs and trade wars, market uncertainty, volatility in exchange rates, inflationary trends, interest rates, and evolving dynamics in the global trade environment have impacted our business, financial performance, and our ability to raise capital.
Recently Issued/Adopted Accounting Pronouncements A discussion of recently issued accounting pronouncements and recently adopted accounting pronouncements is included in Note 2, “ Summary of Significant Accounting Policies ” of the accompanying consolidated financial statements as of December 31, 2023 and 2022 and for the years then ended included elsewhere in this Report. 59 Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market risks, including currency risk, credit and counterparty risk, and inflation risk, as set out below.
Recently Issued/Adopted Accounting Pronouncements A discussion of recently issued accounting pronouncements and recently adopted accounting pronouncements is included in Note 2, “ Summary of Significant Accounting Policies ” of the accompanying consolidated financial statements as of December 31, 2024 and 2023 and for the years then ended included elsewhere in this Report.
Research and development expenses The following table summarizes the components of our R&D expenses for the years ended December 31, 2023 and 2022: Years Ended December 31, Change in (In thousands, except percentages) 2023 2022 $ % R&D product costs $ 5,562 $ 2,565 $ 2,997 117 % R&D personnel costs 2,909 2,026 883 44 % Other R&D costs 485 384 101 26 % Total research and development costs $ 8,956 $ 4,975 $ 3,981 80 % R&D expenses increased approximately $4.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Research and Development Expenses The following table summarizes the components of our R&D expenses for the years ended December 31, 2024 and 2023: Years Ended December 31 Change in (In thousands, except percentages) 2024 2023 $ % R&D product costs $ 5,843 $ 5,562 $ 281 5.1 % R&D personnel costs 3,558 2,909 649 22.3 % Other R&D costs 778 485 293 60.4 % Total research and development costs $ 10,179 $ 8,956 $ 1,223 13.7 % R&D expenses increased $1.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Loss from changes in fair value of FPA put option liability Loss from changes in fair value of FPA put option liability was $(69) thousand for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022.
Change in Fair Value of Forward Purchase Agreement Warrant Liability Due to Modification The loss from changes in the fair value of the forward purchase agreement warrant liability due to modification was $881 thousand for the year ended December 31, 2024 compared to $0 for the year ended December 31, 2023.
There will be continued nominal revenue from replacement of sound processors for patients who need a new battery. Upon commercialization of our Acclaim CI implant product, we expect Acclaim CI revenue to more than replace Esteem FI-AMEI revenue. We expect to obtain FDA approval for the Acclaim CI in 2026.
We will continue our efforts to pursue positive reimbursement changes for fully implanted active middle ear implants. There will be continued nominal revenue from replacement of sound processors for patients who need a new Battery. Upon commercialization of our Acclaim CI product, we expect that Acclaim CI revenues will more than exceed our Esteem FI-AMEI revenue.
We adopted the guidance from ASC 2016-09 and we determined not to apply a forfeiture rate and have made the accounting election that forfeitures will be recognized when the actual forfeiture takes place therefore no estimated forfeiture rate will be recorded.
Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 65 We adopted the guidance from Accounting Standards Update 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Compensation Accounting, and we determined not to apply a forfeiture rate and have made the accounting election that forfeitures will be recognized when the actual forfeiture takes place therefore no estimated forfeiture rate will be recorded.
Net cash used in investing activities for the year ended December 31, 2022 was approximately $0.2 million and consisted of purchases of computer equipment due to increased headcount and purchases of lab equipment. Cash Flows Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $21.8 million.
Cash Flows Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $1.0 million and consisted of purchases of production equipment and lab equipment.
Our R&D expenses are currently tracked on a program-by-program basis. The majority of our R&D costs during the years ended December 31, 2023 and 2022 were incurred for the development of the Acclaim CI. Our products require human clinical trials to obtain regulatory approval for commercial sales.
The majority of our R&D expenses incurred during the years ended December 31, 2024 and 2023 were for the development of the Acclaim CI. Our products require human clinical trials to obtain regulatory approval for commercial sales. We cannot determine with certainty the size, duration, or completion costs of future clinical trials, or if or when they may be completed.
The increase is primarily due to an increase of $3.0 million in R&D product costs for the year ended December 31, 2023, as we continue to develop our cochlear product in preparation for our pivotal clinical study for the Acclaim CI, and an increase of $0.9 million in personnel and salary costs, as we increased headcount across our clinical and cochlear R&D departments. 54 Sales and marketing expenses Sales and marketing expenses increased $0.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase is primarily due to an increase in headcount and contractors in our engineering and clinical departments for the year ended December 31, 2024, as we increased headcount across our clinical and cochlear departments in preparation for our pivotal clinical study for the Acclaim CI.
We estimate costs of R&D activities conducted by service providers, which include the conduct of sponsored research and contract manufacturing activities.
Accounting for clinical trials relating to activities performed by external vendors requires us to exercise significant estimates regarding the timing and accounting for these expenses. We estimate costs of R&D activities conducted by service providers, which include the conduct of sponsored research and contract manufacturing activities.
We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us.
There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us.
See Note 1, “ Nature of the Business and Basis of Presentation ”, of the accompanying audited consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this Report.
See Note 1, “ Nature of the Business and Basis of Presentation ”, of the accompanying audited consolidated financial statements for the years ended December 31, 2024 and 2023 included elsewhere in this Report. 61 We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements.
The increase is primarily due to additional headcount, as well spending for legal fees asscoated with efforts with Congress to allow for reimbursement of the Esteem FI-AMEI product. General and administrative expenses General and administrative expenses increased $4.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Sales and Marketing Expenses Sales and marketing expenses increased $68 thousand for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase is primarily due to increased legal and professional fees to secure insurance reimbursement for the Esteem FI-AMEI product, partially offset by a reduction in headcount.
Gain (loss) from changes in fair value of convertible notes payable consists of changes in the fair value during each reporting period. Loss from changes in fair value of FPA put option liability We recognized the FPA put option liability at fair value at each reporting period.
Gain (loss) from changes in fair value of convertible notes payable consisted of changes in the fair value during each reporting period. Effective September 29, 2023, the convertible notes (related party) were converted upon completion of the Business Combination.
We were founded in 1995 to create a fully implanted hearing device that leveraged the natural ear - not an artificial microphone - to pick up sound. The ear itself is an ideal way to capture sound from our environment.
Our technologies are designed to shift the paradigm within the hearing industry and bring both providers and patients the hearing devices they desire. Founded in 1995, our vision is to create fully implanted hearing devices that leverage the natural ear - not an artificial microphone - to pick up sound.
The sensor absorbs the mechanical energy from ossicular chain and turns it into a signal that can be processed, improved, and increased for a patient’s particular hearing needs. Our first product, the Esteem FI-AMEI, was created in 2006 and received FDA approval in 2010. The Esteem FI-AMEI remains the only FDA approved fully implanted active hearing device on the market.
Our first product, the Esteem ® Fully Implanted Active Middle Ear Implant (“Esteem FI-AMEI”), received FDA approval in 2010. The Esteem FI-AMEI is a fully implanted active middle ear hearing device and remains the only FDA approved fully implanted hearing device in the US market.
The $1.0 million of cash outflows from net changes in the levels of operating assets and liabilities was primarily due to increases in accounts receivable, other receivable, inventories and prepaid expenses and other current assets and decreases in accrued expenses, product warranty liability and lease liabilities, partially offset by an increase in accounts payable.
The $0.6 million of cash outflows from net changes in the levels of operating assets and liabilities was primarily due to decreases of 1) $0.2 million in accrued expenses due to payment of final expenses related to the Business Combination, 2) $0.1 million in operating lease liability (related party) due to payments made for rent, and 3) $0.2 million in product warranty liability due to expected attrition of this liability over time, as well as increases of 4) $0.4 million in inventories related to the purchase of parts for the Esteem FI-AMEI product, 5) $0.6 million in other receivable due to the recognition of an incoming income tax refund and 6) $0.9 million in other liability due to the receipt of a tax refund and corresponding recognition of an uncertain tax benefit.
Key estimates and assumptions impacting the fair value measurement include (i) the expected term of the warrants, (ii) the risk-free interest rate, (iii) the expected dividend yield and (iv) expected volatility of the price of the underlying shares of Class A Common Stock.
Key estimates and assumptions impacting the fair value measurement include (i) the Company’s stock price, (ii) the initial exercise price, (iii) volatility, (iv) the remaining term and (v) the risk-free rate. 64 Research and Development Expenses We will incur substantial expenses associated with prototyping, improvements, testing and clinical trials.
Some devices were implanted in the early 2000s during clinical trials, providing us with nearly two decades of experience with its implantable sensor technology. Throughout our experience, our sensor technology proved a viable alternative and robust option to external or implanted microphones.
Unfortunately, the Esteem FI-AMEI failed to gain commercial traction, primarily due to a lack of reimbursement or insurance coverage from third-party payors. Despite the commercial challenges, approximately 1,000 Esteem FI-AMEI devices were implanted. Some devices were implanted in the early 2000s during clinical trials, providing Envoy Medical with over two decades of experience with our implantable sensor technology.
The following table summarizes the activity for the Company’s Level 3 instruments measured at fair value on a recurring basis (in thousands): Convertible Notes and Envoy Bridge Note (Related Party) Warrant Liability (Related Party) FPA Put Option Liability Forward Purchase Agreement Warrant Liability Balance as of December 31, 2022 $ 33,845 $ 127 $ - $ - Issuances 5,976 - 34 846 Change in fair value 13,332 104 69 (842 ) Capital contribution (14,678 ) - - - Conversion (38,475 ) (231 ) - - Balance as of December 31, 2023 $ - $ - $ 103 $ 4 The fair value of the convertible notes payable (related party) is based on a probability-weighted expected return model (“PWERM”), which represents Level 3 measurements.
The following table summarizes the activity for our Level 3 instruments measured at fair value on a recurring basis (in thousands): Forward Purchase Agreement Warrant Liability Forward Purchase Agreement Put Option Liability Balance as of December 31, 2023 $ 4 $ 103 Change in fair value (411 ) (103 ) Effect of amendments (see Note 10) 975 — Extinguishment of excess warrant liability upon exercise of warrants associated with the forward purchase agreement (96 ) — Balance as of December 31, 2024 $ 472 $ — The fair values of the forward purchase agreement put option liability and the forward purchase agreement warrant liability, which are Level 3 fair value measurements, were estimated using Monte Carlo Simulation models.
This increase primarily consisted of proceeds of $8.0 million from the issuance of convertible notes payable to a related party. Contractual Obligations and Commitments Our principal commitments consist of our operating leases for office space, and various litigation matters arising in the ordinary course of business.
Contractual Obligations and Commitments Our principal commitments consist of our operating leases for office space, a litigation matter arising from the Company’s Business Combination, and term loans entered into during 2024 with GAT Funding, LLC in several installments totaling $20.0 million in outstanding principal as of December 31, 2024.
Other expense Other expense increased by $207 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase in the fair values of warrant liability (related party) in the first quarter of 2023, offset by the exercise and cancellation of the warrants (related party) immediately prior to the Business Combination in the third quarter of 2023.
Other Income Other income decreased by $80 thousand for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to a reduction in interest earned on cash deposits since the completion of the Business Combination transaction in September 2023 and amounts recorded for the year ended December 31, 2023 related to changes in fair value of warrants and other items not recurring for the year ended December 31, 2024.
As a result, we have developed the investigational fully implanted Acclaim CI and the possibility to disrupt a cochlear implant market that we believe to be a large opportunity currently dominated by complacent incumbents. 49 We had a net loss of $29.9 million and $15.9 million for the years ended December 31, 2023 and December 31, 2022, respectively, and had an accumulated deficit of $257.2 million and $226.0 million as of December 31, 2023 and December 31, 2022, respectively.
As a result, we cannot guarantee that we will receive FDA approval on that timeline, or at all. 54 We had a net loss of $20.8 million and $29.9 million for the years ended December 31, 2024 and December 31, 2023, respectively, and had an accumulated deficit of $284.7 million and $257.3 million as of December 31, 2024 and December 31, 2023, respectively.
Removed
Our technologies are designed to shift the paradigm within the hearing industry and bring both providers and patients the hearing devices they desire. We are dedicated to pushing beyond the status quo to provide patients with improved access, usability, independence, and quality of life.
Added
In recent years, we have focused almost exclusively on developing the fully implanted Acclaim® cochlear implant (the “Acclaim CI”), our lead product candidate. We believe that the Acclaim CI is a first-of-its-kind cochlear implant. Our fully implanted technology includes a sensor designed to leverage the natural anatomy of the ear instead of a microphone to capture sound.
Removed
To leverage the natural ear’s benefits, an implanted sensor was created to pick up incoming sound energy from the ossicular chain (i.e., the three tiny hearing bones that connect the eardrum to the cochlea).
Added
The Acclaim CI is designed to address severe to profound sensorineural hearing loss that is not adequately addressed by hearing aids. The Acclaim CI will only be indicated for adults who have been deemed adequate candidates by a qualified physician. The Acclaim CI received the Breakthrough Device Designation from the United States Food and Drug Administration (the “FDA”) in 2019.
Removed
The Esteem FI-AMEI failed to gain commercial traction, primarily because the Centers for Medicaid and Medicare Services classified it as a hearing aid and therefore not eligible for coverage. At an average total price (i.e., device and surgery) of over $25,000, very few individuals were willing or able to pay out-of-pocket for the Esteem FI-AMEI.
Added
As a result, we now have the Acclaim CI, a fully implanted cochlear implant. We believe that Acclaim CI gives us the opportunity to disrupt the existing cochlear implant market. The cochlear implant market is one that already has established market acceptance and reimbursement pathways.
Removed
We believe hearing aid classification is improper for the Esteem FI-AMEI and we continue to work towards having the Esteem FI-AMEI properly classified as a Fully Implanted Active Middle Ear Implant. Despite the commercial challenges of the Esteem FI-AMEI, roughly 1,000 devices were implanted globally.
Added
In the United States, before we can market a new Class III medical device, like the Acclaim CI, we must first receive FDA approval via the premarket application approval process. In October 2024, we received FDA approval of our application for an Investigational Device Exemption (“IDE”) for the Acclaim CI.
Removed
We were unable to provide replacement component sales as needed in 2022 due to the unavailability of certain components. Only minimal replacement component sales were completed in the fourth quarter of 2022.

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Item 7. Management's Discussion & Analysis

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

41 edited+15 added−11 removed113 unchanged
Biggest changeThe incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. 26 If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue our research and development program or the development or commercialization, if any, of the Acclaim CI or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially and adversely affect our business, financial condition, results of operations and value of our securities.
Biggest changeIf we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue our research and development program or the development or commercialization, if any, of the Acclaim CI or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially and adversely affect our business, financial condition, results of operations and value of our securities.
Our ability to generate future revenue from product sales will depend heavily on our success in many areas, including but not limited to: ● completing research and development of the Acclaim CI in a timely and successful manner; ● completing our pivotal clinical study in the United States successfully; ● obtaining FDA approval for the Acclaim CI; ● maintaining and enhancing a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for the Acclaim CI that is compliant with current good manufacturing practices, (“ cGMP ”); ● establishing and maintaining supply and, if applicable, manufacturing relationships with third parties that can provide, in both amount and quality, adequate products to support development and the market demand for the Acclaim CI, if and when it is approved; ● identifying, assessing, acquiring and/or developing new product candidates; ● launching and commercializing any product candidates for which we obtain regulatory and marketing approval, either directly by establishing a sales force, marketing and distribution infrastructure, and/or with collaborators or distributors in the United States, Europe and other potential markets that we will target; ● accurately identifying demand for the Acclaim CI and any future product candidates; ● exposing and educating physicians and other medical professionals with respect to the use of our products; ● obtaining market acceptance of the Acclaim CI and any future product candidates from the medical community and third-party payors; ● ensuring our product candidates are approved for reimbursement from governmental agencies, health care providers and insurers in jurisdictions where they have been approved for marketing; ● addressing any competing technological and market developments that impact the Acclaim CI and any future product candidates or their prospective usage by medical professionals; ● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements; ● maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, patent applications, trade secrets and know-how; ● avoiding and defending against third-party interference or infringement claims; and ● attracting, hiring and retaining qualified personnel.
Our ability to generate future revenue from product sales will depend heavily on our success in many areas, including but not limited to: ● completing research and development of the Acclaim CI in a timely and successful manner; ● completing our pivotal clinical study in the United States successfully; ● obtaining FDA approval for the Acclaim CI; ● maintaining and enhancing a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for the Acclaim CI that is compliant with current good manufacturing practices, (“ cGMP ”); ● establishing and maintaining supply and, if applicable, manufacturing relationships with third parties that can provide, in both amount and quality, adequate products to support development and the market demand for the Acclaim CI, if and when it is approved; ● identifying, assessing, acquiring and/or developing new product candidates; ● launching and commercializing any product candidates for which we obtain regulatory and marketing approval, either directly by establishing a sales force, marketing and distribution infrastructure, and/or with collaborators or distributors in the United States, Europe and other potential markets that we will target; ● accurately identifying demand for the Acclaim CI and any future product candidates; ● exposing and educating physicians and other medical professionals with respect to the use of our products; ● obtaining market acceptance of the Acclaim CI and any future product candidates from the medical community and third-party payors; ● ensuring our product candidates are approved for reimbursement from governmental agencies, health care providers and insurers in jurisdictions where they have been approved for marketing; ● addressing any competing technological and market developments that impact the Acclaim CI and any future product candidates or their prospective usage by medical professionals; ● negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements; 28 ● maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, patent applications, trade secrets and know-how; ● avoiding and defending against third-party interference or infringement claims; and ● attracting, hiring and retaining qualified personnel.
Our future funding requirements will depend on many factors, including but not limited to: ● the progress, results and costs of our planned studies and pivotal clinical trials; ● the cost, timing and outcomes of regulatory review of the Acclaim CI; ● the scope, progress, results and costs of product development, testing, manufacturing, preclinical development and, if applicable, clinical trials for any other product candidates that we may develop or otherwise obtain in the future; ● the costs of manufacturing the Acclaim CI, including costs related to engaging third-party manufacturers therefor; ● the cost of our future activities, including establishing sales, marketing and distribution capabilities for any product or product candidates in any particular geography where we receive marketing approval for such product candidates; ● the terms and timing of any collaborative, licensing and other arrangements that we may establish; ● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and ● the level of revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval.
Our future funding requirements will depend on many factors, including but not limited to: ● the progress, results and costs of our planned studies and pivotal clinical trials; ● the cost, timing and outcomes of regulatory review of the Acclaim CI; ● the scope, progress, results and costs of product development, testing, manufacturing, preclinical development and, if applicable, clinical trials for any other product candidates that we may develop or otherwise obtain in the future; 29 ● the costs of manufacturing the Acclaim CI, including costs related to engaging third-party manufacturers therefor; ● the cost of our future activities, including establishing sales, marketing and distribution capabilities for any product or product candidates in any particular geography where we receive marketing approval for such product candidates; ● the terms and timing of any collaborative, licensing and other arrangements that we may establish; ● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and ● the level of revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval.
Such fluctuations in demand may be due to many factors, many of which are beyond our control, including, among others: ● market acceptance of a new product, including healthcare professionals’ and patients’ preferences; ● market acceptance of the clinical safety and performance of the Acclaim CI; 32 ● development of similarly cost-effective products by our competitors; ● development delays of the Acclaim CI; ● adverse medical side effects suffered by patients using the Acclaim CI, whether actually resulting from the use of the Acclaim CI or not; ● changes in regulatory policies toward hearing loss technologies; ● changes in regulatory approval, clearance requirements and licensure for our product; ● third-party claims of intellectual property infringement; ● budget constraints and the availability of reimbursement or insurance coverage from third-party payors for the Acclaim CI; ● any developments affecting the long-term implantation and use of the Acclaim CI; and ● responses from certain of our competitors to the offering of the Acclaim CI.
Such fluctuations in demand may be due to many factors, many of which are beyond our control, including, among others: ● market acceptance of a new product, including healthcare professionals’ and patients’ preferences; ● market acceptance of the clinical safety and performance of the Acclaim CI; ● development of similarly cost-effective products by our competitors; ● development delays of the Acclaim CI; ● adverse medical side effects suffered by patients using the Acclaim CI, whether actually resulting from the use of the Acclaim CI or not; ● changes in regulatory policies toward hearing loss technologies; ● changes in regulatory approval, clearance requirements and licensure for our product; ● third-party claims of intellectual property infringement; 36 ● budget constraints and the availability of reimbursement or insurance coverage from third-party payors for the Acclaim CI; ● any developments affecting the long-term implantation and use of the Acclaim CI; and ● responses from certain of our competitors to the offering of the Acclaim CI.
Due to the numerous risks and uncertainties involved in product development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. 25 If the Acclaim CI contains design or manufacturing defects, our business and financial results could be harmed.
Due to the numerous risks and uncertainties involved in product development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. If the Acclaim CI contains design or manufacturing defects, our business and financial results could be harmed.
Accordingly, the ultimate resolution of these matters and any future matters could have a material adverse effect on our business, financial condition, results of operation and cash flow and, consequently, could negatively impact the trading price of our Class A Common Stock. We are highly dependent on key members of our executive management team.
Accordingly, the ultimate resolution of these matters and any future matters could have a material adverse effect on our business, financial condition, results of operation and cash flow and, consequently, could negatively impact the trading price of our Class A Common Stock. 39 We are highly dependent on key members of our executive management team.
If we continue to generate operating losses, there will be an adverse effect on our results of operations, financial condition, and the market price of our Class A Common Stock. 24 We have generated limited revenue from product sales and may never be profitable.
If we continue to generate operating losses, there will be an adverse effect on our results of operations, financial condition, and the market price of our Class A Common Stock. We have generated limited revenue from product sales and may never be profitable.
Raising additional capital would cause dilution to our existing stockholders, and may adversely affect the rights of existing stockholders. We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations, and strategic and licensing arrangements.
Raising additional capital would cause dilution to our existing stockholders, which may adversely affect the rights of existing stockholders. We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations, and strategic and licensing arrangements.
As described in our accompanying financial statements, our audited financial statements as of December 31, 2023 contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise.
As described in our accompanying financial statements, our audited financial statements as of December 31, 2024 contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise.
Taylor. ● A lawsuit was filed in November 2023 against Daniel Hirsch, Whitney Haring-Smith, the Sponsor and the Company, as successor to Anzu Special Acquisition Corp I alleging a claim for breach of Anzu’s Amended and Restated Certificate of Incorporation against the Company, a claim for breach of fiduciary duty against Mr. Hirsch, Dr.
For example: ● A lawsuit was filed in November 2023 against Daniel Hirsch, Whitney Haring-Smith, the Sponsor and the Company, as successor to Anzu Special Acquisition Corp I alleging a claim for breach of Anzu’s Amended and Restated Certificate of Incorporation against the Company, a claim for breach of fiduciary duty against Mr. Hirsch, Dr.
If the addressable market is not as large as we believe, our business, financial condition and results of operations and business prospects would be materially and adversely affected. 34 We will depend on third parties to manage our pre-clinical studies and clinical trials, perform related data collection and analysis, and to enroll patients for our clinical trials, and, as a result, we may face costs and delays that are beyond our control.
If the addressable market is not as large as we believe, our business, financial condition and results of operations and business prospects would be materially and adversely affected. 38 We depend on third parties to manage our pre-clinical studies and clinical trials, perform related data collection and analysis, and to enroll patients for our clinical trials, and, as a result, we may face costs and delays that are beyond our control.
When we increase production, our reliance on these third-party suppliers will also subject us to other risks that could harm our business, including: ● we are not, and will not in the near future be, a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than us; ● we may not be able to obtain an adequate supply of components in a timely manner, on commercially reasonable terms or at all; ● our suppliers, especially new suppliers, may make errors in manufacturing that could adversely affect the efficacy or safety of our products or cause delays in shipment; ● we may have difficulty locating and qualifying additional or alternative suppliers; ● switching components or suppliers may require product redesign and possibly resubmission to the FDA or other similar foreign regulatory agencies, which could impede or delay our commercial activities; ● one or more of our suppliers may be unwilling or unable to supply components for our products in a timely manner, on commercially reasonable terms or at all; ● the occurrence of a fire, natural disaster or other catastrophe impacting one or more of our suppliers may affect their ability to deliver products to us in a timely manner or at all; and ● our suppliers may encounter financial or other business hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
An interruption in the supply of a key component could significantly delay our production of the Acclaim CI or increase our production costs. 37 When we increase production, our reliance on these third-party suppliers will also subject us to other risks that could harm our business, including: ● we are not, and will not in the near future be, a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than us; ● we may not be able to obtain an adequate supply of components in a timely manner, on commercially reasonable terms or at all; ● our suppliers, especially new suppliers, may make errors in manufacturing that could adversely affect the efficacy or safety of our products or cause delays in shipment; ● we may have difficulty locating and qualifying additional or alternative suppliers; ● switching components or suppliers may require product redesign and possibly resubmission to the FDA or other similar foreign regulatory agencies, which could impede or delay our commercial activities; ● one or more of our suppliers may be unwilling or unable to supply components for our products in a timely manner, on commercially reasonable terms or at all; ● the occurrence of a fire, natural disaster or other catastrophe impacting one or more of our suppliers may affect their ability to deliver products to us in a timely manner or at all; and ● our suppliers may encounter financial or other business hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
In connection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2023, 2022 and 2021, material weaknesses were identified in our internal control over financial reporting.
In connection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2024, 2023 and 2022, material weaknesses were identified in our internal control over financial reporting.
If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products. This may raise substantial doubts about our ability to continue as a going concern.
If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products. This continues to raise substantial doubt about our ability to continue as a going concern.
The industry in which we operate is competitive, subject to change and sensitive to the introduction of new products, procedures or other market activities of industry participants. We will compete with large, diversified medical device companies, including Sonova, Demant, Cochlear, and others. We also compete with smaller companies similar to us.
The industry in which we operate is competitive, subject to change and sensitive to the introduction of new products, procedures or other market activities of industry participants. We will compete with large, diversified medical device companies, including Sonova, Demant, Cochlear, and others.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information. We have incurred losses in each year since our inception, including net losses of approximately $29.9 million and $15.9 million for the years ended December 31, 2023 and 2022, respectively.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information. We have incurred losses in each year since our inception, including net losses of approximately $20.8 million and $29.9 million for the years ended December 31, 2024 and 2023, respectively.
Legal Proceedings for more information on these lawsuits. 35 These lawsuits can divert our management’s attention and resources from our ordinary business operations, and we would likely incur significant expenses associated with their defense (including, without limitation, substantial attorneys’ fees and other fees of professional advisors and potential obligations to indemnify current and former officers and directors who are or may become parties to such actions).
These lawsuits can divert our management’s attention and resources from our ordinary business operations, and we would likely incur significant expenses associated with their defense (including, without limitation, substantial attorneys’ fees and other fees of professional advisors and potential obligations to indemnify current and former officers and directors who are or may become parties to such actions).
We anticipate that our expenses will increase substantially if and as we: ● continue the research and development of the Acclaim CI, including through clinical trials; ● seek additional regulatory and marketing approvals in jurisdictions outside the United States; ● establish a sales, marketing, and distribution infrastructure to commercialize our product candidate; ● rely on our third-party suppliers and manufacturers to obtain adequate supply of materials and components for our products; ● seek to identify, assess, acquire, license, and/or develop other product candidates and subsequent generations of our current product candidate; ● seek to maintain, protect, and expand our intellectual property portfolio; ● seek to identify, hire, and retain skilled personnel; ● create additional infrastructure to support our operations as a public company and our product candidate development and planned future commercialization efforts; and ● experience any delays or encounter issues with respect to any of the above, including, but not limited to, failed studies, complex results, safety issues or other regulatory challenges that require longer follow-up of existing studies or additional supportive studies in order to pursue marketing approval.
We anticipate that our expenses will increase substantially if and as we: ● continue the research and development of the Acclaim CI, including through clinical trials; ● seek additional regulatory and marketing approvals in jurisdictions outside the United States; ● establish a sales, marketing, and distribution infrastructure to commercialize our product candidate; ● rely on our third-party suppliers and manufacturers to obtain adequate supply of materials and components for our products; ● seek to identify, assess, acquire, license, and/or develop other product candidates and subsequent generations of our current product candidate; ● seek to maintain, protect, and expand our intellectual property portfolio; ● seek to identify, hire, and retain skilled personnel; ● create additional infrastructure to support our operations as a public company and our product candidate development and planned future commercialization efforts; and ● experience any delays or encounter issues with respect to any of the above, including, but not limited to, failed studies, complex results, safety issues or other regulatory challenges that require longer follow-up of existing studies or additional supportive studies in order to pursue marketing approval. 27 The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations, or grants.
If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business. 27 We and certain of our service providers are from time to time subject to cyberattacks and security incidents.
If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business.
If such events prevent us from obtaining necessary components for production of Acclaim CI devices, or substantially raise the prices for such components, we may be delayed in the FDA trial process, or we may be unable to produce sufficient Acclaim CI devices to meet demand, which would materially and adversely affect our results of operations and financial condition. 28 We have identified material weaknesses in our internal control over financial reporting.
If such events prevent us from obtaining necessary components for production of Acclaim CI devices, or substantially raise the prices for such components, we may be delayed in the FDA trial process, or we may be unable to produce sufficient Acclaim CI devices to meet demand, which would materially and adversely affect our results of operations and financial condition.
As of December 31, 2023 and 2022, we had an accumulated deficit of approximately $257.2 million and $226.0 million, respectively. Substantially all of our operating losses in such years resulted from costs incurred in connection with the development of the Acclaim CI and from general and administrative costs associated with our operations.
As of December 31, 2024 and 2023, we had an accumulated deficit of approximately $284.7 million and $257.3 million, respectively. Substantially all of our operating losses in such years resulted from costs incurred in connection with the development of the Acclaim CI and from general and administrative costs associated with our operations.
The following material weaknesses were identified: ● We do not maintain a sufficient complement of personnel with accounting knowledge, experience and training to appropriately analyze, record and disclose certain accounting matters to provide reasonable assurance of preventing material misstatements. ● Our management does not implement a formal risk assessment that addresses risks relevant to financial reporting objectives, including cybersecurity and fraud risks. ● We have not designed, documented and maintained formal accounting policies, procedures and controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and adequate controls related to the preparation, posting, modification and review of journal entries. ● We have not designed and maintained effective controls around the interpretation and accounting treatment of the valuation of a material liability and the forward purchase agreement. ● We have not designed and maintained effective controls over certain information technology general controls for information systems that are relevant to the preparation of our consolidated financial statements, including ineffective controls around user access and segregation of duties.
The following material weaknesses were identified: ● We do not maintain a sufficient complement of personnel with accounting knowledge, experience and training to appropriately analyze, record and disclose certain accounting matters to provide reasonable assurance of preventing material misstatements. ● Our management does not implement a formal risk assessment that addresses risks relevant to financial reporting objectives, including cybersecurity and fraud risks. ● We have not designed, documented and maintained formal accounting policies, procedures and controls over significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including segregation of duties and adequate controls related to the preparation, posting, modification and review of journal entries, and the accounting treatment of complex transactions, including fair value measurement under GAAP. ● We have not designed and maintained effective controls over certain information technology general controls for information systems that are relevant to the preparation of our consolidated financial statements, including ineffective controls around user access and segregation of duties. 32 The material weaknesses related to the insufficient complement of personnel and formal accounting policies, and the lack of procedures and controls resulted in adjustments to several accounts and disclosures.
We rely upon third-party vendors, including Contract Research Organization (“ CROs ”), to monitor and manage data for our ongoing preclinical studies and will rely on them to manage our clinical trials. We also rely on CROs for execution of our preclinical studies and will rely on them for execution of our clinical trials.
We rely upon third-party vendors, including Contract Research Organization (“ CROs ”), to monitor and manage data for our ongoing clinical trial. We also rely on CROs for execution of our clinical trial.
These remediation measures are ongoing and include the following steps: ● hiring additional accounting and financial reporting personnel with appropriate technical accounting knowledge and public company experience in financial reporting; ● designing and implementing effective processes and controls over significant accounts and disclosure; ● designing and implementing security management and change management controls over information technology systems, including adjusting user access levels and implementing external logging of activity and periodic review of such logs; and ● engaging an accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in ‘‘Internal Control — Integrated Framework’’ issued by the Committee of Sponsoring Organizations of the Treadway Commission. 29 While we are designing and implementing measures to remediate our existing material weaknesses, we cannot predict the success of such measures or the outcome of its assessment of these measures at this time.
These remediation measures are ongoing and include the following steps: ● hiring additional accounting and financial reporting personnel with appropriate technical accounting knowledge and public company experience in financial reporting; ● designing and implementing effective processes and controls over significant accounts and disclosure; ● designing and implementing security management and change management controls over information technology systems, including adjusting user access levels and implementing external logging of activity and periodic review of such logs; and ● engaging an accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in “Internal Control — Integrated Framework’’ issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Certain of our directors and officers may have different interests than other holders of Class A Common Stock. As of March 27, 2024, Mr. Taylor, a member of the Board, holds approximately 52.6% of the currently outstanding shares of Class A Common Stock and approximately 22.2% of the outstanding shares of our Series A Preferred Stock.
Certain of our directors and officers may have different interests than other holders of Class A Common Stock. As of March 24, 2025, Mr. Taylor, a member of the Board, holds approximately 48.2% of the currently outstanding shares of Class A Common Stock and approximately 24.2% of the outstanding shares of our Series A Preferred Stock.
We also utilize a third-party vendor to maintain our IT system networks, and as a result of limited internal IT resources, we are only able to perform limited due diligence on our third-party IT vendors. We receive periodic security monitoring from our cybersecurity insurance provider.
We also utilize a third-party vendor to maintain our IT system networks, and as a result of limited internal IT resources, we are only able to perform limited due diligence on our third-party IT vendors.
Haring-Smith and the Sponsor and claims for unjust enrichment, fraudulent misrepresentation and tortious interference with economic relations against the defendants. See Part I, Item 3.
Haring-Smith and the Sponsor and claims for unjust enrichment, fraudulent misrepresentation and tortious interference with economic relations against the defendants. See Part I, Item 3. Legal Proceedings for more information on these lawsuits.
We may never generate any revenue or operate on a profitable basis. Even if we achieve profitability, we may not be able to sustain it. If we are unable to achieve sustainable profitability, our financial condition and the price of our securities will be materially and adversely affected. 30 Clinical failure can occur at any stage of clinical development.
We may never generate any revenue or operate on a profitable basis. Even if we achieve profitability, we may not be able to sustain it. If we are unable to achieve sustainable profitability, our financial condition and the price of our securities will be materially and adversely affected. The FDA trial process is uncertain.
However, we expect that we will need to significantly increase our production rates to meet the supply of Acclaim CI devices needed for our clinical trials and, if the Acclaim CI obtains FDA approval, for eventual commercialization, which we are targeting to obtain in 2026.
As a result, our purchases of supplies and components are limited to date. However, we expect that we will need to significantly increase our production rates to meet the supply of Acclaim CI devices needed for our clinical trials and, if the Acclaim CI obtains FDA approval, for eventual commercialization, which we are targeting to obtain in late 2027/early 2028.
At any time, these competitors and other potential market entrants may develop new products, procedures or treatment alternatives that could render our products obsolete or uncompetitive.
We also compete with smaller companies similar to us. 35 At any time, these competitors and other potential market entrants may develop new products, procedures or treatment alternatives that could render our products obsolete or uncompetitive.
Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely. 31 Outside the United States, our international operations will generally be subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products.
Outside the United States, our international operations will generally be subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products.
If we are unable to address any issues mentioned above, or encounter other problems, expenses, difficulties, complications, and delays in connection with the establishment and expansion of our business, our entire business may fail, in which case you may lose part of, or your entire investment.
If we are unable to address any issues mentioned above, or encounter other problems, expenses, difficulties, complications, and delays in connection with the establishment and expansion of our business, our entire business may fail, in which case you may lose part of, or your entire investment. 33 We have a history of net losses and negative cash flow from operations since our inception and we expect such losses and negative cash flows from operations to continue in the foreseeable future.
However, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may experience security breaches that may remain undetected for an extended period.
We receive periodic security monitoring from our cybersecurity insurance provider. 30 However, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.
If the Acclaim CI does not achieve an adequate level of acceptance by patients, healthcare professionals, and government and private third-party payors, we may not generate significant product revenues, we may not become profitable, in which case our results of operations, cash flows and the value of our securities will be materially and adversely affected. 33 We will be dependent upon contract manufacturing organizations and material suppliers, making us vulnerable to supply shortages and problems, increased costs and quality or compliance issues, any of which could harm our business.
If the Acclaim CI does not achieve an adequate level of acceptance by patients, healthcare professionals, and government and private third-party payors, we may not generate significant product revenues, we may not become profitable, in which case our results of operations, cash flows and the value of our securities will be materially and adversely affected.
Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. Our third-party service providers and partners are also subject to these heightened risks.
We may experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
Our clinical experience to date does not necessarily predict future results and may not have revealed certain potential limitations of the technology or potential complications from the Acclaim CI and may require further clinical validation. Any product version we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.
Clinical failure can occur at any stage of clinical development. Our clinical experience to date does not necessarily predict future results and may not have revealed certain potential limitations of the technology or potential complications from the Acclaim CI and may require further clinical validation.
There can be no assurance that we will be able to detect and fix any defects in the Acclaim CI in time to maintain our FDA trial schedule.
As the Acclaim CI has no history of commercial operation, we have a limited frame of reference from which to evaluate its long-term performance. There can be no assurance that we will be able to detect and fix any defects in the Acclaim CI in time to maintain our FDA trial schedule.
We and certain of our officers and directors have been and may in the future become defendants in one or more stockholder derivative actions or other class-action lawsuits. For example: ● A lawsuit was filed in January 2020 against certain members of the Legacy Envoy board of directors alleging that the terms of financing transactions between GAT and Glen A.
We and certain of our officers and directors have been and may in the future become defendants in one or more stockholder derivative actions or other class-action lawsuits.
If the Acclaim CI is not widely adopted, our business, financial condition, and results of operations will be materially and adversely affected. The successful commercialization of the Acclaim CI, if it receives FDA approval, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies.
Any such delays will cause us significant expense by extending our time to commercialization if FDA approval is obtained, if we are able to obtain it at all. 34 The successful commercialization of the Acclaim CI, if it receives FDA approval, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies.
To date, we have completed initial patient implants of the Acclaim CI as part of our early feasibility study. As the Acclaim CI has no history of commercial operation, we have a limited frame of reference from which to evaluate its long-term performance.
To date, we have completed initial patient implants of the Acclaim CI as part of our early feasibility study, and we received approval from the FDA to begin our pivotal trial, which we began in the first quarter of 2025.
If we are able to proceed to FDA trials for the Acclaim CI and, if the Acclaim CI obtains FDA approval and eventual commercialization, we may be exposed to the risk of supply chain disruptions from events such as the COVID-19 pandemic, the ongoing war in Ukraine and the military conflict in Israel and Gaza, and other global, national, regional, and local events that cannot yet be predicted.
Our inability to raise additional funds on favorable terms, or at all, would materially and adversely affect our results of operations, financial condition, liquidity, the trading price of our securities, and our growth prospects. 31 As we have begun producing additional units of our Acclaim CI for the clinical trial process, we are exposed to the risk of supply chain disruptions from events such as tariffs and trade wars, the ongoing war in Ukraine and the military conflict in Israel and Gaza, and other global, national, regional, and local events that cannot yet be predicted.
Removed
The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations, or grants.
Added
The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
Removed
Our inability to raise additional funds on favorable terms, or at all, would materially and adversely affect our results of operations, financial condition, liquidity, the trading price of our securities, and our growth prospects.
Added
Our third-party service providers and partners are also subject to these heightened risks.
Removed
Supply constraints resulting from such events may also cause or exacerbate inflation.
Added
We and certain of our service providers are from time to time subject to cyberattacks and security incidents.
Removed
The material weaknesses related to the insufficient complement of personnel and formal accounting policies, and the lack of procedures and controls resulted in adjustments to several accounts and disclosures.
Added
Our supply chain risk will be increased if we are able to obtain FDA approval for the Acclaim CI and begin commercial scale production. Supply constraints resulting from such events may also cause or exacerbate inflation.
Removed
We have a history of net losses and negative cash flow from operations since our inception and we expect such losses and negative cash flows from operations to continue in the foreseeable future.
Added
We have identified material weaknesses in our internal control over financial reporting.
Removed
Clinical failure can occur at any stage of clinical development. We are currently in the process of the early feasibility study for the Acclaim CI, and we submitted our IDE for approval in Q1 of 2024 with approval anticipated by end of Q2 2024 or beginning of Q3 2024.
Added
While we are designing and implementing measures to remediate our existing material weaknesses, we cannot predict the success of such measures or the outcome of its assessment of these measures at this time.
Removed
Our production of Acclaim CI devices is currently limited to production of prototype devices and devices for our early feasibility study. As a result, our purchases of supplies and components are limited to date.
Added
Any product version we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval. We cannot predict the timing of clinical trial results, availability of regulatory personnel, or delays, constraints or outcomes of any regulatory submissions or approvals. Clinical failure can occur at any stage of clinical development.
Removed
An interruption in the supply of a key component could significantly delay our production of the Acclaim CI or increase our production costs.
Added
We have received approval from the FDA to begin our pivotal trial, which we began in the first quarter of 2025.
Removed
Taylor on the one hand and Legacy Envoy on the other hand were unreasonably favorable to GAT and Mr. Taylor, that Mr.
Added
If the Acclaim CI is not widely adopted, our business, financial condition, and results of operations will be materially and adversely affected.
Removed
Taylor breached his fiduciary duty as a shareholder, that each defendant breached his fiduciary duty as a director in approving such transactions and engaged in common law fraud in not sufficiently disclosing the transactions, a claim of unjust enrichment against GAT and Mr.
Added
The FDA’s policies may change, and additional government laws, regulations, and policies may be enacted that could prevent, limit, or delay regulatory approval of our product candidates, limit the marketability of our product candidates, or impose additional regulatory obligations on us.
Removed
Taylor, and claims against the other directors for aiding and abetting and conspiracy in relation to the claims against GAT and Mr.
Added
The current U.S. presidential administration has proposed significant changes to the structure, operations, and staffing of the federal regulatory agencies, including the FDA.
Added
Although the proposals are for more efficient review and less regulation, it is possible that reductions and turnover in staffing, reductions in funding, changes to policy and procedure, and general uncertainty regarding the status of agencies, their staff, and their funding will cause delays in clinical trials for the Acclaim CI or result in the Acclaim CI not receiving FDA approval for commercialization.
Added
Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.
Added
Similarly, we cannot currently anticipate whether or how artificial intelligence may cause significant change in our industry, but our competitors will likely have greater resources than us to implement proprietary artificial intelligence solutions in their businesses, which may give them significant competitive advantages.
Added
We will be dependent upon contract manufacturing organizations and material suppliers, making us vulnerable to supply shortages and problems, increased costs and quality or compliance issues, any of which could harm our business. Our production of Acclaim CI devices is currently limited to production of prototype devices and devices for our early feasibility study.

Other COCH 10-K year-over-year comparisons