美國
證券和交易委員會
華盛頓特區 20549
表格
(標記一個)
根據1934年證券交易法第13或15(d)節的季度報告 |
截至本季度結束
根據1934年證券交易法第13或15(d)節的轉型報告書 |
委託文件號碼：
（按其章程規定的確切註冊人名稱）
| ||
（國家或其他管轄區的 | （IRS僱主 | |
公司成立或組織） | 唯一識別號碼） | |
(主要行政辦公室地址) | (郵政編碼) |
(
(發行人的電話號碼，包括區號)
根據證券法第12(b)條註冊的證券：
| 交易 |
| 普通股，每股面值$0.001 | |
每一類的名稱 | 符號: | ANNX | ||
|
檢查發行人（1）在過去12個月內（或在註冊人被要求提交此類報告的較短時間內）是否提交了《交易所法》第13條或15(d)條所要求提交的所有報告，以及（2）在過去90天內是否受到此類提交要求的約束。
請在以下方框內打勾：公司是否已電子提交了在過去的12個月內（或者在公司需要提交此類文件的較短時期內）根據規則405 of Regulation S-T(232.405章節)所要求提交的每一個互動數據文件。
(
大型加速報告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 較小的報告公司 | ||
新興成長公司 |
如果是新興成長型企業，請勾選是否選擇不使用按照《證券交易法》第13(a)條規定的新或修訂財務會計準則的過渡期。
請在以下方框內打勾：公司是否是空殼公司(根據證券交易法第12b-2條規定定義）。是
截至2024年11月12日，有
截至2024年9月30日的第三季度10-Q表格
目錄
頁面 | ||
1 | ||
1 | ||
2 | ||
3 | ||
2024年1月1日至2024年7月30日（前身）、2024年7月31日至2024年9月30日（後繼），以及截至2023年9月30日止九個月的未經審計的簡明合併現金流量表 | 5 | |
6 | ||
49 | ||
75 | ||
75 | ||
77 | ||
77 | ||
78 | ||
78 | ||
78 | ||
79 | ||
79 | ||
82 | ||
第一部分 - 財務信息
項目1.基本報表
Adagio醫療控股公司。
簡明合併資產負債表
(以千計，除分享和每分享數據外)
(未經審計)
| 九月30日 |
| 12月31日， | ||||
2024 | 2023 | ||||||
(未經審計) | |||||||
資產 | |||||||
流動資產： | |||||||
現金及現金等價物 | $ | | $ | | |||
應收賬款，淨額 |
| |
| | |||
存貨淨額 | |
| | ||||
預付費用 |
| |
| | |||
其他流動資產 |
| |
| | |||
總流動資產 | | | |||||
物業和設備，淨值 | | | |||||
使用權資產，淨額 | | | |||||
無形資產，淨額 | | — | |||||
商譽 | | — | |||||
其他資產 | | | |||||
總資產 | $ | | $ | | |||
負債、可轉換優先股和股東權益（赤字） | |||||||
流動負債: | |||||||
應付賬款 | $ | |
| $ | | ||
應計負債 |
| |
|
| | ||
經營租賃負債，流動 | | | |||||
可轉換應付票據，流動 | — | | |||||
存量證券負債 | — | | |||||
短期貸款 | — | | |||||
應計交易費用 | — | | |||||
其他應計負債 | | | |||||
總流動負債 |
| |
|
| | ||
經營租賃負債，長期 | | | |||||
可轉換票據應付款，非流動資產 | | — | |||||
認股權證負債 | | — | |||||
遞延所得稅負債，淨 | | — | |||||
長期貸款 | — | | |||||
其他長期負債 | | | |||||
總負債 | |
| | ||||
100億股認可，分別於2024年5月3日和2024年2月2日擁有發行並流通的股份數量 | |||||||
Legacy Adagio的可轉換優先股，$ |
| — |
|
| | ||
股東權益（赤字）： | |||||||
Legacy Adagio的普通股，$ | — | ||||||
普通股，每股面值爲 $0.0001； |
| |
|
| — | ||
追加實收資本 |
| |
|
| | ||
累積其他綜合收益（損失） |
| ( |
|
| | ||
累積赤字 | ( | ( | |||||
股東權益（赤字） |
| |
|
| ( | ||
負債合計、可轉換優先股和股東權益（赤字） | $ | |
| $ | | ||
附帶的說明是這些簡明合併財務報表不可或缺的一部分。
1
Adagio醫療控股公司。
綜合損益表和綜合收益（損失）簡明綜合利潤表
(以千計，除分享和每分享數據外)
(未經審計)
截至2019年9月30日三個月的收入 | 截至九月三十日的九個月 | |||||||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||||||
7月31日至9月30日 | 7月1日至7月30日 | 7月1日至9月30日 | 7月31日至9月30日 | 1月1日至7月30日 | 從1月1日到9月30日 | |||||||||||||||
收入 | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
營業費用和營業費用： | ||||||||||||||||||||
Cost of revenue | | | | | | | ||||||||||||||
研發 | | | | | | | ||||||||||||||
銷售、一般和行政 | | | | | | | ||||||||||||||
營業費用總計 | | | | | | | ||||||||||||||
運營損失 | ( | ( | ( | ( | ( | ( | ||||||||||||||
其他收入（費用）： | ||||||||||||||||||||
可轉換票據公允價值調整 | | ( | ( | | | ( | ||||||||||||||
權證負債公允值調整 | | | ( | | | ( | ||||||||||||||
利息支出 | ( | ( | ( | ( | ( | ( | ||||||||||||||
利息收入 | | — | | | | | ||||||||||||||
其他（費用）收益，淨 | | | ( | | ( | ( | ||||||||||||||
其他總收益（費用），淨額 | | ( | ( | | | ( | ||||||||||||||
淨收入（虧損） | $ | | $ | ( | $ | ( | $ | | $ | ( | $ | ( | ||||||||
其他全面收益（損失）： | ||||||||||||||||||||
外幣匯兌調整 | ( | ( | | ( | | ( | ||||||||||||||
全面收入（損失） | $ | | $ | ( | $ | ( | $ | | $ | ( | $ | ( | ||||||||
基本每股淨利潤（虧損）（註釋15） | $ | | $ | ( | $ | ( | $ | | $ | ( | $ | ( | ||||||||
每股攤薄淨利潤（虧損）（注15） | $ | | $ | ( | $ | ( | $ | | $ | ( | $ | ( | ||||||||
附帶的說明是這些簡明合併財務報表不可或缺的一部分。
2
Adagio醫療控股公司。
合併可轉換優先股及股東權益（虧損）簡明報表
(以千爲單位，除非另有說明)
截至2024年9月30日的三個月 | ||||||||||||||||||||||
累計 | ||||||||||||||||||||||
額外 | 其他 | 總計 | ||||||||||||||||||||
可轉換優先股 | 普通股 | 實收資本 | 累計 | 綜合的 | 股東的 | |||||||||||||||||
| 股份 |
| 金額 |
| 股份 |
| 金額 |
| 資本 |
| 赤字 |
| 收入 |
| 權益（赤字） | |||||||
截至2024年6月30日的餘額（前任） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
外幣折算調整 | — | — | — | — | — | — | ( | ( | ||||||||||||||
股票期權行使 | — | — | | — | | — | — | | ||||||||||||||
基於股票的補償 | — | — | — | — | | — | — | | ||||||||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
截至2024年7月30日的餘額（前任） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
截至2024年7月31日的餘額（繼任者） | — | $ | — | | $ | | $ | | $ | ( | $ | — | $ | | ||||||||
外幣折算調整 | — | — | — | — | — | — | ( | ( | ||||||||||||||
發行贊助商收益 | — | — | | — | — | — | — | — | ||||||||||||||
凈利潤 | — | — | — | — | — | | — | | ||||||||||||||
截至2024年9月30日的餘額（繼承人） | — | $ | — | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||||
截至2023年9月30日的三個月 | ||||||||||||||||||||||
累計 | ||||||||||||||||||||||
額外 | 其他 | 總計 | ||||||||||||||||||||
可轉換優先股 | 普通股 | 實收資本 | 累計 | 綜合的 | 股東的 | |||||||||||||||||
| 股份 |
| 金額 |
| 股份 |
| 金額 |
| 資本 |
| 赤字 |
| 收入 |
| 權益（赤字） | |||||||
截至2023年6月30日的餘額（前身） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
外幣折算調整 | — | — | — | — | — | — | | | ||||||||||||||
股票期權行使 | — | — | ( | — | | — | — | | ||||||||||||||
基於股票的補償 | — | — | — | — | | — | — | | ||||||||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
截至2023年9月30日的餘額（前任） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
3
Adagio Medical Holdings Inc.
可轉換優先股和股東權益（赤字）簡明合併報表
（以千計，共享數據除外）
截至2024年9月30日的九個月 | ||||||||||||||||||||||
累積 | ||||||||||||||||||||||
額外 | 其他 | 總計 | ||||||||||||||||||||
可轉換優先股 | 普通股 | 已付款 | 累積 | 全面 | 股東 | |||||||||||||||||
| 股票 |
| 金額 |
| 股票 |
| 金額 |
| 資本 |
| 赤字 |
| 收入 |
| 權益（赤字） | |||||||
截至 2023 年 12 月 31 日的餘額（前身） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
外幣折算調整 | — | — | — | — | — | — | | | ||||||||||||||
將優先股換成預先注資的認股權證 | ( | ( | — | — | | — | — | | ||||||||||||||
股票期權練習 | — | — | | — | | — | — | | ||||||||||||||
基於股票的薪酬 | — | — | — | — | | — | — | | ||||||||||||||
淨虧損 | — | — | — | — | — | ( | — | ( | ||||||||||||||
截至 2024 年 7 月 30 日的餘額（前身） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
截至 2024 年 7 月 31 日的餘額（繼任者） | — | $ | — | | $ | | $ | | $ | ( | $ | — | $ | | ||||||||
外幣折算調整 | — | — | — | — | — | — | ( | ( | ||||||||||||||
發放贊助商收益 | — | — | | — | — | — | — | — | ||||||||||||||
淨收入 | — | — | — | — | — | | — | | ||||||||||||||
截至 2024 年 9 月 30 日的餘額（繼任者） | — | $ | — | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||||
截至2023年9月30日的九個月 | ||||||||||||||||||||||
累積 | ||||||||||||||||||||||
額外 | 其他 | 總計 | ||||||||||||||||||||
可轉換優先股 | 普通股 | 已付款 | 累積 | 全面 | 股東 | |||||||||||||||||
| 股票 |
| 金額 |
| 股票 |
| 金額 |
| 資本 |
| 赤字 |
| 收入 |
| 權益（赤字） | |||||||
截至2022年12月31日的餘額（前身） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
外幣折算調整 | — | — | — | — | — | — | ( | ( | ||||||||||||||
股票期權練習 | — | — | | — | | — | — | | ||||||||||||||
基於股票的薪酬 | — | — | — | — | | — | — | | ||||||||||||||
淨虧損 | — | — | — | — | — | ( | — | ( | ||||||||||||||
截至 2023 年 9 月 30 日的餘額（前身） | | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | ||||||||
隨附的附註是這些簡明合併財務報表的組成部分。
4
Adagio Medical Holdings Inc.
簡明合併現金流量表
（以千計）
截至9月30日的九個月 | ||||||||||
2024 | 2023 | |||||||||
7 月 31 日至 9 月 30 日 | 1 月 1 日至 7 月 30 日 | 1 月 1 日至 9 月 30 日 | ||||||||
來自經營活動的現金流： |
| |||||||||
淨收益（虧損） | $ | | $ | ( | $ | ( | ||||
爲將淨收益（虧損）與經營活動中使用的淨現金進行對賬而進行的調整： | ||||||||||
折舊和攤銷 |
| |
| |
| | ||||
非現金運營租賃費用 | | | | |||||||
基於股票的薪酬 | — | | | |||||||
庫存減值準備金 | ( | | | |||||||
定期貸款折扣的攤銷 | — | | | |||||||
處置財產和設備損失 | — | | | |||||||
應付可轉換票據公允價值的變化 | ( | ( | | |||||||
認股權證負債公允價值的變化 | ( | ( | | |||||||
經營資產和負債的淨變動： |
|
|
| |||||||
應收賬款，淨額 |
| |
| ( |
| ( | ||||
庫存，淨額 |
| ( |
| ( |
| | ||||
預付費用和其他流動資產 |
| ( |
| ( |
| | ||||
應付賬款 | ( | ( | — | |||||||
應計負債 |
| ( |
| |
| | ||||
應計交易成本 |
| — |
| |
| | ||||
其他應計負債 |
| |
| |
| | ||||
經營租賃負債 | ( | ( | | |||||||
其他長期負債 | — | — | ( | |||||||
遞延稅 |
| — |
| — |
| | ||||
用於經營活動的淨現金 | ( | ( | ( | |||||||
來自投資活動的現金流： | ||||||||||
購買財產和設備 | ( | ( | ( | |||||||
購買軟件 | — | — | ( | |||||||
用於投資活動的淨現金： | ( | ( | ( | |||||||
來自融資活動的現金流： | ||||||||||
行使普通股期權的收益 | — | — | | |||||||
發行可轉換應付票據的收益 | — | | | |||||||
定期貸款的收益 | — | — | | |||||||
償還不可兌換的定期貸款 | — | ( | ( | |||||||
融資活動提供的淨現金 | — | | | |||||||
外幣折算對現金和現金等價物的影響 |
| |
| |
| | ||||
現金和現金等價物的淨變動 |
| ( |
| ( |
| ( | ||||
期初的現金和現金等價物 | | | | |||||||
期末的現金和現金等價物 | $ | | $ | | $ | | ||||
現金流信息的補充披露： | ||||||||||
支付利息的現金 | $ | — | $ | | $ | | ||||
非現金投資和融資活動的補充披露： | ||||||||||
爲換取租賃負債而獲得的使用權資產 | $ | — | $ | ( | $ | — | ||||
經營租賃使用權資產記錄的租賃負債 | $ | — | $ | | $ | — | ||||
分配給認股權證負債的定期貸款收益金額 | $ | — | $ | — | $ | | ||||
將優先股換成預先注資的認股權證 | $ | — | $ | | $ | — | ||||
隨附的附註是這些簡明合併財務報表的組成部分。
5
Adagio Medical Holding, Inc.
附註至簡明合併財務報表
(未經審計)
以下展品作爲本季度10-Q表格的一部分或參照併入。
我們的公司
Adagio Medical Holding, Inc.（之前稱爲Aja Holdco, Inc.）及其全資子公司（統稱爲「公司」、「繼任者」）是一家醫療技術公司，專注於開發和商業化用於治療心臟心律失常的消融技術，包括房顫、房撲和室性心動過速。公司的技術集中在超低溫冷凍消融（「ULTC」）和脈衝場冷凍消融（「PFCA」）上，旨在使用公司的專有控制檯、導管和刀頭，在心臟的任何地方產生持久、連續、全層的病變。遺留的Adagio（如下文定義）在2020年6月和2024年3月分別獲得了歐洲市場的iCLAS™冷凍消融系統和Vt冷凍消融系統的CE標記，並已在歐盟正式推出。該公司尚未在美國推出商業產品，但正在努力獲得必要的監管批准。該公司總部門設在加利福尼亞州拉古那海岸。
在2024年7月31日（「交割日期」），ARYA Sciences Acquisition Corp IV，一家開曼群島的豁免公司（「ARYA」）、Aja Holdco, Inc.（「ListCo」），一家特拉華州公司以及ARYA的全資子公司、Aja Merger Sub 1，一家開曼群島的豁免公司及ListCo的全資子公司（「ARYA Merger Sub」）、Aja Merger Sub 2, Inc.，一家特拉華州公司及ListCo的全資子公司（「Company Merger Sub」）與Adagio Medical, Inc.，一家特拉華州公司（「遺留Adagio」、「前任」）完成了業務合併（「業務合併」），根據2024年2月13日各方的業務合併協議的條款，經過2024年6月25日ARYA與Adagio之間的同意和修正案第1號修改（「業務合併協議」）。
根據業務合併協議，在交割日期，（i）ARYA Merger Sub與ARYA合併（「ARYA合併」），Company Merger Sub與遺留Adagio合併（「Adagio合併」，與ARYA合併統稱爲「合併」），ARYA和遺留Adagio在合併中存續，且在合併生效後，ARYA和遺留Adagio均成爲ListCo的全資子公司（ARYA合併生效的時間稱爲「ARYA合併生效時間」，Adagio合併生效的時間稱爲「Adagio合併生效時間」，合併均生效後的時間稱爲「交割」，交割發生的日期稱爲「交割日期」），（ii）ListCo向特拉華州國務卿遞交了修改和重述的ListCo公司章程，並且ListCo的董事會批准並採納了ListCo的修改和重述的章程，以及（iii）ListCo將其名稱更改爲Adagio Medical Holdings, Inc.
請參考 注3 - 向前合併 有關業務合併的詳細信息。
公司的普通股（如下定義）於2024年8月1日在納斯達克資本市場（NASDAQ：ADGM）以ADGm的代碼開始交易。
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流動性與持續經營
附帶的簡明合併基本報表是基於假設公司將持續作爲持續經營單位而編制的。 公司收入有限，自創立以來經歷了反覆的營業虧損和負的現金流，並預計在未來幾年的時間裏將繼續保持這種狀態。
截至2024年9月30日，繼任者報告的現金及現金等價物爲$
管理層不認爲公司當前的現金及現金等價物足以在財務報表發佈之日起的至少12個月內支持運營。管理層認爲這對公司的持續經營能力提出了重大懷疑。
管理層打算通過（i）在短期內協商其他現金、股權或債務融資，（ii）繼續追求必要的監管批准以在美國市場進行商業化，以及（iii）執行成本削減措施來管理現金消耗，來減輕影響其持續作爲一個持續經營實體的重大疑慮的情況和事件。然而，無法保證當前的計劃會爲公司帶來任何流動性，或以公司可接受的條款獲得融資。
如果公司無法維持足夠的財務資源，其業務、財務狀況和經營結果將受到實質性和不利的影響。公司可能需要延遲、限制、減少或終止其產品發現和開發活動或未來的商業化努力。隨附的簡明合併基本報表是在假設公司將持續作爲一個持續經營實體的基礎上編制的，並不包括可能因這一不確定性結果而產生的調整。此會計基礎預期公司資產的恢復和負債的履行將在正常商業過程中進行。
資源的戰略重新調整 和 企業重組
在2023年12月1日，Legacy Adagio批准了一項資源戰略重組和企業重組（以下簡稱「RIF」），旨在重新分配資本，以符合其未來兩年的業務重點。
作爲RIF的一部分，Legacy Adagio啓動了裁員，
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註釋2 - 重要會計政策摘要
基礎 演示文稿
合併的基本報表已根據美國通用會計原則（「U.S. GAAP」）編制。此筆記中提到的適用指南是指美國權威的公認會計原則，見於會計準則彙編（「ASC」）和財務會計標準委員會（「FASB」）的會計標準更新（「ASU」）。
由於業務合併，從會計角度來看，ListCo是收購方，Legacy Adagio是被收購方和前身。財務報表展示包括Legacy Adagio在閉幕日期之前的期間的財務報表作爲「前身」，以及公司在閉幕日期之後的期間的財務報表作爲「後繼者」，包括Legacy Adagio和ARYA的合併。後繼者期間包括公司在2024年7月31日至2024年9月30日的運營結果和現金流。
由於在業務合併的截止日期應用收購會計法，隨附的合併基本報表包含一條黑色分界線，指示所示的前任和繼任報告實體在不同基礎上呈現，因此不可比較。
未經審計 中期 基本信息
隨附的截至2024年9月30日的 interim condensed consolidated balance sheet，涵蓋了2024年7月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任）、2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任）以及截至2023年9月30日的三個月和九個月（前任）的 condensed consolidated statements of operations and comprehensive income (loss) 和關於 convertible preferred stock 及股東權益（赤字）的 condensed consolidated statements，涵蓋了2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任）以及截至2023年9月30日的九個月（前任），以及相關的腳註披露均未經審計。
這些未經審計的中期基本報表是根據美國公認會計原則編制的，管理層認爲，這些報表反映了截至2024年9月30日（繼任者）公司的財務狀況所需的所有調整，這些調整僅包括正常的例行調整，並且反映了從2024年7月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任者）、2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任者）和截至2023年9月30日的三個月和九個月（前任）的經營成果和全面收入（虧損），以及從2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任者）和截至2023年9月30日的九個月的現金流。
從2024年7月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任者）、2024年1月1日至2024年7月30日（前任）和2024年7月31日至2024年9月30日（繼任者）期間的結果並不一定預示着預計的截至2024年12月31日的年度結果或任何其他中期的結果。
新興 增長 公司狀態
根據《1933年證券法》第2(a)條的定義，公司是一家「新興成長公司」（「證券法」），此定義經2012年的《創業公司啓動法案》（「JOBS法案」）修訂。
根據《就業法案》第102(b)(1)條款，新興增長公司在私人公司（即那些尚未獲得證券法註冊聲明有效或沒有根據《交易法》註冊證券的公司）被要求遵守新的或修訂的財務會計標準之前，無需遵守新的或修訂的財務會計標準。《就業法案》規定，公司可以選擇不參加延長期過渡期，並遵守適用於非新興增長公司的要求，但任何此類選擇一旦做出即不可撤銷。公司已決定不選擇退出該延長期過渡期，這意味着當發佈或修訂會計標準時，如果其對公共公司或私人公司的適用日期不同，公司作爲新興增長公司，可以在私人公司採用新的或修訂的標準時採納新標準。
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原則 合併
合併的財務報表包括了Adagio Medical Holdings, Inc.及其全資子公司的賬戶。所有的內部公司餘額和交易在合併中都已被消除。
估算的使用 假設
根據美國通用會計準則編制合併財務報表需要管理層做出估計和假設，這些估計和假設影響資產、負債、營業收入、費用以及或有資產和負債的披露。 這些估計和假設基於當前事實、歷史經驗和各種在特定情況下被認爲合理的其他因素，其結果構成了對資產和負債賬面價值及收入和費用的記錄做出判斷的基礎，而這些信息從其他來源並不容易獲得。 實際結果可能與這些估計有所不同。
細分市場
經營分部被定義爲可獲得單獨財務信息的實體組成部分，並且該信息定期被首席運營決策者（「CODM」）審核，以決定如何將資源分配給單個分部並評估其表現。 本公司的CODM是首席執行官。 本公司已確定其運作爲
現金及現金等價物
本公司將自購買之日起三個月內到期的所有高流動性投資，包括其貨幣市場賬戶，視爲現金等價物。公司的所有現金等價物都有流動市場。在美國每個金融機構的賬戶中持有的現金存款，由聯邦存款保險公司（「FDIC」）投保，最高爲25萬美元。在歐洲聯盟每個金融機構的賬戶中持有的現金存款，由存款保險計劃投保，最高爲10萬歐元。公司將現金存放在銀行存款賬戶中，這些賬戶在某些情況下可能超過規定的保險限額。任何損失或無法訪問未投保資金均可能對公司的財務狀況、經營結果和現金流產生重大不利影響。管理層預計該賬戶不會發生任何損失。
集中度 信用風險和表外風險
可能使公司面臨信用風險的金融工具主要包括現金及現金等價物。公司將其現金及現金等價物存入主要金融機構；然而，有時存入資金可能超過提供的保險金額。自成立以來，公司在其存入資金上未曾經歷任何損失。
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收入確認
公司主要通過銷售用於公司冷凍消融控制檯（"控制檯"）的冷凍消融導管、導絲、食道加熱氣囊及其他配件（統稱爲"消耗品"）來產生產品營業收入。公司直接將其產品銷售給醫院和醫療中心。在較小程度上，公司還產生來自無償租賃給客戶的控制檯的租賃收入。
公司根據ASC 606《與客戶的合同收入》（"ASC 606"）會計處理來自客戶合同的營業收入。ASC 606的核心原則是公司應確認收入，以反映向客戶轉移承諾的貨物或服務的情況，以及與公司期望獲得的商品或服務交換的對價相符的金額。公司通過以下五個步驟確認來自客戶的銷售收入：
•步驟1：識別與客戶的合同。
•步驟2：識別合同中的履約義務。
•步驟 3：確定交易價格。
•步驟4：將交易價格分配給合同中的履約義務。
•步驟五：當公司滿足績效義務時，確認營業收入。
公司的客戶合同通常包含具有交付義務的績效承諾，其中包括耗材，並可能還包括借給客戶的控制檯。公司會評估多項績效義務安排中的每項承諾，以確定其是否代表一個獨立的績效義務。在公司客戶安排中，主要的績效義務是耗材的銷售。
當公司將控制檯借給客戶時，它始終保留對控制檯的所有權，並且不要求客戶對任何消耗品進行最低購買承諾。在這種情況下，公司根據收到的客戶訂單向客戶開具消耗品的發票。隨着時間的推移，公司預計通過客戶對其他消耗品的持續購買和使用來彌補借出控制檯的成本。基於這些原因，公司判斷消耗品的部分安排對價是隱含的控制檯使用租金。因此，公司根據每項獨立績效義務的相對估計單獨售價在租賃元件（即控制檯）和非租賃元件（即消耗品）之間分配安排對價。分配給租賃元件的收入在2024年1月1日至2024年7月30日（前任公司）、2024年7月31日至2024年9月30日（繼任公司）和截至2023年9月30日的九個月（前任公司）期間並不重要。
對客戶消耗品銷售的營業收入在公司的簡明合併的經營和綜合收益（虧損）報表中被分類爲營業收入。消耗品的交付是滿足於某一時點的績效義務，當貨物的控制權轉移給客戶時（即，裝運點）。當控制權轉移給客戶時，收入被確認，金額反映公司預計應獲得的產品對價。
其他 營業收入 考慮因素
營業收入是以扣除銷售稅後的淨額報告的。公司已選擇會計政策，不單獨確認向客戶發貨的績效義務，而是將其作爲履約成本進行會計處理。
公司的合同主要包括固定金額。只有在與可變金額相關的不確定性得到解決時，甚至在這種情況下，公司才將在交易價格中包括估計的可變金額，以至於有可能不會發生重大收入累計逆轉。客戶通常需要在30天內付款。
由於公司合同的短期性質，獲得合同的任何增量成本在發生時作爲銷售、一般和行政費用記錄。
如果承諾的商品或服務在與客戶的合同的背景下被視爲不重要，則公司不評估它們是否是履約義務。此外，如果在合同開始時的預期是客戶付款與承諾的商品或服務轉移之間的時間將少於一年，則公司也不評估合同是否具有顯著的融資成分。
在2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（後任）及截至2023年9月30日的九個月（前任）期間，收入僅來自歐洲市場。
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庫存
庫存包括原材料、在製品和成品，按成本或可變現淨值中的較低者進行計價。庫存的成本流出方法爲先進先出（"FIFO"）。成本可能包括材料、勞動力和製造業間接費用。每當因數表明庫存成本超過賬面價值時，庫存的賬面價值會被審查以評估可能的減值，管理層會根據可變現淨值調整庫存。公司還定期評估庫存，以估算過剩數量和過時造成的損失，並在作出此類判斷時將庫存成本減記至可變現淨值。可變現淨值是根據預計銷售價格（在業務的正常過程中）減去預計完成和處置成本來判斷的。在研究和開發活動中使用的庫存在發生時便會計入費用。
物業及設備
固定資產按成本入賬，減去累計折舊。折舊和攤銷採用直線法，分攤到相關資產的估計使用壽命，通常爲 至
物業和設備包括借給客戶的設備，並位於客戶的場所。公司保留對客戶評估持有的設備的所有權，並有權在設備未按預期使用時將其移除。
無形資產 資產
有限使用壽命的無形資產按照其預計的使用壽命進行直線攤銷。在確定確定壽命無形資產的預計使用壽命時，公司考慮了收購資產的性質、競爭地位、生命週期位置以及預計未來的運營現金流，以及其通過持續投資和法律侵權保護來支持這些資產的承諾。
無限期使用的無形資產包括在建研發（「IPR&D」）。無限期壽命的無形資產在出現減值因數時需要進行減值測試，至少每年進行一次。然而，實體可以首先評估定性因素，以判斷是否需要進行定量減值測試。如果實體根據定性評估判斷無限期無形資產的公允價值可能低於其賬面價值，則需要進一步測試。否則，不需要進一步的減值測試。無限期無形資產減值測試包括一步分析，將無形資產的公允價值與其賬面價值進行比較。如果無形資產的賬面價值超過其公允價值，則確認減值損失，金額等於該超出部分。
遺留Adagio沒有重大無形資產。
商譽
根據ASC 350，商譽 - 其他無形資產，公司在報告單位級別對商譽進行減值測試。公司在商譽減值測試中有一個報告單位。商譽每年在第四季度進行減值測試，或者更頻繁地進行測試，如果事件或情況的變化表明商譽的賬面價值可能無法恢復（「觸發事件」）。在發生觸發事件時，實體有權先評估定性因素，以判斷是否需要進行定量減值測試。如果商譽減值的可能性大於50%，則要將報告單位（即公司）的公平價值與其賬面價值進行比較。對於賬面價值超過公平價值的金額，確認減值損失，前提是確認的損失不能超過商譽的總金額。
Legacy Adagio沒有商譽。
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集中度
公司截至2024年11月4日有
公司的
減值 長期資產的
公司每年或在事件或商業情況變化提示資產賬面價值可能無法完全收回時，審查長期資產，包括物業和設備以及有限使用壽命的無形資產。 當資產的賬面價值超過預期使用和最終處置的總未貼現現金流時，確認減值損失。 減值損失的金額爲資產賬面價值超過其公允價值的部分。 對於2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任）以及截至2023年9月的九個月期間，公司確定存在
外幣 翻譯 and Transactions
The assets, liabilities, and results of operations of Adagio Medical GmbH are recorded using the Euro as the designated functional currency, which is the currency of the primary economic environment in which Adagio Medical GmbH operates. Consequently, transactions in currencies other than Euro are measured and recorded in Euro. Upon consolidation with the Company, its assets and liabilities are translated to U.S. Dollars at currency exchange rates as of the condensed consolidated balance sheet date and its revenues and expenses are translated at the weighted-average currency exchange rates during the applicable reporting periods. Translation adjustments resulting from the process of translating this entity’s financial statements are reported in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets and foreign currency translation adjustment in the condensed consolidated statements of operations and comprehensive income (loss).
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租賃
公司根據ASC 842對其租賃財產進行會計處理。在該指導下，符合租賃定義的安排被分類爲經營租賃或融資租賃，並在綜合資產負債表上記錄爲使用權資產和租賃負債，計算方法是以隱含在租賃中的利率或公司的增量借款利率對固定租賃支付進行折現，增量借款利率是基於當前經濟環境、當前借款、租賃價值、滿足租賃義務的貨幣、利率敏感性、租賃期限和重要性來確定的有抵押借款的利率。租賃負債因利息而增加，並因每期付款而減少，使用權資產在租賃期限內進行攤銷。對於經營租賃，租賃負債的利息和使用權資產的攤銷在租賃期限內產生按直線法分配的租金費用。變量租賃費用在發生時確認。
公司在合同開始時確定合同是否是租賃或包含租賃。如果合同傳達了在一段時間內控制和指導特定財產、廠房或設備使用權的權利，以換取對價，則該合同將被視爲租賃或包含租賃。公司通常還必須有權獲得從使用該財產、廠房和設備中獲取實質上所有經濟利益的權利。
公司在租賃開始時使用租賃協議中的隱含利率（如易於獲得）或其增量借款利率作爲計算未來租賃支付現值的基礎。增量借款利率表示公司在類似期限和類似經濟環境下，以有抵押方式借款所需支付的利率。
在計算使用權資產和租賃負債時，公司決定將租賃和非租賃組件合併用於其房地產業租賃。公司採用了排除初始期限爲十二個月的短期租賃的政策選擇，免於ASC 842的初始確認條款。請參閱 註釋11-經營租賃 的更多詳細信息。
公司的顯性租賃協議針對其控制檯符合經營租賃的條件，因此，營業收入根據ASC 842《租賃》和ASC 606《客戶合同收入》進行確認。在2024年1月1日至2024年7月30日（前任）、2024年7月31日至2024年9月30日（繼任）和截至2023年9月30日的九個月（前任）期間，分配給租賃組件的收入並不顯著。
營業收入成本
營業收入的成本包括原材料、直接勞動力、製造費用、交通和接收成本以及與公司產品生產相關的其他不太重要的間接成本。
收入成本還包括借給客戶的遊戲主機的折舊費用。
研發
研究和開發費用主要包括直接參與研究和開發活動的人員的薪資、諮詢費用和與員工相關的成本（包括基於股票的補償）、臨牀試驗費用、設備成本、材料成本、分攤的租金和設施成本以及折舊。與未來可能產品相關的研究和開發費用在發生時計入費用。公司還在發生時計提並報銷與第三方進行的臨牀試驗相關的活動費用。
銷售、一般及行政
銷售、一般與行政費用主要包括執行、財務及其他行政職能人員的工資和與員工相關的費用（包括基於股票的補償）、分攤的租金和設施成本、與知識產權及公司事務相關的法律費用、會計和諮詢服務的專業費用、營銷成本和保險費用。公司在發生時將所有銷售、一般和行政成本費用化。發生的交易成本記錄在銷售、一般和行政成本中。
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應計交易成本（前任）
與業務組合相關，前任Adagio應計交易成本，主要包括法律、會計及其他專業費用，這些費用已發生並計入費用，但尚未支付。至2023年12月31日的應計費用（前任）在簡明合併資產負債表中記錄爲應計交易成本。
公平 價值 測量
公允價值測量的基礎是：公允價值是一個退出價格，表示在市場參與者之間的有序交易中出售資產或轉移負債所收到的金額。因此，公允價值是一種基於市場的測量，應基於市場參與者在定價資產或負債時使用的假設來確定。爲考慮這些假設，以下三級公允價值等級用於確定測量公允價值的輸入：
•一級-活躍市場中相同資產或負債的報價價格。
•二級-除了一級價格之外的可觀察輸入，適用於市場中直接或間接可觀察的類似資產或負債。
•第三級 - 不可觀察輸入，這些輸入由很少或沒有市場活動支持，並使用定價模型、折現現金流方法或類似技術對金融工具進行估值，同時還包括那些確定公允價值需要重大判斷或估計的工具。
按公允價值計量的金融工具的分類基於對公允價值計量的最低顯著輸入水平的整體評估。管理層對特定輸入在整體公允價值計量中的重要性的評估需要判斷，並考慮與資產或負債相關的特定因素。不同假設和/或估計方法的使用可能會對估計的公允價值產生重大影響。因此，披露的公允價值估計或初始記錄的金額可能無法反映公司或金融工具持有人在當前市場交易中可以實現的金額。可轉換票據應付和認股權證負債的公允價值可能受到某些不可觀察輸入的影響，特別是折現率、預期波動率以及歷史和預測業績。對這些輸入的顯著變化可能導致公允價值計量顯著不同。
公允價值 期權 可轉換票據
根據ASC 825財務工具（「ASC 825」）的規定，Legacy Adagio選擇了公允價值選項來對2022年10月發行的可轉換票據（「2022年10月可轉換票據」）、2023年4月（「2023年4月可轉換票據」）、2023年11月（「2023年11月可轉換票據」）、2024年2月（「2024年2月可轉換票據」，「2024年臨時融資票據」）、2024年5月（「2024年5月可轉換票據」）、2024年6月（「2024年6月可轉換票據」）和2024年7月（「2024年7月可轉換票據」）（統稱爲「Legacy Adagio可轉換票據」）進行會計處理，公司也選擇了公允價值選項來對可轉換證券票據（如下定義）進行會計處理，以便以更精確的金額來衡量這些負債，反映Legacy Adagio和公司運營的當前經濟環境。
上述可轉換票據在發行時按公允價值記錄，並隨後在每個報告期末重新計量爲公允價值。可轉換票據的公允價值變動（不包括與利息相關的金額）記錄在「可轉換票據公允價值調整」中，而與利息相關的金額則作爲利息費用記錄在綜合損益表中。
由於應用公允價值選項，與發行可轉換票據相關的直接成本和費用在發生時計入費用（即不作爲遞延成本確認）。參考 第4條 - 公允價值計量 以獲取更多詳細信息。
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Warrants
The Company has Convert Warrants (as defined below) issued along with the Convertible Securities Notes, and PIPE Pre-funded Warrants (as defined below) issued in PIPE Financing (as defined below), which are classified as liabilities. The Company also has PIPE Base Warrants (as defined below) issued in PIPE Financing, which is classified as equity. Legacy Adagio has certain common stock warrants (“SVB Warrants”) issued along with the SVB Term Loan (as defined below) and pre-funded warrants to purchase Series E preferred stock (“Series E Pre-funded Warrants”), which were both classified as liabilities.
The Company and Legacy Adagio determine the classification of warrants based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions for equity classification. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter until settlement. Changes in the estimated fair value of the liability-classified warrants are recognized in warrant liabilities fair value adjustment in the condensed consolidated statements of operations and comprehensive income (loss).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to a liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the condensed consolidated balance sheet date.
See Note 10- Warrants for additional information related to the warrants.
Term Loan (Predecessor)
The Company accounts for the Predecessor term loan at residual value on the date of issuance. The expected life of the term loan is the contractual term ending on the maturity date. The Company classifies the term loan as current liabilities within twelve months of the maturity date or when otherwise due. Interest expense is recognized in the condensed consolidated statements of operations and comprehensive income (loss) over the contractual term of the loan. See Note 9- Debt for additional information related to the term loan.
Convertible Preferred Stock (Predecessor)
The Company records the Legacy Adagio convertible preferred stock at fair value on the dates of issuance, net of issuance costs. Upon the occurrence of certain events that are outside the Legacy Adagio’s control, including a deemed liquidation event, holders of the convertible preferred stock can cause redemption for cash. Each share of preferred stock would automatically be converted into shares of Legacy Adagio common stock at the then effective conversion rate immediately upon the earlier of (i) the election of the holders of a majority of the outstanding shares of preferred stock, voting as a separate class on an as-converted to common stock basis, or (ii) the closing of the sale of the Legacy Adagio’s common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended, with aggregate offering proceeds to Legacy Adagio (before deduction for underwriters’ discounts and expenses relating to the issuance) of at least $
As the Legacy Adagio preferred stock is considered to be contingently redeemable, the Legacy Adagio preferred stock has been classified outside of permanent equity.
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Stock-Based Compensation
The Company recognizes compensation expense for all stock-based awards issued to employees and non-employees based on the estimated grant-date fair value, which is recognized as expense on a straight-line basis over the requisite service period. The Company has elected to recognize forfeitures as they occur. The fair value of stock options is determined using the Black-Scholes option-pricing model. The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to the Company’s common stock valuation. Refer to Note 14- Stock-Based Compensation.
Due to the absence of an active market for Legacy Adagio common stock, the Company utilized methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation to estimate the fair value of Legacy Adagio common stock. In determining the exercise prices for options granted, the Company considered the fair value of the common stock as of the grant date. The fair value of the common stock is determined based upon a variety of factors, including the Company’s financial position, historical performance and operating results, the Company’s stage of development, the progress of the Company’s research and development programs, the prices at which the Company sold its convertible preferred stock, the superior rights, preferences and privileges of the Company’s convertible preferred stock relative to its common stock, external market conditions affecting the medical technologies industry, the lack of marketability of the Legacy Adagio common stock, prospects of a transaction and market performance of peer companies. Significant changes to the key assumptions underlying the factors used could result in different fair values of Legacy Adagio at each valuation date.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Deferred tax assets and liabilities are determined based on the difference between the condensed consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse and include Net Operating Loss (“NOL”) carryforwards and Research and Development (“R&D”) tax credit carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.
ASU 2019-12, Simplifying the Accounting for Income Taxes was adopted in the first quarter of 2021 and the Company has recorded franchise taxes not based on income outside of income tax expense. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had
To date, there have been
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Note 3 – Forward Merger
On February 13, 2024, ARYA, ListCo, ARYA Merger Sub, and Company Merger Sub, entered into a Business Combination Agreement, which was amended by the Consent and Amendment No. 1 to the Business Combination Agreement, dated as of June 25, 2024.
Prior to the annual general meeting, holders of
Description of the Transaction
Upon the consummation of Business Combination,
| a) | Each issued and outstanding Class A ordinary share of ARYA, par value $ |
| b) | Each issued and outstanding Class B ordinary share of ARYA, par value $ |
| c) | Each warrant of Legacy Adagio (other than the Series E Pre-funded Warrants) was terminated in accordance with the terms of the applicable warrant agreement. |
| d) | All issued and outstanding convertible promissory notes of Legacy Adagio (excluding the Bridge Financing Notes and the 2024 Bridge Financing Notes, as defined below), including any accrued and unpaid interest thereon, are automatically and fully converted into shares of Legacy Adagio common stock in accordance with the terms of such convertible promissory notes, and such convertible promissory notes are cancelled, satisfied, extinguished, discharged and retired in connection with such conversion. |
| e) | Each share of Legacy Adagio preferred stock, par value $ |
| f) | All issued and outstanding shares of Legacy Adagio common stock including Series E Pre-funded Warrants that had been issued and outstanding are automatically cancelled and extinguished and converted into shares of the Company’s Common Stock based on the exchange ratio set forth in the Business Combination Agreement. |
| g) | Each issued, outstanding and unexercised option to purchase Legacy Adagio common stock (“Legacy Adagio Option”) had been vested prior to the Closing with an aggregate value that exceeds the aggregate exercise price of such Legacy Adagio Option (each an “In-the-Money Adagio Options”) are cancelled and extinguished in exchange for options to purchase shares of the Company’s Common Stock, and each issued and outstanding Legacy Adagio equity award (other than an In-the-Money Adagio Options) are automatically cancelled and extinguished for no consideration, and each holder thereof will cease to have any rights with respect thereto. |
| h) | $ |
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In connection with the execution of the Business Combination Agreement, ListCo and ARYA entered into Subscription Agreements (the “Initial Subscription Agreements”), with Perceptive Life Sciences Master Fund, Ltd, a Cayman Islands exempted company (the “Perceptive PIPE Investor”) and certain other investors (the “Initial Other PIPE Investors”, and together with the Perceptive PIPE Investor, the “Initial PIPE Investors”). In June 2024, ListCo and ARYA entered into additional Subscription Agreements (the “June Subscription Agreements” and, together with the Initial Subscription Agreements, the “Subscription Agreements”) with certain additional investors, (the “June PIPE Investors”, and together with the Initial Other PIPE Investors, the “Other PIPE Investors”, and the Other PIPE Investors, together with the Perceptive PIPE Investor, the “PIPE Investors”).
Pursuant to the subscription agreements, the PIPE Investors have committed financing valued at $
The PIPE Financing included:
(i)Commitments by certain Other PIPE Investors to purchase $
(ii)Commitments by certain Other PIPE Investors that were shareholders of ARYA to not to redeem
(iii)Agreements to purchase
(iv)Contribution of total $
(v)An additional cash investment of $
In return for the investment specified in (iv) and (v) above, the Perceptive PIPE Investor received
Further, in connection with the execution of the Business Combination Agreement, certain investors (“Convert Investors”) executed a securities purchase agreement, dated February 13, 2024, with ListCo (the “Convertible Security Subscription Agreement”), pursuant to which ListCo issued on the Closing Date to the Convert Investors $
Acquisition Method of Accounting
The Business Combination has been accounted for as a forward-merger in accordance with U.S. GAAP. Under this method of accounting, ListCo has been treated as the “accounting acquirer” and Legacy Adagio as the “accounting acquiree” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination has been accounted for using the acquisition method of accounting. The acquisition method of accounting is based on ASC 805 and uses the fair value concepts defined in ASC 820. ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date, with limited exceptions per ASC 805-20-30-12 through 30-23. As such, under the acquisition method of accounting, ListCo’s assets and liabilities retain their carrying amounts, and the assets and liabilities of Legacy Adagio, including any intangible assets recognized in connection with the Business Combination, are recorded at their fair values as of the acquisition date, except as otherwise required. The excess of the purchase price over the estimated fair values of net assets acquired is recorded as goodwill.
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Under the acquisition method of accounting, ListCo was considered to be the accounting acquirer based on the terms of the Business Combination. Upon consummation of the Business Combination, the cash on hand resulted in the equity at risk being considered insufficient for Legacy Adagio to finance its activities without additional subordinated financial support. Therefore, Legacy Adagio was considered a Variable Interest Entity (“VIE”) and the primary beneficiary of Legacy Adagio was treated as the accounting acquirer.
ListCo is the primary beneficiary of Legacy Adagio. ListCo will hold
The following is a summary of the purchase price calculation (unaudited, in thousands except share and per share data):
Number of the Company’s Common Stock issued | | |
Number of replacement stock options granted to Legacy Adagio’s option holders by the Company | | |
Total shares and stock options | | |
Multiplied by the Company’s Common Stock price at the Closing | $ | |
Total | $ | |
Number of PIPE Base Warrants issued in lieu of settling Bridge Financing Notes | | |
Multiplied by estimated value of PIPE Base Warrants at the Closing | $ | |
Estimated fair value of PIPE Base Warrants issued in lieu of settling Bridge Financing Notes | $ | |
Total purchase price | $ | |
The allocation of the purchase price was as follows (unaudited, in thousands):
Assets Acquired: | |||
Cash | $ | ||
Accounts receivable, net | |||
Inventories, net | |||
Prepaid expenses | |||
Other current assets | |||
Property and equipment, net | |||
Intangible assets, net | |||
Goodwill | |||
Right-of-use asset, net | |||
Other assets | |||
Tota assets acquired | $ | ||
Liabilities Assumed: | |||
Accounts payable | $ | ||
Accrued liabilities | |||
Operating lease liabilities, current | |||
Convertible notes payable, long-term | |||
Warrant liabilities | |||
Operating lease liabilities, long-term | |||
Deferred tax liabilities | |||
Total liabilities assumed | $ | ||
Net total | $ |
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Goodwill represents the excess of the total purchase consideration over the fair value of the underlying net assets and captures the value attributable to future economic benefits arising from future technology development beyond the existing pipeline of identified IPR&D projects.
The acquired intangible assets consist of developed technology and IPR&D, which were valued at $
In connection with the Business Combination, the transactions that occurred concurrently with the Closing Date of the Business Combination were reflected “on the line”. “On the line” describes those transactions triggered by the consummation of the Business Combination that are not recognized in the consolidated financial statements of the Predecessor nor the Successor as they are not directly attributable to either period but instead were contingent on the Business Combination.
The number of shares of common stock issued and amounts recorded on the line within stockholders’ equity (deficit) are reflected below to arrive at the opening consolidated balance sheet of the Successor.
Accumulated | ||||||
Number of Shares | Common Stock | APIC | Deficit | |||
ListCo closing equity as of July 30, 2024 | — | — | $ | | $ | ( |
Accumulated deficit carried over from ARYA | — | — | — | ( | ||
Contribution of cash proceeds in PIPE Financing | | — | | — | ||
Conversion of ARYA convertible promissory Notes | | — | | — | ||
Conversion of ARYA Class A ordinary shares and Class B ordinary shares | | — | — | — | ||
Conversion of Class A ordinary shares subject to redemption | | — | | — | ||
Shares issued for acquisition of Legacy Adagio | | | | — | ||
Additional shares issued and reclassification of Class A ordinary shares subject to non-redemption agreements and open market subscription agreements | | — | | — | ||
Successor’s opening equity as of July 31, 2024 (Successor) | | | $ | | $ | ( |
In conversion of the ARYA’s equity outstanding prior to the Closing Date, for each issued and outstanding Class B ordinary share of ARYA at par value $
Pro Forma Financial Information (Unaudited)
The following unaudited pro forma financial information summarizes the results of operations for the Company as though the Business Combination had occurred on January 1, 2023 and has been derived from the historical consolidated financial statements of the Company’s Predecessor Periods and the Successor Period. The Successor and Predecessor Periods for the periods three months ended September 30, 2024; three months ended September 30, 2023; nine months ended September 30, 2024 and nine months ended September 30, 2023 have been combined. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or the future consolidated results of operations of the Company.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenue | $ | $ | $ | | $ | ||||||
Net loss | ( | ( | ( | ( | |||||||
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The unaudited pro forma financial information for the three and nine months ended September 30, 2024 and 2023 combines the historical results of Adagio Medical, Inc., ARYA, and ListCo for the three and nine months ended September 30, 2024 and 2023, assuming that the companies were combined as of January 1, 2023.
The unaudited pro forma results reflect the adjustments for recording the step-up amortization adjustments for the fair value of intangible assets acquired, reversal of change in fair value of Legacy Adagio Convertible Notes and warrants, reversal of interest on Legacy Adagio Convertible Notes, reversal of interest on Legacy Adagio’s SVB Term Loan, and recording interest on Convertible Securities Notes.
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Note 4 – Fair Value Measurements
The Company’s financial instruments include its money market accounts (included as part of cash and cash equivalents), accounts receivable, accounts payable, common stock warrant liabilities (i.e. Convert Warrants and SVB Warrants), pre-funded warrant liabilities (i.e. PIPE Pre-funded Warrants), and convertible notes payables (i.e. Convertible Securities Notes and Legacy Adagio Convertible Notes). The recorded carrying amounts of cash and equivalents, accounts receivable and accounts payable approximates fair value due to their short-term nature. The convertible notes, common stock warrant liabilities, and pre-funded warrant liabilities are carried at fair value.
Assets and liabilities recognized at fair value on a recurring basis in the condensed consolidated balance sheets consists of cash equivalents, common stock warrant liabilities, pre-funded warrant liabilities, and convertible notes payables. These items are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The following tables summarize the Company’s financial instruments at fair value based on the fair value hierarchy for each class of instrument (in thousands):
September 30, 2024 (Successor) | Level 1 | Level 2 | Level 3 | |||
Assets: | ||||||
Money market account | $ | | $ | — | $ | — |
Liabilities: | ||||||
Convertible Securities Notes | $ | — | $ | — | $ | |
Convert Warrants | $ | — | $ | — | $ | |
PIPE Pre-funded Warrants | $ | — | $ | — | $ | |
December 31, 2023 (Predecessor) | Level 1 | Level 2 | Level 3 | |||
Assets: | ||||||
Money market account | $ | | $ | — | $ | — |
Liabilities: | ||||||
Legacy Adagio Convertible Notes | $ | — | $ | — | $ | |
SVB Warrants | $ | — | $ | — | $ | |
There were
Legacy Adagio Convertible Notes (Predecessor)
On October 27, 2022, Legacy Adagio entered into a note purchase agreement with investors for the issuance and sale of convertible promissory notes with an aggregate principal amount of $
On April 4, 2023, Legacy Adagio issued a $
22
On November 28, 2023, Legacy Adagio issued a $
On February 13, 2024, Legacy Adagio issued a $
On May 21, 2024, Legacy Adagio issued a $
On June 25, 2024, Legacy Adagio issued a $
On July 23, 2024, Legacy Adagio issued a $
Upon the consummation of the Business Combination, the principal of Bridge Financing Notes along with its accrued but unpaid interest, was converted into the shares of the Company’s Common Stock and Base Warrants as part of the PIPE Financing. Refer to Note 9- Debt for details.
The Company measures Legacy Adagio Convertible Notes at fair value based on significant inputs not observable in the market, which caused them to be classified as Level 3 measurements within the fair value hierarchy.
In determining the fair value of the Legacy Adagio Convertible Notes as of December 31, 2023, the Company applied the probability-weighted expected return method (“PWERM”). The PWERM determines the value of an instrument based upon an analysis of future values for the potential instrument payouts under different future outcomes. The instrument value is based upon the present value of the probability of each future outcome becoming available to the instrument holders, and the rights of each security.
The Company calculated the estimated fair value of convertible promissory notes as of December 31, 2023 using the following assumptions:
As of December 31, 2023 | Discount rate | Expected Term (years) | Risk-Free interest rate | Volatility |
October 2022 Convertible Notes | | |||
April 2023 Convertible Notes | | |||
November 2023 Convertible Notes | |
In determining the fair value of the Legacy Adagio Convertible Notes as of July 31, 2024 prior to the Closing, the Company used the observed closing stock price of ARYA as of July 31, 2024 multiplied by the actual number of shares that the Legacy Adagio Convertible Notes converted into.
23
The following table presents changes in the Level 3 convertible promissory notes measured at fair value for the year ended December 31, 2023 (Predecessor) (in thousands):
Year ended December 31, 2023 | Balance (beginning of year) | Additions | Fair value measurement adjustments | Balance | ||||
October 2022 Convertible Notes | $ | | $ | — | $ | | $ | |
April 2023 Convertible Notes | — | | ( | | ||||
November 2023 Convertible Notes | — | | | |
The following table presents changes in the Level 3 convertible promissory notes measured at fair value for the period from January 1, 2024 to July 30, 2024 (Predecessor) (in thousands):
Period from January 1 to July 30, 2024 (Predecessor) | Balance (beginning of year) | Additions | Fair value measurement adjustments | Balance | ||||
October 2022 Convertible Notes | $ | | $ | — | $ | ( | $ | |
April 2023 Convertible Notes | | — | | | ||||
November 2023 Convertible Notes | | | ( | | ||||
February 2024 Convertible Notes | — | | ( | | ||||
May 2024 Convertible Notes | — | | | | ||||
June 2024 Convertible Notes | — | | | | ||||
July 2024 Convertible Notes | — | | | |
Convertible Securities Notes (Successor)
On July 31, 2024, the Company issued the $
The Company measures the Convertible Securities Notes at fair value based on significant inputs not observable in the market, which caused them to be classified as Level 3 measurements within the fair value hierarchy.
The Company utilized the binomial lattice model to value the Convertible Securities Notes at the Closing Date and as of September 30, 2024. The following table summarizes the significant inputs as of the valuation dates:
Convertible Securities Notes | ||||
| July 31. 2024 |
| September 30, 2024 | |
Stock price | $ | $ | ||
Discount rate | ||||
Expected Term (years) | ||||
Risk-Free interest rate | ||||
Volatility |
The following table presents changes in the Level 3 convertible promissory notes measured at fair value for the periods from July 31, 2024 to September 30, 2024 (Successor) (in thousands):
Convertible Securities Notes - July 31, 2024 to September 30, 2024 (Successor) | |||
Balance (beginning of period) | $ | | |
Additions | — | ||
Fair value measurement adjustments | ( | ||
Balance (end of period) | $ | | |
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Warrant Liabilities (Predecessor)
i.Series E Pre-funded Warrants
On June 25, 2024, the Legacy Adagio issued to certain investor the Series E Pre-funded Warrants to purchase the Legacy Adagio’s Series E Preferred Stock, in exchange of the investor’s existing holding of Series E Preferred Stock. The exercise price of the pre-funded warrants is $
The fair value of the Series E Pre-funded Warrants is based on the fair value of the Series E Preferred Stock minus the exercise price. As of June 30, 2024, the Company estimated the fair value of the Series E Preferred Stock by applying a conversion factor of
As of July 31, 2024 prior to the Closing, the Company estimated the fair value of Series E Pre-funded Warrants based on the observed closing stock price of ARYA as of July 31, 2024 multiplied by the actual number of shares that the Series E Pre-funded Warrants converted into. The estimated fair value of the Series E Pre-funded Warrants as of June 30, 2024 and July 31, 2024 prior to the Closing is $
Upon the consummation of the Business Combination, the Series E Pre-funded Warrants were automatically cancelled and extinguished and converted into shares of the Company’s Common Stock based on the exchange ratio set forth in the Business Combination Agreement.
ii.SVB Warrants
On February 3, 2023, in conjunction with the Loan and Security Agreement (“LSA”) with Silicon Valley Bank (“SVB Term Loan”), Legacy Adagio issued Initial Warrants to purchase shares of common stock of the Company, and a contingent right to obtain an additional share of the common stock upon the non-occurrence of the Interest Only Milestone (as defined below). The Company measured SVB Warrants at fair value based on significant inputs not observable in the market, which caused them to be classified as Level 3 measurements within the fair value hierarchy. Changes in the fair value of the common stock warrants related to updated assumptions and estimates were recognized as warrant liabilities fair value adjustment within the condensed consolidated statements of operations and comprehensive income (loss).
The SVB Warrants were not material as of December 31, 2023 (Predecessor) and there were no material changes in fair value for the periods from July 1, 2024 to July 30, 2024 (Predecessor), January 1, 2024 to July 30, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor).
The SVB Warrants were terminated prior to the consummation of the Business Combination as the fair market value of Legacy Adagio common stock is lower than the warrant exercise price before the Closing. Refer to Note 10- Warrants for additional information.
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認股權證負債（繼承者）
i.轉換Warrants
在2024年7月31日，公司發行了
As set forth in the agreement of the Convertible Securities Notes, the Convert Warrants are exercisable on a cashless basis or on a gross basis for one share of the Company’s Common Stock at $
可轉換權證在公允價值層級中被分類爲第3等級計量。公司在交易結束日和2024年9月30日利用Black-Scholes Merton期權模型對可轉換證券附屬票據進行估值。以下表格總結了估值日期的重要輸入：
轉換Warrants | ||||
| 2024年7月31日 |
| 2024年9月30日 | |
普通股票價格 | $ | $ | ||
預期波動率 | ||||
無風險利率 | ||||
預期股息收益率 | ||||
預期期限（年） |
下表展示了截至2024年7月31日至2024年9月30日（繼任者）按公允價值計量的3級可轉換債券的變化（單位：千）。
轉換認股權證 - 2024年7月31日至2024年9月30日（繼任者） | |||
期初餘額 | $ | | |
新增 | — | ||
fair價值測量調整 | ( | ||
期末餘額 | $ | | |
26
ii.PIPE預融資權證
在2024年7月31日，公司發行了
根據PIPE預融資認股權證協議的規定，PIPE預融資認股權證可在無現金方式或以總金額方式行使，兌換公司普通股的每股價格爲$
PIPE預融資權證在公允價值層級中被分類爲第三層次測量。PIPE預融資權證的公允價值基於公司普通股的公允價值減去行使價格。
下表呈現了自2024年7月31日至2024年9月30日（繼任者）期間以公允價值計量的第三級PIPE預先融資認購權證的變動（單位：千）。
PIPE預資助權證 - 2024年7月31日至2024年9月30日（繼承者） | |||
期初餘額 | $ | | |
新增 | — | ||
fair價值測量調整 | ( | ||
期末餘額 | $ | | |
註釋5 - 存貨，淨值
截至2024年9月30日和2023年12月31日的存貨包括以下內容（單位：千）:
2023年9月30日， | 12月31日 | |||||
2024 |
| 2023 | ||||
（繼承者） | (前任) | |||||
原材料 | $ | | $ | | ||
在製品 | | | ||||
成品 |
| |
| | ||
存貨總額 | $ | | $ | | ||
過時和過期的庫存按發生時計入費用。庫存的記錄已扣除過時和製造業廢料的$
庫存的記錄已扣除過時和製造業廢料的$
27
註釋6 - 資產和設備
截至2024年9月30日和2023年12月31日，公司的資產和設備淨額包括以下內容（以千計）:
2023年9月30日， | 十二月-24 | |||||
| 2024 |
| 2023 | |||
(繼任者) | (前任者) | |||||
控制檯 | $ | | $ | | ||
其他機械和設備 | | | ||||
租賃改善 |
| |
| | ||
工具和模具 | | | ||||
計算機設備 | | | ||||
演示設備 | | | ||||
傢具和固定裝置 | | | ||||
施工中 | — | | ||||
車輛 |
| |
| | ||
不動產、廠房和設備總計 |
| |
| | ||
減：累計折舊 |
| ( |
| ( | ||
物業及設備（淨額） | $ | | $ | | ||
折舊費用爲$
折舊費用爲$
注意 7 – 前進商譽和無形資產
公司的無形資產淨額包括以下內容（以千計）：
2024年9月30日 | |||||||||||
(繼承者) | |||||||||||
| 使用壽命（年） |
| 賬面總額 |
| 累計攤銷 |
| 淨賬面價值 | ||||
IPR&D | 不定期 | $ | $ | — | $ | ||||||
開發的科技 | ( | ||||||||||
總計 | $ | $ | ( | $ | |||||||
無形資產的攤銷預計在2025年至2028年期間每年約爲$
截至2024年9月30日（繼承者），公司擁有$的商譽
根據公司的定性分析，
28
備註 8 - 應計負債
下表展示截至2024年9月30日和2023年12月31日的應計負債的詳細信息（以千計）:
2023年9月30日， | 12月31日 | |||||
2024 |
| 2023 | ||||
(繼任者) |
| (前任者) | ||||
薪酬及相關費用 | $ | | $ | | ||
研發費用 | | | ||||
其他 | | | ||||
總計應計負債 | $ | | $ | | ||
備註 9 - 債務
截至2024年9月30日和2023年12月31日的未償債務包括以下內容（單位：千）:
2024年9月30日 | 2023年12月31日 | ||||
(繼任者) | (前任者) | ||||
可轉換證券票據 | $ | | $ | — | |
2022年10月份以公允價值計量的可轉換票據 | — | | |||
2023年4月可轉換票據按公允價值計量 | — | | |||
2023年11月可轉換票據按公允價值計量 | — | | |||
SVB定期貸款 | — | | |||
總未償債務 | $ | | $ | | |
2022年10月可轉換票據（前身）
2022年10月27日，Legacy Adagio與投資者簽訂了2022年10月可轉換票據，發行和出售總本金爲$的可轉換本票
2023年4月4日，原定於2023年10月27日到期的2022年10月可轉換票據被修訂，將到期日延長至以下日期中的最晚者：（i）2024年1月5日，（ii）Legacy Adagio與ARYA之間關於潛在業務合併的一些擬議條款和條件的非約束性摘要的協議終止，或（iii）前述非約束性條款清單中所定義的獨佔期的終止或失效。2022年10月可轉換票據協議也已修訂，以將2022年10月可轉換票據置於2023年4月可轉換票據（如下所述）之下，並規定將所有2022年10月可轉換票據的本金和應計利息轉換爲Legacy Adagio的E系列優先股，以便於業務合併。
On November 28, 2023, the October 2022 Convertible Notes agreement was further amended to subordinate the October 2022 Convertible Notes to the April 2023 Convertible Notes and the November 2023 Convertible Notes (as described below). Upon the consummation of the Business Combination, all principal and accrued interest in respect of the October 2022 Convertible Notes was converted into shares of the Legacy Adagio common stock, when multiplied by the exchange ratio applicable to the Legacy Adagio common stock in the Business Combination, entitled the holder of this note to receive a number of shares of the same class of common stock that are issued in the Private Investment in Public Equity Financing (「PIPE Financing」) equal to the then outstanding principal amount and any accrued and unpaid interest under this note, divided by
在2024年2月13日，2022年10月可轉換票據協議進一步修訂，將到期日期延長至商業合併協議的終止，並使2022年10月可轉換票據從屬於2023年4月可轉換票據、2023年11月可轉換票據和2024年2月可轉換票據（如下所述）。
29
The total of $
For the periods from July 1, 2024 to July 30, 2024 (Predecessor), from January 1, 2024 to July 30, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor), Legacy Adagio has recognized the interest expense of $
Upon the consummation of the Business Combination, all principal and accrued interest in respect to the October 2022 Convertible Notes were converted into
Bridge Financing Notes (Predecessor)
April 2023 Convertible Notes
On April 4, 2023, Legacy Adagio issued a $
On November 28, 2023, the April 2023 Convertible Notes were amended to align certain terms of the April 2023 Convertible Notes with the November 2023 Convertible Notes.
Upon the consummation of the Business Combination, this note was automatically converted into the type of securities that are issued in the PIPE Financing in an amount equal to the then-outstanding principal amount and any accrued and unpaid interest, divided by the effective price of the securities sold in the PIPE Financing.
As of December 31, 2023 (Predecessor), the principal amount outstanding was $
For the periods from July 1, 2024 to July 30, 2024 (Predecessor), from January 1, 2024 to July 30, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor), Legacy Adagio has recognized the interest expense of $
30
2023年11月可轉換債券
在2023年11月28日，Legacy Adagio向Perceptive PIPE投資者發行了一份面額爲$
在業務合併完成時，該票據自動轉換爲在PIPE融資中發行的證券類型，其金額等於當時未償還的本金和任何應計且未支付的利息，除以在PIPE融資中銷售證券的有效價格。
在2023年12月，2023年11月的可轉換票據被修訂，允許在2023年12月13日和2023年12月28日分別發行金額爲$的延期提款承諾。
截至2023年12月31日（前公司），未償還的本金金額爲$
在2024年7月1日至2024年7月30日（前公司）以及2024年1月1日至2024年7月30日（前公司）期間，Legacy Adagio已確認利息費用爲$
2024年可轉換債券
在2024年5月21日，Legacy Adagio向Perceptive PIPE投資者發行了一項金額爲$
在業務合併完成時，該票據自動轉換爲在PIPE融資中發行的證券類型，其金額等於當時未償還的本金和任何應計且未支付的利息，除以在PIPE融資中銷售證券的有效價格。
在2024年7月1日至2024年7月30日（前身）以及在2024年1月1日至2024年7月30日（前身）期間，Legacy Adagio已確認利息支出爲$
2024年6月可轉換票據
2024年6月25日，Legacy Adagio向Perceptive PIPE投資者發行了一份$
在業務合併完成時，該票據自動轉換爲在PIPE融資中發行的證券類型，其金額等於當時未償還的本金和任何應計且未支付的利息，除以在PIPE融資中銷售證券的有效價格。
在2024年7月1日至2024年7月30日（前任）和2024年1月1日至2024年7月30日（前任）期間，Legacy Adagio已確認利息費用爲$
31
2024年7月可轉換債券
在2024年7月23日，Legacy Adagio向Perceptive PIPE投資者發行了一份$
在業務合併完成時，該票據自動轉換爲在PIPE融資中發行的證券類型，其金額等於當時未償還的本金和任何應計且未支付的利息，除以在PIPE融資中銷售證券的有效價格。
在2024年7月1日至2024年7月30日（前任）期間，Legacy Adagio已確認利息支出$
根據業務合併協議，未償還的$
2024年2月可轉換債券（前身）
在2024年2月13日，Legacy Adagio向Perceptive PIPE投資者發行了一筆本金爲$
在商業合併完成時，2024年2月可轉換票據將自動轉讓給公司，作爲根據2024年2月13日公司、ARYA、Legacy Adagio與Perceptive PIPE投資者之間簽署的票據購買協議和可轉換證券認購協議（見下文）發行可轉換證券票據的一部分。任何在2024年2月可轉換票據的本金上產生的利息將因將票據轉讓給公司而被沒收。
在2024年7月1日至2024年7月30日（前任）和2024年1月1日至2024年7月30日（前任）期間，Legacy Adagio已確認利息費用爲$
在結算日，$
32
SVB 定期貸款（前身）
2023年2月3日，Legacy Adagio簽署協議以獲得首筆定期貸款預付款$
與SVB定期貸款的發行相關，Legacy Adagio發行了負債分類的Warrants，公允價值爲$
認定Warrants負債和控制項權利的初始確認導致了$的折扣。
截至2023年12月31日，SVB定期貸款的未償本金爲$。
在2024年7月1日至2024年7月30日（前任）、2024年1月1日至2024年7月30日（前任）及截至2023年9月30日的三個月和九個月（前任）期間，Legacy Adagio已確認利息支出爲$
在交易結束之前，Legacy Adagio現有的SVB定期貸款淨餘額爲$
可轉換證券票據（繼承者）
與業務合併協議的執行相關，Convert Investors 於2024年2月13日簽訂了可轉換證券認購協議，並於2024年6月20日與ListCo進行了修訂。根據協議，ListCo在交割日向Convert Investors發行 $
總計$
共計
2024年2月可轉換票據的轉換是根據與其他簽署可轉換證券認購協議的投資者相同的條款進行的。
從2024年7月31日到2024年9月30日（繼任者）期間，公司已確認利息支出爲$
33
Note 10 - Warrants
SVB Warrants (Predecessor)
On February 3, 2023, in conjunction with the LSA, the Legacy Adagio issued Initial Warrants to purchase
The exercise price of the SVB Warrants is $
The SVB Warrants were terminated prior to the consummation of the Business Combination as the fair market value of Legacy Adagio common stock is lower than the exercise price of the SVB Warrants before the Closing.
Series E Pre-funded Warrants (Predecessor)
On June 25, 2024, in conjunction with the Series E Preferred Stock exchange agreement (refer to Note 13-Mezzanine Equity and Stockholders’ Equity (Deficit)), Legacy Adagio issued to a certain investor
The exercise price of the pre-funded warrants is $
Upon the consummation of the Business Combination, the
Convert Warrants (Successor)
As mentioned in Note 9- Debt, the Company issued $
PIPE Pre-funded Warrants (Successor)
The Company issued
As set forth in the agreement of the PIPE Pre-Funded Warrants, the PIPE Pre-Funded Warrants are exercisable on a cashless basis or on a gross basis for one share of the Company’s Common Stock at an exercise price of $
34
PIPE Base Warrants (Successor)
On the Closing Date, the Company issued
The Company also issued
Further, in connection with the non-redemption agreements entered with certain Other PIPE Investors holding
The Base Warrants can be exercised to the Company’s Common Stock at any time during the period from the issuance date to the expiration date which is the fifth anniversary from the date of issuance. The warrants can be exercised on a gross or net basis at an exercise price of $
The Base Warrants were fair valued at $
According to the ASC 815, it is determined that the Base Warrants associated with the PIPE Financing are indexed to the Company’s Common Stock under and are accounted for as equity, which is initially measured at fair value. The Base Warrants are classified as equity in the financial statements because they meet the ASC 815-40 indexation guidance. Specifically, 1) the Base Warrants can be exercised at any time during the exercise period without contingencies; 2) the Base Warrants can be settled in a fixed number of shares upon exercise with any adjustments, such as antidilution and alternative issuance adjustments, consistent with ASC 815 guidance, which does not preclude equity classification. Additionally, the Company has sufficient authorized shares available to settle the Base Warrants, and all the adjustments are in the control of the Company, further supporting the equity classification.
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Note 11 - Operating Leases
The Company leases distribution and research and development facilities as well as sub-leases office and manufacturing space from third parties and related parties (refer to Note 17- Related Party Transactions) under its operating leases. The leases have expirations ranging from March 2024 to June 2026, some of which include rent escalations or an
As of September 30, 2024 and December 31, 2023, the Company does not have any finance or short-term leases and has not entered into leases which have not yet commenced that would entitle the Company to significant rights or create additional obligations during the periods as of September 30, 2024 and December 31, 2023.
The following table summarizes quantitative information of the Company’s operating leases for the periods from January 1, 2024 to July 30, 2024 (Predecessor), from July 31, 2024 to September 30, 2024 (Successor), and the nine months ended September 30, 2023 (Predecessor):
Nine months ended September 30, | |||||||
2024 | 2023 | ||||||
Predecessor | Successor | Predecessor | |||||
In thousands, unaudited | January 1 to July 30 | July 31 to September 30 | January 1 to September 30 | ||||
Operating cash flows paid for operating leases | $ | $ | $ | ||||
Weighted average remaining lease term (years) | |||||||
Weighted average discount rate | |||||||
Operating lease cost was $
Operating lease cost was $
The following table presents the future minimum payments under the non-cancelable operating leases as of September 30, 2024 (in thousands):
Three months ending December 31, 2024 | $ | | ||
Year ending December 31, 2025 | | |||
Year ending December 31, 2026 | | |||
Total undiscounted future cash flows | | |||
Less: imputed interest | ( | |||
Total operating lease liability | $ | |
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Note 12 - Commitments and Contingencies
Litigation
The Company is not currently party to any legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings, if any.
Note 13 - Mezzanine Equity and Stockholders’ Equity (Deficit)
Authorized Shares (Predecessor)
The Legacy Adagio’s Amended and Restated Articles of Incorporation authorize the issuance of two classes of stock designated as common and preferred stock, each having a par value of $
Convertible Preferred Stock (Predecessor)
Legacy Adagio classifies convertible preferred stock as temporary equity on the accompanying condensed consolidated balance sheets, as all such preferred stock is redeemable either at the option of the holder or upon an event outside the control of Legacy Adagio. The requirements of a deemed liquidation event, as defined within its amended and restated certificate of incorporation filed in November 2020, are not entirely within Legacy Adagio’s control. In the event of such a deemed liquidation event, the proceeds from the event are distributed in accordance with the liquidation preferences, provided that the holders of preferred stock have not converted their shares into common stock. Legacy Adagio records the issuance of preferred stock at the issuance price less related issuance costs. Legacy Adagio has not adjusted the carrying value of outstanding preferred stock to its liquidation preference because a deemed liquidation event is not probable of occurring as of the end of the reporting period.
During the periods from January 1, 2024 to July 30, 2024 (Predecessor), the following transactions have been executed:
•On June 25, 2024,
On the Closing Date, the Legacy Adagio’s
There were no preferred stock transactions during the year ended December 31, 2023 (Predecessor).
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The following table summarizes information related to issuance of the Company’s preferred stock as of December 31, 2023 (Predecessor) (in thousands, except share data):
Preferred Stock Class | Number of Shares Authorized | Shares Issued and Outstanding | Carrying Value (1) | Conversion Price | Number of Common Stock Equivalent Shares | Liquidation Preference | |||
Series A | | | $ | | $ | | | $ | |
Series B | | | | | | | |||
Series C | | | | | | | |||
Series D | | | | | | | |||
Series E | | | | | | | |||
| | $ | | | $ | |
(1)The carrying value reflects the gross proceeds received from the sale of the preferred stock less issuance costs.
The relative rights, terms, privileges, and restrictions granted to or imposed upon preferred stockholders are described below:
Preferred Stock - Dividends
Prior and in preference to any declaration or payment of any dividends to the holders of common stock, the holders of preferred stock shall be entitled to receive dividends out of any assets legally available therefor, at the rate of eight percent (
In the event that the dividend amount declared by the Board of Directors of Legacy Adagio is insufficient to permit payment of the full aforesaid dividends, such dividends will be paid ratably to each holder of preferred stock in proportion to the dividend amounts to which each holder of preferred stock is entitled. After payment of the full amount of the aforesaid dividends, any additional dividends declared shall be distributed to the holder of common stock and preferred stock in proportion to the number of shares of common stock that would be held by such holder on an as-converted to common stock basis.
Liquidation Preference
In the event of liquidation of Legacy Adagio, including a merger, acquisition, or sale of all or substantially all the assets of Legacy Adagio, holders of preferred stock are entitled to receive an amount equal to the original issue price of each share of preferred stock held plus any dividends declared but not yet paid, prior to any distribution of assets or surplus funds of Legacy Adagio to common stock shareholders. After payment has been made to the holders of the preferred stock of the full amounts to which they are entitled as noted above, the remaining assets would be distributed among the holders of the common stock pro rata based on the number of shares of common stock held by each holder.
If, at the time of liquidation, the assets are insufficient to permit full payment of the liquidation preferences of the series listed in the order above, the assets must be distributed ratably among the holders of the series in proportion to the full preferential amount each such holder is otherwise entitled to receive in respect to such shares.
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Voting Rights
So long as the shares of preferred stock that are convertible into at least
On all other matters, the holders of the preferred stock shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock.
Fractional votes by the holders of preferred stock shall not be permitted and any fractional voting rights shall be rounded to the nearest whole number.
Conversion Rights
Each share of preferred stock shall be convertible, at the option of the holder, into shares of common stock without the payment of any additional consideration. The preferred stock shall be convertible into the number of fully paid and nonassessable shares of common stock which results from dividing the conversion price per share in effect for the preferred stock at the time of conversion into the per share conversion value. The initial per share conversion price of Series A, Series B, Series C, Series D, and Series E is $
Each share of preferred stock shall automatically be converted into shares of common stock at the then effective conversion rate immediately upon the earlier of (i) the election of the holders of a majority of the outstanding shares of preferred stock, voting as a separate class on an as-converted to common stock basis, or (ii) the closing of the sale of the Legacy Adagio common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended, with aggregate offering proceeds to Legacy Adagio (before deduction for underwriters’ discounts and expenses relating to the issuance) of at least $
Protective Provisions
So long as there are at least
So long as shares of Series E preferred stock that are convertible into at least
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Common Stock (Predecessor)
Each share of common stock is entitled to
On the Closing Date, as explained in Note 3- Forward Merger, each share of Legacy Adagio issued and outstanding prior to the Closing Date was converted into the Company’s Common Stock based on exchange ratio set forth in the Business Combination Agreement.
Common Stock (Successor)
As of September 30, 2024 (Successor), the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to
In September 2024, the Company issued
As of the reporting date, the vesting of the Sponsor Earnout was not considered probable.
According to ASC 815, it is determined that the Sponsor Earnout is indexed to the Company’s Common Stock and classified as equity and is initially measured at fair value and not subsequently remeasured. The Sponsor Earnout vests when the Company’s stock price meets a stated price or there is a company sale during the earnout period. Upon meeting either vesting condition, the same number of the Company’s Common Stock would be issued and no longer subject to forfeiture or cancellation. The Sponsor Earnout meets the ASC 815-40 indexation guidance. Specifically, the stated stock price and company sale, as the exercise contingencies, do not preclude equity indexation and there is no variability in the number of shares issuable under the Sponsor Earnout. Additionally, the Sponsor Earnout at the issuance meets the ASC 815-40 equity classification criterion as the Company has sufficient authorized shares available to settle the Sponsor Earnout and all the antidilution adjustments are in the control of the Company.
The holders of the Company’s Common Stock are entitled to receive dividends whenever funds are legally available, when and if declared by the Company’s Board of Directors. As of September 30, 2024 (Successor), no cash dividend has been declared to date. Each share of the Company’s Common Stock is entitled to one vote.
Below table summarizes the number of shares of common stock outstanding immediately following the Closing:
Number of Shares | ||
Contribution from PIPE Financing for cash | | |
Conversion of ARYA convertible promissory notes | | |
Conversion of ARYA Class A ordinary shares and Class B ordinary shares | | |
Conversion of Class A ordinary shares subject to redemption | | |
Shares issued in purchase consideration | | |
Additional shares issued and reclassification of Class A ordinary shares subject to non-redemption agreements and open market subscription agreements | | |
Total | |
The table below summarizes the Company’s reserved common stock for further issuance as of September 30, 2024 (Successor) and December 31,2023 (Predecessor):
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September 30, 2024 | December 31, 2023 | |||
(Successor) | (Predecessor) | |||
Conversion of preferred stock | — | | ||
Stock options issued and outstanding under the 2012 and 2022 Plan | — | | ||
Common shares available for future grant under the 2012 and 2022 Plan | — | | ||
Base Warrants | | — | ||
PIPE Pre-funded Warrants | | — | ||
Convertible Securities Notes | | — | ||
Convert Warrants | | — | ||
Company’s Common Stock issuable upon the exercise of outstanding options Legacy Adagio’s equity plans that were assumed in the Business Combination | | — | ||
Common Stock reserved for future issuance under the 2024 Equity Incentive Plan | | — | ||
Common Stock reserved for future issuance under the 2024 Key Employee Equity Incentive Plan | | — | ||
Common Stock reserved for future issuance under the 2024 Employee Stock Purchase Plan | | — | ||
Common stock reserved for future issuance | | |
Note 14 - Stock-Based Compensation
Predecessor Periods
2012 Stock Incentive Plan
In January 2011, Legacy Adagio’s Board approved the 2012 Stock Incentive Plan (the “2012 Plan”), which permitted grants of Incentive Stock Options (“ISOs”) and Non-statutory Stock Options (“NSOs”) to employees, directors and consultants. The maximum number of shares that can be granted under the 2012 Plan cannot exceed
2022 Stock Incentive Plan
In April 2022, the Legacy Adagio’s Board approved, in conjunction with the termination of the 2012 Plan, the 2022 Stock Incentive Plan (the “2022 Plan”), permitting ISOs and NSOs to employees, directors and consultants. The maximum number of shares granted under the 2022 Plan cannot exceed
The Stock Incentive Plan provides a means whereby participants may purchase shares of common stock pursuant to ISOs or NSOs and such persons may be granted shares of common stock for consideration consisting of cash and/or past services rendered to or on behalf of Legacy Adagio. ISOs may only be granted to employees. NSOs and stock purchase rights may be granted to employees and consultants. Generally, options awards only have service conditions that need to be met for the awards to vest, with the exception of grants to
The stock options generally vest over
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The following table summarizes stock option activity during the periods from January 1, 2024 to July 30, 2024 (Predecessor):
| Weighted | |||||||||
Weighted | Average | Aggregate | ||||||||
Average | Remaining | Intrinsic | ||||||||
| Exercise Price | Contractual | Value | |||||||
Shares | Per Share | Life (years) | (in thousands) | |||||||
Outstanding, December 31, 2023 (Predecessor) |
| | $ | | $ | | ||||
Forfeited |
| ( | | — | — | |||||
Options forfeited in connection with the Business Combination |
| | | — | ||||||
Outstanding, July 30, 2024 (Predecessor) |
| | $ | | — | $ | — | |||
Vested and expected to vest, July 30, 2024 (Predecessor) | | $ | | — | $ | — | ||||
Vested and exercisable, July 30, 2024 (Predecessor) | | $ | | — | $ | — | ||||
There were
The fair value of awards vested was $
Upon the consummation of the Business Combination,
Stock-Based Compensation Expense
The following table summarizes the total stock-based compensation expense for the stock options expense recorded in the unaudited condensed consolidated statements of operations and comprehensive income/(loss) for the periods from January 1, 2024 to July 30, 2024 (Predecessor), July 1 to July 30 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor) (in thousands):
2024 | 2023 | |||||||||||
July 1 to July 30 | January 1 to July 30 | Three months ended September 30 | Nine months ended September 30 | |||||||||
Selling, general, and administration | $ | | $ | | $ | | $ | | ||||
Research and development | | | | | ||||||||
Total stock-based compensation expense | $ | | $ | | $ | | $ | | ||||
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Successor Periods
2024 Equity Incentive Plan
The Board of Directors of the Company adopted the 2024 Equity Incentive Plan on July 26, 2024. The purpose of the plan is to promote the success and enhance the value of the Company by linking the individual interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The 2024 Equity Incentive Plan authorizes the issuance of up to
The Company has not granted any awards under this plan as of September 30, 2024.
2024 Key Employee Equity Incentive Plan
The Board of Directors of the Company adopted the 2024 Key Employee Equity Incentive Plan on July 26, 2024. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the individual interests of key employees of the Company to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The 2024 Key Employee Equity Incentive Plan authorizes the issuance of up to
The Company has not granted any awards under this plan as of September 30, 2024.
2024 Employee Stock Purchase Plan
The Board of Directors of the Company adopted the 2024 Equity Incentive Plan on July 26, 2024. The 2024 Employee Stock Purchase Plan provides a means by which eligible employees of the Company and certain designated related corporations may be given an opportunity to purchase shares of the Company’s Common Stock. The plan permits the Company to grant a series of purchase rights to eligible employees under an Employee Stock Purchase Plan. The 2024 Employee Stock Purchase Plan authorizes the issuance of up to
The Company has
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The following table summarizes stock option activity during the periods from July 31, 2024 to September 30, 2024 (Successor):
| Weighted | |||||||||
Weighted | Average | Aggregate | ||||||||
Average | Remaining | Intrinsic | ||||||||
| Exercise Price | Contractual | Value | |||||||
Shares | Per Share | Life (years) | (in thousands) | |||||||
Outstanding, July 31, 2024 (Successor) |
| | $ | | — | $ | | |||
Options issued as part of the Business Combination |
| | | — | | |||||
Outstanding, September 30, 2024 (Successor) |
| | $ | | — | $ | | |||
Options vested, September 30, 2024 (Successor) | | $ | | — | $ | | ||||
Options vested and exercisable, September 30, 2024 (Successor) | | $ | | — | $ | | ||||
As discussed above, the Company has not granted any options under the 2024 Equity Incentive Plan, the 2024 Key Employee Equity Incentive Plan and the 2024 Employee Stock Purchase Plan.
Note 15 – Earnings Per Share (“EPS”)
Predecessor
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per common share excludes the potential impact of the Company’s convertible preferred stock, common stock warrants, and common stock options because the Company's net losses would cause such shares to be anti-dilutive. Therefore, as the Company recorded net losses in the periods presented, basic and diluted net loss per common share are the same.
(Predecessor) | ||||||||
Period from July 1 to July 30, 2024 | Period from July 1 to July 30, 2023 | Period from January 1 to July 30, 2024 | Nine months ending September 30, 2023 | |||||
Numerator: | ||||||||
Net income (loss) attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( |
Denominator: | ||||||||
Weighted-average shares outstanding used in computing net income (loss) per share attributable to common stockholders - basic and diluted | ||||||||
Net income (loss) per share attributable to common stockholders - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the periods presented because the impact of including them would be anti-dilutive:
(Predecessor) | ||
As of July 30, 2024 | As of September 30, 2023 | |
Convertible preferred stock | | |
Stock options | | |
SVB Warrants | - | |
Total potentially dilutive securities | ||
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Successor
After the Business Combination, the Successor calculated basic EPS and diluted EPS to common stockholders in conformity with the two-class method required for companies with participating securities. The Company considered (i) the Convertible Securities Notes and (ii) the earnout shares subject to vesting conditions to be participating securities as they participate in any distributions declared by the Company. The Company’s Base Warrants and Convert Warrants are considered as non-participating securities, as the holders are not entitled to any shareholder right prior to the exercise of the Base Warrants and the Convert Warrants. As of the reporting date, none of the Base Warrants or the Convert Warrants were exercised to receive the Company’s Common Stock.
Under the two-class method, undistributed earnings allocated to these participating securities were subtracted from net income in determining net income attributable to common stockholders. Net income attributable to common stockholders was not allocated to Convertible Securities Notes as the holders of Convertible Securities Notes did not have a contractual obligation to share in income.
Further, Basic EPS under the two-class method includes the impact of the Company’s PIPE Pre-funded Warrants as the PIPE Pre-funded Warrants are exercisable for only $
The Company discloses the Diluted EPS under the if-converted method as such diluted EPS is lower than the diluted EPS calculated under the two-class method. The Earn-out shares subject to vesting conditions are not considered in the denominator for the calculation of diluted EPS as the vesting conditions for the Earn-out shares were not met during the successor reporting period.
The following table sets forth the computation of basic earnings per share attributable to common stockholders and the participating securities for the periods presented (in thousands, except share and per share data):
Basic EPS:
July 31, 2024 to September 30, 2024 (Successor) | ||||||||
Common Shares | Convertible Securities Notes | Sponsor Earnout | ||||||
(amounts in thousands, except the per share information) | ||||||||
Numerator: | ||||||||
Net income allocated to each class of participating securities | $ | | $ | $ | ||||
Denominator: | ||||||||
Weighted-average shares outstanding | | — | — | |||||
Shares issuable to Convertible Securities Notes | — | | — | |||||
Sponsor Earnout | — | — | | |||||
Net income per share attributable to each class of participating securities – Basic | $ | | $ | | $ | | ||
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The following table sets forth the computation of diluted earnings per share attributable to common stockholders for the periods presented (in thousands, except share and per share data):
Diluted EPS:
(amounts in thousands, except the per share information) | July 31, 2024 to September 30, 2024 (Successor) | ||
Numerator: | |||
Net income – Basic | $ | | |
Less: Adjustment for fair value changes to convertible securities notes | ( | ||
Net income attributable to common stockholders – Diluted | $ | | |
Denominator: | |||
Weighted-average shares outstanding – Basic | | ||
Weighted-average effect of shares issuable to Convertible Securities Notes (if-converted method) | | ||
Weighted-average shares outstanding – Diluted | | ||
Net income per share attributable to common shares – Diluted (if-converted method) | $ | |
The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the periods presented because the impact of including them would be anti-dilutive:
September 30, 2024 (Successor) | ||
Base Warrants | | |
Convert Warrants | | |
Earn-out Shares, subject to vesting conditions | | |
Stock options issued in connection with the Business Combination | | |
Total potentially dilutive securities | |
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Note 16 - Income Taxes
The Company accounts for income taxes in accordance with ASC 740. Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets. The Company currently has a full valuation allowance against our deferred tax assets. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. For the periods from January 1, 2024 to July 30, 2024 (Predecessor) and July 31, 2024 to September 30, 2024 (Successor), there was no material change from fiscal year ended December 31, 2023 (Predecessor) in the amount of the Company's deferred tax assets that are not considered to be more likely than not to be realized in future years.
For the periods from January 1, 2024 to July 30, 2024 (Predecessor) and July 31, 2024 to September 30, 2024 (Successor), the effective tax rate for the Company’s operations was
For the nine months ended September 30, 2023 (Predecessor), the effective tax rate for the Company’s operations was
The Company is subject to U.S. federal income tax as well as income tax of foreign and state tax jurisdictions. The tax years 2019-2023 remain open to examination by the major taxing jurisdictions to which the Company is subject, except the Internal Revenue Service for which the tax years 2020-2023 remain open.
Note 17 - Related Party Transactions
Shared Services Agreement
During the periods from January 1, 2024 to July 30, 2024 (Predecessor), from July 31, 2024 to September 30, 2024 (Successor), from July 1, 2024 to July 30, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor), the Company incurred $
Laguna Hills Sublease (Predecessor)
In addition to the Shared Services Agreement, Legacy Adagio also sub-leases approximately
During the periods from January 1, 2024 to July 30, 2024 (Predecessor), and the three and nine months ended September 30, 2023, Legacy Adagio incurred $
Refer to Note 11-Operating Leases for further detail.
October 2022 Convertible Notes (Predecessor)
On October 27, 2022, Legacy Adagio issued a $
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Convertible Securities Notes (Successor)
In connection with the Business Combination and the Convertible Securities Notes agreement, the Company issued a $
PIPE Financing (Successor)
In connection with the Business Combination and the PIPE Financing, the Company issued
Further, in connection with the PIPE Financing, the Company issued
Note 18 - Subsequent Events
The Company evaluates subsequent events and transactions that occurred after the condensed consolidated balance sheet date through the date that the financial statements were issued. During this period, the Company did not identify any subsequent events that would have required adjustment in the condensed consolidated financial statements.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this Item 2 to “we,” “us,” “ListCo” or the “Company” refer to Adagio Medical Holdings, Inc. and its consolidated subsidiaries at and after the consummation of the Business Combination (as defined below). References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this Quarterly Report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties (some of which are beyond our control) or other factors:
| ● | Failure to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably and retain our key employees. |
| ● | We have no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective; |
| ● | The Company is a medical device company that has incurred net losses in every period to date and expects to continue to incur significant losses as it develops its business; |
| ● | The Company’s growth prospects partially depend on its ability to accelerate the commercialization of its products and to capitalize on market opportunities; |
| ● | The Company’s growth prospects partially depend on its ability to accelerate the commercialization of its products and to capitalize on market opportunities; |
| ● | Even if the Company is able to launch its pipeline portfolio successfully, it may experience material delays in its commercialization program relative to its current expectations; |
| ● | The life sciences technology market is highly competitive. Competitors include new entrants and established companies, many of which have significantly greater resources than the Company. If the Company fails to compete effectively, its business and results of operation and ours will suffer; |
| ● | If the Company is unable to establish manufacturing capacity by itself or with third-party partners in a timely and cost-effective manner, commercialization of its products would be delayed, which would result in lost revenue and harm its and our business; |
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| ● | 公司的產品商業化將需要公司與領先的生命科學公司和研究機構建立關係併成功合作； |
| ● | 如果公司無法建立有效的商業化網絡，包括有效的分銷渠道以及銷售和營銷功能，這可能會對其及我們的業務、財務狀況、運營結果和前景產生不利影響； |
| ● | 公司的經營業績未來可能會顯著波動，這使得其及我們的未來經營業績難以預測，可能導致其及我們的經營業績低於預期或公司和/或我們可能提供的任何指導； |
| ● | 沒有任何保證表明公司能夠執行其業務模型，包括實現其產品的市場接受度； |
| ● | 公司產品的成功依賴於適當的醫生培訓、實踐和患者選擇； |
| ● | 即使公司的產品商業化並獲得廣泛的科學和市場認可，如果公司未能改進這些產品或推出具有吸引力的新產品，其收入和前景，以及我們的收入和前景，可能會受到影響； |
| ● | 公司的產品市場規模可能小於預估，從而限制公司成功銷售其產品的能力； |
| ● | 失去任何第三方供應商和製造商，或這些供應商和製造商在生產公司產品時遇到的任何困難； |
| ● | 未能防範軟體或硬件的漏洞； |
| ● | 未能籌集額外資金以開發業務發展和商業化計劃； |
| ● | 由於政治不穩定、自然災害或其他原因，導致不利的美國或全球經濟狀況造成的風險； |
| ● | 我們一位或多位高管及其他關鍵員工的失去； |
| ● | 未能招聘和留住合格員工； |
| ● | 未能遵守聯邦、州和地方法律法規； |
| ● | 無法維持我們普通股在納斯達克資本市場的上市； |
| ● | 本文件中討論的其他風險和不確定性以及我們向美國證券交易委員會（「SEC」）提交的文件，包括公司於2024年8月6日提交給SEC的8-K當前報告。 |
如果這些風險或不確定性中的一個或多個變爲現實，或我們任何假設被證明不正確，則實際結果可能在重要方面與這些前瞻性聲明中預測的結果有所不同。我們不承擔更新或修訂任何前瞻性聲明的義務，無論是由於新信息、未來事件還是其他原因，除非適用的證券法要求這樣做。
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管理層關於財務狀況和經營成果的討論與分析
以下對財務狀況和運營結果的討論和分析應與本報告中包含的壓縮合並財務報表及相關附註和其他財務信息一起閱讀。討論和分析中的某些信息包含了前瞻性聲明，這些聲明涉及風險和不確定性。我們的實際結果可能因多種因素與這些前瞻性聲明中的預期結果有重大差異。請參見本報告中的「關於前瞻性聲明的警示說明」和「風險因素」。除非上下文另有要求，本招股說明書本節中提及的「我們」、「我們」、「Adagio」和「公司」均指Adagio Medical Holdings, Inc及其合併子公司在業務合併完成後的業務和運營。提及「Legacy Adagio」指的是Adagio Medical, Inc及其合併子公司在交割前的業務和運營。「ListCo」指的是交割前的特拉華州公司Aja HoldCo, Inc。ListCo在交割後更名爲「Adagio Medical Holdings, Inc」。提到我們的「管理層」或「管理團隊」指我們的高管和董事。
2024年7月26日，ARYA Sciences Acquisition CORP IV（「ARYA」）召開了年度股東大會，ARYA股東在會議上審議並通過了諸如業務合併協議等事項。2024年7月31日，業務合併協議的各方完成了業務合併。
根據會計標準分類法805《商業合併》中列出的標準分析，ListCo被視爲在業務合併中的會計收購方。Legacy Adagio是根據會計標準分類法805《商業合併》中的標準分析，被視爲會計被收購方及前身。因此，Legacy Adagio的歷史財務報表在完成業務合併後成爲合併公司的歷史財務報表。因此，本報告中包含的財務報表反映了(i)交割前Legacy Adagio的歷史運營結果；(ii)交割後公司的合併結果。附帶的財務信息包括一個前身期間，該期間包括至2024年7月30日與業務合併同時的時期，以及從2024年7月31日至2024年9月30日的繼任期間。在壓縮合並財務報表和報表附註的表格中，已在前身和繼任期間之間放置黑線，以突出這兩個期間之間缺乏可比性，並區分這些期間的截止時間。
Overview
我們是一家發展階段的醫療器械公司，專注於心髒心律失常的消融技術的開發和商業化，包括房顫（「AF」）、房撲（「AFL」）和室性心動過速（「VT」）。我們的獨特產品組合基於超低溫冷凍消融（「ULTC」）和脈衝場冷凍消融（「PFCA」）。我們的科技基於一個假設，即能夠持續創建持久的、連續的、貫穿整個層次的病變是改善心臟消融在心房和心室中有效性和結果的基礎。
我們的產品組合包括三個產品系列：iCLAS™房用ULTC導管及附件，vCLAS™室用ULTC導管，以及Cryopulse™房用PFCA導管及附件。所有這些導管都共享同一套ULTC冷凍消融控制檯。一臺獨立的脈衝場消融（PFA）控制檯與冷凍消融控制檯連接，以實現PFCA治療的同步，配合Cryopulse導管使用，未來將進行最大程度的集成，以實現操作靈活性和最小佔地面積。我們於2020年5月在歐洲獲得了iCLAS™冷凍消融系統的CE標誌，並在歐盟商業化推出。
我們正在不斷努力，達到技術組合開發過程中的下一個里程碑。我們於2024年3月獲得了歐洲的Vt冷凍消融系統的CE標記，並已在歐盟商業發佈。關鍵里程碑包括數據發佈、臨牀試驗以及美國和歐洲市場的監管和商業化發展。每個設備的數據發佈是關鍵的估值驅動里程碑，因爲投資者使用這些數據來理解程序的有效性。預計良好的結果將推動我們在市場條款下的額外投資和融資。
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我們在美國尚未正式推出，但正在努力獲得必要的監管批准。自2011年成立以來，我們每年都出現淨虧損截至2024年9月30日和2023年12月31日，我們累計虧損分別爲1320萬美元和13360萬美元。我們的淨收入（虧損）在2024年7月31日至2024年9月30日（繼任者）期間爲360萬美元，在2024年1月1日至2024年7月30日（前任者）期間爲（2130）萬美元，以及在截至2023年9月30日的九個月內（前任者）爲（2800）萬美元。經營活動中使用的淨現金分別爲640萬美元、1600萬美元和1860萬美元。我們幾乎所有的淨虧損都源於與我們的研究和開發項目相關的成本以及與我們的運營相關的一般和管理成本。截至2024年9月30日和2023年12月31日，我們的現金分別爲2830萬美元和140萬美元。
隨附的簡明合併財務報表是在假設我們將繼續作爲持續經營單位的基礎上編制的，該假設考慮了在正常經營過程中實現資產和負債。我們的營業收入有限，自成立以來經歷了重複的經營虧損和負現金流，並預期在未來幾年仍將繼續出現這些情況。這些因素對繼續作爲持續經營單位的能力提出了重大疑問，自財務報表發佈之日起的十二個月內。此外，管理層認爲我們當前的現金及現金等價物不足以支持至少12個月的運營，因此對我們繼續作爲持續經營單位的能力存在重大疑問。請參見我們簡明合併財務報表中的註釋1-組織和業務描述，以獲取關於持續經營評估的補充信息。
額外資本的需求部分將取決於我們開發活動的範圍和成本。截至目前，我們尚未從商業化產品的銷售中產生任何顯著的營業收入。我們產生產品收入的能力將取決於我們產品在美國和歐洲的成功開發和最終商業化。在此之前，如果有的話，我們預計將通過出售股權或債務、信用額度下的借款，或通過潛在的合作、其他戰略交易或政府及其他撥款來資助我們的運營。當需要時，可能沒有充足的資本可供我們使用，或其條件不可接受。如果我們無法籌集資本，我們可能被迫延遲、減少、暫停或停止我們的研發項目或任何未來的商業化努力，這將對我們的業務、前景、經營結果和財務狀況產生負面影響。有關更多信息，請參見2024年8月6日向SEC提交的公司8-K當前報告中的「風險因素」部分。
合併的描述
在2024年7月31日（「交割日期」），ARIA科學收購公司IV，一家開曼群島豁免公司（「ARYA」），Aja Holdco, Inc.（「ListCo」），一家特拉華州公司及ARYA的全資子公司，Aja Merger Sub 1，一家開曼群島豁免公司及ListCo的全資子公司（「ARYA Merger Sub」），Aja Merger Sub 2, Inc.，一家特拉華州公司及ListCo的全資子公司（「公司合併子公司」），及Adagio Medical, Inc.，一家特拉華州公司（「Legacy Adagio」或「前任」），根據2024年2月13日各方簽署的《業務合併協議》（「業務合併協議」）的條款，完成了業務合併（「業務合併」）。該協議經過2024年6月25日ARYA和Adagio之間簽署的《業務合併協議的同意和修正案第1號》的修訂。
根據業務合併協議，在交割日，(i) ARYA合併子公司與ARYA合併（「ARYA合併」），公司合併子公司與Legacy Adagio合併（「Adagio合併」，與ARYA合併統稱爲「合併」），ARYA和Legacy Adagio在合併中存續，完成這種合併後，ARYA和Legacy Adagio均成爲ListCo的全資子公司（ARYA合併生效的時間稱爲「ARYA合併生效時間」，Adagio合併生效的時間稱爲「Adagio合併生效時間」，兩個合併都生效的時間稱爲「交割」，交割發生的日期稱爲「交割日」），(ii) ListCo向特拉華州州務卿提交了ListCo的修訂和重述的公司章程，ListCo的董事會批准並採納了ListCo的修訂和重述的章程，以及(iii) ListCo將其名稱更改爲Adagio醫療控股公司。
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在年度股東大會之前，持有2,707,555股ARYA可贖回A類普通股的股東行使了以約每股11.56美元的贖回價格贖回股份的權利，總贖回金額約爲3130萬。
在商業合併完成後，
a)每一股已發行的ARN A類普通股，面值爲每股0.0001美元，均被自動取消、終止並轉換爲公司的普通股，每股面值爲0.0001美元（「公司的普通股」）。
b)每一股已發行的ARN B類普通股，面值爲每股0.0001美元，均被自動取消、終止並轉換爲接收一股公司的普通股的權利，除了(i) 1,000,000股被贊助方放棄的B類普通股，及發行給PIPE投資者（如下文定義），包括感知PIPE投資者（如下文定義）；(ii) 1,147,500股公司普通股授予贊助方的股份，受股權觸發價格歸屬的限制，如果在交易完成的第十週年之前，公司在任何30個交易日內的後續交易價格等於或超過每股24.00美元，超過20個交易日（「股份觸發價格歸屬」）。
c)Legacy Adagio的每個Warrants（除系列E預認購Warrants外）已根據適用的Warrants協議的條款終止。
d)遺產Adagio所有已發行的可轉換承諾票據（不包括橋接融資票據和2024年橋接融資票據，如下所定義），以及其所產生的任何應計和未支付的利息，將根據這些可轉換承諾票據的條款自動完全轉換爲遺產Adagio的普通股，並因此類轉換而取消、滿足、終止、解除並註銷該可轉換承諾票據。
e)每一份Legacy Adagio優先股，面值爲每股0.001美元，已發行並且尚未註銷的股份將自動按照一比一的比例轉換爲Legacy Adagio普通股。
f)所有已發行並且尚未註銷的Legacy Adagio普通股，包括已發行的系列E預認購Warrants，均自動被取消和撤銷，並根據業務合併協議中規定的交換比例轉換爲公司的普通股。
g)每個已經發行、未行使的購買Legacy Adagio普通股的期權（「Legacy Adagio期權」）在交割前已完全歸屬，其總價值超過該Legacy Adagio期權的總行使價格（每個「有利可圖的Adagio期權」）將被取消並用購買公司普通股的期權進行交換，而每個已發行和在外的Legacy Adagio股權獎勵（不包括有利可圖的Adagio期權）將自動取消並以無對價的形式消失，且各持有人將不再對其享有任何權利。
h)$700萬的2024年橋樑融資票據轉換爲可轉換證券票據和認股權證（如下定義）。
在執行業務合併協議時，ListCo與ARYA簽訂了認購協議（「初步認購協議」），其中包括Perceptive Life Sciences Master Fund, Ltd，一家開曼群島豁免公司（「Perceptive PIPE投資者」）以及其他一些投資者（「初步其他PIPE投資者」，與Perceptive PIPE投資者合稱爲「初步PIPE投資者」）。在2024年6月，ListCo與ARYA簽署了額外的認購協議（「6月認購協議」，與初步認購協議合稱爲「認購協議」），與若干額外的投資者（「6月PIPE投資者」，與初步其他PIPE投資者合稱爲「其他PIPE投資者」，與Perceptive PIPE投資者合稱爲「PIPE投資者」）。
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Pursuant to the subscription agreements, the PIPE Investors have committed financing valued at $64.5 million (the “PIPE Financing”).
The PIPE Financing included:
(i)Commitments by certain Other PIPE Investors to purchase $2.5 million in Class A shares of ARYA in the open market and not to redeem such shares before the Closing, resulting in the issuance of 355,457 shares of Company’s Common Stock and 299,902 warrants exercisable for shares of the Company’s Common Stock (the “Base Warrants”).
(ii)Commitments by certain Other PIPE Investors that were shareholders of ARYA to not to redeem 247,700 Class A shares of ARYA, resulting in the issuance of 405,772 shares of Company’s Common Stock and 343,756 Base Warrants.
(iii)Agreements to purchase 1,036,666 shares of Company’s Common Stock, 1,440,000 Base Warrants, and 670,000 PIPE Pre-funded Warrants for a cash investment of $12 million in the Company.
(iv)Contribution of total $29.5 million in April 2023 Convertible Notes, November 2023 Convertible Notes, May 2024 Convertible Notes, June 2024 Convertible Notes, and July 2024 convertible Notes (collectively, “Bridge Financing Notes”), and accrued interest of $1.7 million by the Perceptive PIPE Investor.
(v)An additional cash investment of $15.9 million by the Perceptive PIPE Investor.
In return for the investment specified in (iv) and (v) above, the Perceptive PIPE Investor received 6,622,959 shares of Company’s Common Stock and 5,445,069 Base Warrants.
Further, in connection with the execution of the Business Combination Agreement, certain investors (“Convert Investors”) executed a securities purchase agreement, dated February 13, 2024, with ListCo (the “Convertible Security Subscription Agreement”), pursuant to which ListCo issued on the Closing Date to the Convert Investors $20.0 million of 13% senior secured convertible notes (the “Convertible Securities Notes”), which will be convertible into shares of the Company’s Common Stock at a conversion price of $10.00 per share, subject to adjustment, and 1,500,000 warrants (the “Convert Warrants”), each Convert Warrant being exercisable on a cashless basis or for cash at a price of $24.00 per share, subject to adjustment. Such $20.0 million of financing in the form of Convertible Securities Notes includes the conversion of the 2024 Bridge Financing Notes into Convertible Securities Notes and Convert Warrants at Closing, as further described in Note 9-Debt in our condensed consolidated financial statements.
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Key Factors Affecting Our Performance
We compete primarily on the basis that our products are designed to enable more physicians to treat more patients more efficiently and effectively. Our continued success depends on our ability to:
•continue to develop innovative, proprietary products that address significant clinical needs in a manner that is safe and effective for patients and easy-to-use for physicians;
•obtain and maintain regulatory clearances or approvals;
•demonstrate safety and effectiveness in our sponsored and third-party clinical trials;
•expand its sales force across key markets to increase physician awareness;
•obtain and maintain coverage and adequate reimbursement for procedures using its products;
•attract and retain skilled research, development, sales and clinical personnel;
•cost-effectively manufacture, market and sell its products; and
•obtain, maintain, enforce and defend our intellectual property rights and operate its business without infringing, misappropriating or otherwise violating the intellectual property rights of others.
Innovation
Our business strategy relies significantly on innovation to develop and introduce new products and to differentiate our products from our competitors. We expect our research and development expenditures to increase as we make additional investments to support our growth strategies. We plan to increase our research and development expenditures with internal initiatives, as well as potentially licensing or acquiring technology from third parties. We also expect expenditures associated with our manufacturing organization to grow over time as production volume increases and we bring new products to market. Our internal and external investments will be focused on initiatives that we believe will offer the greatest opportunity for growth and profitability. With a significant investment in research and development, a strong focus on innovation and a well-managed innovation process, we believe we can continue to innovate and grow.
Regulatory
Our commercial success will depend upon a number of factors, some of which are beyond our control, including the receipt of regulatory clearances, approvals, or authorizations for existing or new product offerings by us, or product enhancements. We must complete additional clinical testing before we can seek regulatory approval in the United States and begin commercialization of our products. After our products are cleared, approved, or authorized, numerous and pervasive regulatory requirements continue to apply. As such, our ability to navigate, obtain and maintain the required regulatory clearances, approvals, or authorizations, as well as comply with other regulatory requirements, for our products will in part drive our results of operations and impact our business.
Investments in Our Growth
In order to generate future growth, we plan to continue to expand and leverage our sales and marketing infrastructure to increase our customer base and grow our business. Identifying and recruiting qualified sales and marketing personnel and training them on our products, applicable federal and state laws and regulations, and on our internal policies and procedures requires significant time, expense and attention. It often takes several months or more before a sales representative is fully trained and productive. Our ability to increase our customer base and achieve broader market acceptance of our products will also depend to a significant extent on our ability to expand our marketing efforts as our plans to dedicate significant resources to our marketing programs.
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Competition
Our industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Our most significant competitors are large, well-capitalized companies. We must continue to successfully compete considering our competitors’ existing and future products and related pricing and their resources to successfully market to the physicians who could use our products. Publications of clinical results by us, our competitors and other third parties can also have a significant influence on whether, and the degree to which, we are able to gain market share and increase utilization of our products.
Reimbursement and Insurance Coverage
In both U.S. and non-U.S. markets, our ability to successfully commercialize and achieve market acceptance of our products depends, in significant part, on the availability of adequate financial coverage and reimbursement from third-party payors, including governmental payors (such as the Medicare and Medicaid programs in the United States), managed care organizations and private health insurers. Third-party payors decide which treatments they will cover and establish reimbursement rates for those treatments. Our products are purchased by hospitals and other providers who will then seek reimbursement from third-party payors for the procedures performed using our products. Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. In certain international markets, a product must be approved for reimbursement before it can be approved for sale in that country. Furthermore, many international markets have government-managed healthcare systems that control reimbursement for new devices and procedures. In most markets there are private insurance systems as well as government-managed systems.
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Key Components of Results of Operations
Revenues
We generate product revenue primarily from the sale of the catheters, stylets and warming balloons (“Consumables”) used with our consoles. We sell our products directly to hospitals and medical centers. To a lesser extent, we also generate lease revenue from the implied rental of consoles loaned to customers at no charge. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Please refer to Note 2-Summary of Significant Accounting Policies in our condensed consolidated financial statements for additional details on our revenue recognition policy. Our revenue is subject to fluctuation due to the foreign currency in which our products are sold.
Costs and Operating Expenses
Cost of Revenue
Cost of revenue includes raw materials, direct labor, manufacturing overhead, shipping and receiving costs and other less significant indirect costs related to the production of our products. Cost of revenue also includes the depreciation expense of consoles loaned to the customers.
Research and Development Expenses
Research and development expenses are expensed when incurred and are related to the development of our product candidates which includes pre-clinical, clinical, quality assurance, and research and development operational activities. These costs consist of:
•salaries, benefits, and other employee-related costs, including stock-based compensation expense for personnel engaged in research and development functions;
•activities associated with clinical trials performed by third parties;
•professional fees;
•equipment, materials, and costs related to product manufacturing; and
•other operational costs including rent and facilities costs, and depreciation.
We do not track research and development expenses by project or product, as we are at an earlier stage in our pre-clinical and clinical development. Management believes that the breakdown of research and development expenses by project or product would be arbitrary and would not provide a meaningful assessment.
Management expects the research and development expenses to increase, as we will incur incremental expenses associated with the product candidates that are currently under development and in pre-clinical and clinical trials. Product candidates in later stages of clinical development generally have higher development costs, primarily due to the increased size and duration of later-stage clinical trials.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, and employee-related costs (including stock-based compensation) for personnel in executive, finance and other administrative functions, allocated rent and facilities costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, marketing costs and insurance costs, and transaction costs in connection with the Business Combination. We expense all selling, general and administrative costs as incurred.
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Convertible notes fair value adjustment
We recorded the October 2022 Convertible Notes, the April 2023 Convertible Notes, the November 2023 Convertible Notes, the 2024 Bridge Financing Note, the May 2024 Convertible Notes, the June 2024 Convertible Notes, July 2024 Convertible Notes, and Convertible Securities Notes at fair value at issuance and subsequently remeasure them to fair value at each reporting period. The change in fair value of the convertible promissory notes, excluding amounts related to interest, is recorded in “Convertible notes fair value adjustment,” while amounts related to interest are recorded as interest expense in the consolidated statements of operations and comprehensive income (loss).
Warrant liabilities fair value adjustment
We accounted for certain common stock warrants outstanding as warrant liabilities at fair value, determined using the Black-Scholes option pricing model. The liability is subject to re-measurement at each reporting period and any change in fair value is recognized as warrant liabilities fair value adjustment in the condensed consolidated statements of operations and comprehensive income (loss).
Interest expense
Interest expense is primarily incurred from our outstanding debt obligations, including those under the October 2022 Convertible Notes, the April 2023 Convertible Notes, the November 2023 Convertible Notes, the February 2024 Convertible Notes, the May 2024 Convertible Notes, June 2024 Notes, July 2024 Convertible Notes, Convertible Securities Notes , and the SVB Term Loan.
Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents, and marketable securities.
Other (expense) income, net
Other (expense) income, net primarily consists of foreign currency unrealized and realized gain / loss, and other income related to research and development (“R&D”) tax credit.
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Results of Operations
Comparison for the periods from January 1, 2024 to July 30, 2024 (Predecessor), from July 31, 2024 to September 30, 2024 (Successor), from July 1, 2024 to July 30, 2024 (Predecessor), and from July 31, 2024 to September 30, 2024 (Successor), to the three and nine months ended September 30, 2023 (Predecessor)
The following table sets forth a summary of our results of operations. This information should be read together with our condensed consolidated financial statements and related notes.
For the three months ended September 30, | ||||||||||||||||
2024 | 2023 | |||||||||||||||
Successor | Predecessor | Predecessor | Change | |||||||||||||
July 31 to September 30 | July 1 to July 30 | July 1 to September 30 | $ | % | ||||||||||||
Revenue | $ | 132 | $ | 53 | $ | 41 | $ | 144 | $ | 351% | ||||||
Cost of revenue and operating expenses: | ||||||||||||||||
Cost of revenue | 414 | 157 | 253 | 318 | 126 | |||||||||||
Research and development | 1,217 | 1,251 | 4,418 | (1,950) | (44) | |||||||||||
Selling, general, and administrative | 2,926 | 4,851 | 4,451 | 3,326 | 75 | |||||||||||
Total cost of revenue and operating expenses | 4,557 | 6,259 | 9,122 | 1,694 | 19 | |||||||||||
Loss from operations | (4,425) | (6,206) | (9,081) | (1,550) | 17 | |||||||||||
Other income (expense): | ||||||||||||||||
Convertible notes fair value adjustment | 3,255 | (1,907) | (1,051) | 2,399 | (228) | |||||||||||
Warrant liabilities fair value adjustment | 4,973 | 177 | (23) | 5,173 | n.m | |||||||||||
Interest expense | (435) | (304) | (485) | (254) | 52 | |||||||||||
Interest income | 166 | — | 2 | 164 | 8,200 | |||||||||||
Other (expense) income, net | 72 | 5 | (123) | 200 | (163) | |||||||||||
Total other income (expense), net | 8,031 | (2,029) | (1,680) | 7,682 | (457) | |||||||||||
Net income (loss) | $ | 3,606 | $ | (8,235) | $ | (10,761) | $ | 6,132 | $ | (57) | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment | (9) | (2) | 4 | (15) | n.m | |||||||||||
Comprehensive income (loss) | $ | 3,597 | $ | (8,237) | $ | (10,757) | $ | 6,117 | $ | (57) | ||||||
n.m. = not meaningful
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For the nine months ended September 30, | ||||||||||||||||
2024 | 2023 | |||||||||||||||
Successor | Predecessor | Predecessor | Change | |||||||||||||
July 31 to September 30 | January 1 to July 30 | January 1 to September 30 | $ | % | ||||||||||||
Revenue | $ | 132 | $ | 333 | $ | 222 | $ | 243 | $ | 109% | ||||||
Cost of revenue and operating expenses: | ||||||||||||||||
Cost of revenue | 414 | 1,381 | 972 | 823 | 85 | |||||||||||
Research and development | 1,217 | 7,585 | 13,625 | (4,823) | (35) | |||||||||||
Selling, general, and administrative | 2,926 | 13,047 | 8,234 | 7,739 | 94 | |||||||||||
Total cost of revenue and operating expenses | 4,557 | 22,013 | 22,831 | 3,739 | 16 | |||||||||||
Loss from operations | (4,425) | (21,680) | (22,609) | (3,496) | 15 | |||||||||||
Other income (expense): | ||||||||||||||||
Convertible notes fair value adjustment | 3,255 | 2,059 | (4,084) | 9,398 | (230) | |||||||||||
Warrant liabilities fair value adjustment | 4,973 | 191 | (83) | 5,247 | n.m | |||||||||||
Interest expense | (435) | (1,818) | (1,082) | (1,171) | 108 | |||||||||||
Interest income | 166 | 3 | 2 | 167 | n.m | |||||||||||
Other (expense) income, net | 72 | (33) | (113) | 152 | (135) | |||||||||||
Total other income (expense), net | 8,031 | 402 | (5,360) | 13,793 | (257) | |||||||||||
Net income (loss) | $ | 3,606 | $ | (21,278) | $ | (27,969) | $ | 10,297 | $ | (37) | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment | (9) | 3 | (1) | (5) | n.m | |||||||||||
Comprehensive income (loss) | $ | 3,597 | $ | (21,275) | $ | (27,970) | $ | 10,292 | $ | (37) | ||||||
n.m. = not meaningful
Revenue
Our revenues were $0.1 million and $53.0 thousand for the periods from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and $41.0 thousand for the three months ended September 30, 2023 (Predecessor). The increase of $0.1 million, or 351%, is due to the increase of consumable sales. For the three months ended September 30, 2024, and 2023, revenue was generated only in European markets.
Our revenues were $0.1 million and $0.3 million for the periods from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and $0.2 million for the nine months ended September 30, 2023 (Predecessor). The increase of $0.2 million, or 109%, is due to the increase of consumable sales. For the nine months ended September 30, 2024, and 2023, revenue was generated only in European markets.
Costs of revenue and operating expenses
Cost of revenue
Cost of revenue was $0.4 million and $0.2 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and $0.3 million for the three months ended September 30, 2023 (Predecessor). The increase of $0.3 million, or 126%, primarily resulted from a $0.3 million increase in cost of goods sold related to increased sales.
Cost of revenue was $0.4 million and $1.4 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $1.0 million for the nine months ended September 30, 2023 (Predecessor). The increase of $0.8 million, or 85%, primarily resulted from a $0.4 million increase in cost of goods sold related to increased sales and a $0.4 million increase in the depreciation of consoles.
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Research and development expenses
Research and development expenses were $1.2 million and $1.3 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $4.4 million for the three months ended September 30, 2023. The $2.0 million decrease, or 44%, was primarily related to a $0.5 million decrease in product manufacturing, $0.6 million decrease in clinical trial expense, $0.3 million decrease in animal testing cost, $33.0 thousand decrease in travel costs related to clinical studies, $0.1 million decrease in regulatory fees, $0.2 million decrease in payroll, and $0.1 million decrease in costs related to prototypes and other research and development costs. The decrease in research and development expenses results from Legacy Adagio receiving CE Marking on VT Cryoablation in March 2024.
Research and development expenses were $1.2 million and $7.6 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $13.6 million for the nine months ended September 30, 2023. The $4.8 million decrease, or 35%, was primarily related to a $1.3 million decrease of manufacturing absorption costs, $1.1 million decrease in product manufacturing, $0.9 million decrease in clinical trial expense, $0.5 million decrease in animal testing cost, $0.3 million decrease in costs related to consulting and prototypes, $0.1 million decrease in travel, and $0.6 million decrease in payroll. The decrease in research and development expenses results from Legacy Adagio receiving CE Marking on VT Cryoablation in March 2024.
The following is a breakdown of our research and development costs by type of expense:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||
Successor | Predecessor | Predecessor | Successor | Predecessor | Predecessor | |||||||||
July 31 to September 30 | July 1 to July 30 | July 1 to September 30 | July 31 to September 30 | January 1 to July 30 | January 1 to September 30 | |||||||||
Pre-clinical trial costs and other research and development costs | $ | 568 | $ | 265 | $ | 1,197 | $ | 568 | $ | 1,732 | $ | 3,093 | ||
Clinical trial costs | 379 | 397 | 1,040 | 379 | 2,619 | 3,918 | ||||||||
Quality assurance costs | 373 | 201 | 843 | 373 | 1,764 | 2,259 | ||||||||
Operational costs | (103) | 388 | 1,338 | (103) | 1,470 | 4,355 | ||||||||
Total research and development expenses | $ | 1,217 | $ | 1,251 | $ | 4,418 | $ | 1,217 | $ | 7,585 | $ | 13,625 | ||
Our clinical trial expenses relate to trials for our iCLAS atrial ULTC catheter and system (CYROCURE-2), iCLAS atrial ULTC catheter and system (iCLAS for PsAF), vCLAS ventricular ULTC catheter (CYROCURE-VT), vCLAS ventricular ULTC catheter (FULCRUM-VT), and PFCA catheter. Clinical trial costs include the expenses spent on clinical trials studies and other related expenses. Quality assurance includes regulatory fees and third-party service fees. Pre-clinical trial costs and other research and development costs includes the expenses resulting from professional fees, prototypes, and animal testing. Operational costs includes the expenses spent on product manufacturing.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses were $2.9 million and $4.9 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and $4.5 million for the three months ended September 30, 2023 (Predecessor). The increase in selling, general and administrative expenses of $3.3 million, or 75%, is primarily due to an increase of $2.4 million in professional fees which include legal and accounting fees related to the transaction costs associated with the Business Combination and an increase in payroll and personnel expense of $0.9 million.
Selling, general and administrative expenses were $2.9 million and $13.0 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and $8.2 million for the nine months ended September 30, 2023 (Predecessor). The increase in selling, general and administrative expenses of $7.7 million, or 94%, is primarily due to an increase of $5.7 million in professional fees which include legal and accounting fees related to the transaction costs associated with the Business Combination and an increase in payroll and personnel expense of $1.9 million and an increase in building and maintenance costs of $0.2 million.
Convertible notes fair value adjustment
The convertible notes fair value decreased $3.3 million and increased $1.9 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and increased $1.1 million for the three months ended September 30, 2023 (Predecessor). The decrease of $3.3 million for the period from July 31, 2024 to September 30, 2024 (Successor) is due to a decrease in the fair value of the Convertible Securities Notes. The increase of $1.9 million from July 1, 2024 to July 30, 2024 (Predecessor) is related to an increase in the fair value of the April 2023 Convertible Notes, November 2023 Convertible Notes, May 2024 Convertible Notes, June 2024 Convertible Notes, and July 2024 Convertible Notes of $3.3 million, $1.7 million, $0.7 million, $0.6 million, and $0.2 million, respectively. The increases were offset by decreases in the fair value of the October 2022 Convertible notes and February 2023 Notes of $4.6 million and $39.0 thousand, respectively. The increase of $1.1 million for the three months ended September 30, 2023 (Predecessor) is due to a fair value increase of the October 2022 Convertible Notes and the April 2023 Convertible Notes of $0.9 million and $0.1 million, respectively.
The convertible notes fair value decreased $3.3 million and $2.1 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and increased $4.1 million for the nine months ended September 30, 2023 (Predecessor). The decrease of $3.3 million for the period from July 31, 2024 to September 30, 2024 (Successor) is due to a decrease in the fair value of the Convertible Securities Notes. The decrease of $2.1 million January 1, 2024 to July 30, 2024 (Predecessor) is related to decreases in the October 2022 Convertible Notes, November 2023 Convertible Notes, and February 2024 Convertible Notes of $4.3 million, $2.4 million, and $0.3 million, respectively. These decreases were offset by increases in the April 2023 Convertible Notes, May 2024 Convertible Notes, June 2024 Convertible Notes, July 2024 Convertible Notes of $3.4 million, $0.7 million, $0.6 million, and $0.2 million, respectively. The increase of $4.1 million for the nine months ended September 30, 2023 (Predecessor) is due to a fair value increase of the October 2022 Convertible Notes and the April 2023 Convertible Notes of $3.9 million and $0.2 million, respectively.
Warrant liabilities fair value adjustment
The warrant liabilities fair value decreased $5.0 million and $0.2 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and increased $22.6 thousand for the three months ended September 30, 2023 (Predecessor). The decrease of $5.0 million from July 31, 2024 to September 30, 2024 (Successor) is related to a decrease in the fair value of the PIPE Pre-funded Warrants and the Convert Warrants of $2.7 million and $2.3 million, respectively. The decrease of $0.2 million from July 1, 2024 to July 30, 2024 (Predecessor) is related to a decrease in the fair value of SVB Warrants and Series E Pre-funded Warrants of $63.3 thousand and $0.1 million, respectively. The increase of $22.6 thousand for the three months ended September 30, 2023 (Predecessor) is due to a fair value increase of the SVB Warrants.
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The warrant liabilities fair value decreased $5.0 million and $0.2 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and increased $82.7 thousand for the nine months ended September 30, 2023 (Predecessor). The decrease of $5.0 million from July 31, 2024 to September 30, 2024 (Successor) is related to a decrease in the fair value of the PIPE Pre-funded Warrants and the Convert Warrants of $2.7 million and $2.3 million, respectively. The decrease of $0.2 million from January 1, 2024 to July 30, 2024 (Predecessor) is related to a decrease in the fair value of SVB Warrants and Series E Pre-funded Warrants of $77.6 thousand and $0.1 million, respectively. The increase of $82.7 thousand for the nine months ended September 30, 2023 (Predecessor) is due to a fair value increase of the SVB Warrants.
Interest expense
Interest expense was $0.4 million and $0.3 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $0.5 million for the three months ended September 30, 2023 (Predecessor). The increase of $0.3 million, or 52%, was related to additional interest incurred from the convertible promissory notes issued in November 2023, February 2024, May 2024, June 2024, July 2024 Notes, and the Convertible Securities Notes.
Interest expense was $0.4 million and $1.8 million for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $1.1 million for the nine months ended September 30, 2023 (Predecessor). The increase of $1.2 million, or 108% was related to additional interest incurred from the convertible promissory notes issued in April 2023, November 2023, February 2024, May 2024, June 2024, July 2024 Notes, and the Convertible Securities Notes .
Interest income
Interest income was $0.2 million and nil for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $2.0 thousand for the three months ended September 30, 2023 (Predecessor). The increase in interest income of $0.2 million is primarily due to the increase of cash balances in an asset management account.
Interest income was $0.2 million and $3.0 thousand for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, and was $2.0 thousand for the nine months ended September 30, 2023 (Predecessor). The increase in interest income of $0.2 million, is primarily due to the increase of cash balances in an asset management account.
Other income (expense), net
Other income was $72.0 thousand and $5.0 thousand for the period from July 31, 2024 to September 30, 2024 (Successor) and from July 1, 2024 to July 30, 2024 (Predecessor), respectively, compared to other expense of $0.1 million for the three months ended September 30, 2023 (Predecessor). This increase in other income of $0.2 million was primarily attributable to the foreign exchange currency gain of $0.2 million.
Other income was $72.0 thousand and other expense was $33.0 thousand for the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), respectively, compared to other expense of $0.1 million for the nine months ended September 30, 2023 (Predecessor). This net increase in other income of $0.2 million was primarily attributable to the foreign exchange currency gain of $0.2 million.
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Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through the sale of equity securities, convertible promissory notes and the SVB Term Loan. Since inception we have incurred operating losses and negative cash flows and anticipate continuing to do so for at least the next several years.
As of September 30, 2024 and December 31, 2023, the Successor had cash and cash equivalents of $28.3 million and Predecessor had $1.4 million, respectively. For the period from July 31, 2024 to September 30, 2024 (Successor) and from January 1, 2024 to July 30, 2024 (Predecessor), net income (losses) were $3.6 million and $(21.3) million, respectively, and was $(28.0) million for the nine months ended September 30, 2023 (Predecessor). For the period from July 31, 2024 to September 30, 2024 (Successor), the period from January 1, 2024 to July 30, 2024 (Predecessor), and for the nine months ended September 30, 2023 (Predecessor) net cash used in operating activities was $6.4 million, $16.0 million, and $18.6 million, respectively.
For the twelve months after the issuance date of the financial statements, the Company projects $0.8 million of cash inflows from revenue. The Company does not require significant cash reserve to meet short term and long-term obligations with a balance of approximately $4.4 million for accounts payable, $2.9 million for accrued liabilities, and $0.4 million for other accrued liabilities as of September 30, 2024 (Successor). With the Company currently having a balance of $28.3 million in cash as of September 30, 2024 after the Closing of the Business Combination (refer to the Description of the Merger for additional details), the Company has more than adequate cash reserves to cover its current and non-current liabilities.
Future Funding Requirements
In the future, we may need to raise additional funds through the issuance of debt and/or equity securities or otherwise. Until such time, if ever, that we can generate revenue sufficient to achieve profitability, we expect to finance our operations through equity or debt financings, which may not be available to us on the timing needed or on terms that we deem to be favorable. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. We may be required to delay, limit, reduce or terminate our product discovery and development activities or future commercialization efforts.
Our future liquidity and capital funding requirements will depend on numerous factors, including:
•our revenue growth;
•our research and development efforts;
•our sales and marketing activities;
•our ability to raise additional funds to finance our operations;
•the outcome, costs and timing of any clinical trial results for our current or future products;
•the emergence and effect of competing or complementary products;
•the availability and amount of reimbursement for procedures using our products;
•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of
any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
• | our ability to retain our current employees and the need and ability to hire additional management and sales, scientific and medical personnel; |
•the terms and timing of any collaborative, licensing or other arrangements that we have or may establish;
•debt service requirements; and
•the extent to which we acquire or invest in businesses, products or technologies;
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Our primary uses of capital are, and we expect will continue to be, investment in our commercial organization and related expenses, clinical research and development services, and related supplies, legal and other regulatory expenses, general administrative costs and working capital.
See the section titled “Risk Factors” of the Company's Current Report on Form 8-K filed with the SEC on August 6, 2024 for additional risks associated with our substantial capital requirements.
Debt Obligations (Predecessor)
October 2022 Convertible Notes
In October 2022, we entered into a Note Purchase Agreement with investors for the issuance and sale of convertible promissory notes (the “October 2022 Convertible Notes”) with an aggregate principal amount of $9.5 million at an interest rate of eight percent (8.0%) per year. The October 2022 Convertible Notes had an original maturity date of October 27, 2023, which was subsequently extended to the latest of (i) January 5, 2024, (ii) termination of agreements between Legacy Adagio and ARYA in connection with a non-binding summary of certain proposed terms and conditions of the Business Combination, or (iii) the termination or lapse of the exclusivity period as defined in the non-binding term sheet as mentioned above.
The October 2022 Convertible Notes were also amended to be subordinate to the April 2023 Convertible Notes (as described below) and provide for the conversion of all principal and accrued interest in respect of all the October 2022 Convertible Notes into shares of Series E Preferred Stock of Legacy Adagio in connection with the Business Combination. (refer to Note 9-Debt in our condensed consolidated financial statements for additional details).
In November 2023 and February 2024, the October 2022 Convertible Notes were further amended to also subordinate the November 2023 Convertible Notes and the 2024 Bridge Financing Note. Upon the consummation of the Business Combination, all principal and accrued interest in respect of the October 2022 Convertible Notes were converted into shares of Legacy Adagio Common Stock when multiplied by the exchange ratio applicable to the Legacy Adagio Common Stock in the Business Combination, which entitled the holder of this note to receive a number of shares of the same class of common stock that were issued in the PIPE Financing equal to the then outstanding principal amount and any accrued and unpaid interest under this note, divided by 75% of the effective price of each share of common stock sold in the PIPE Financing. Further, on the Closing Date, Legacy Adagio common stocks were converted to the Company’s Common Stock based on the exchange ratio set forth in the Business Combination Agreement.
Upon the consummation of the Business Combination, the October 2022 Convertible Notes automatically converted into 1,444,899 shares of the Company’s Common Stock.
Bridge Financing Notes
April 2023 Convertible Notes
In April 2023, we issued a $5.0 million convertible promissory note that would mature on the latest of (i) January 5, 2024, (ii) termination of agreements between Legacy Adagio and ARYA in connection with the Business Combination, or (iii) the termination or lapse of the exclusivity period as defined in the non-binding term sheet as mentioned above, and accrued simple interest at eight percent (8.0%) per annum. Additionally, we obtained the right to issue up to $10.0 million in additional convertible promissory notes available beginning one month after April 4, 2023 through the occurrence of an ARYA stockholder vote with regard to the Business Combination.
In November 2023, the April 2023 Notes were amended to align certain terms to the November 2023 Notes (refer to Note 9-Debt in our condensed consolidated financial statements for the periods ended September 30, 2024, and December 31, 2023, for additional details).
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November 2023 Convertible Notes
On November 28, 2023, Legacy Adagio issued to Perceptive Life Sciences Master Fund, Ltd. (the “Perceptive PIPE Investor”), a $2.0 million convertible promissory note that would mature on the latest of (i) January 5, 2024, (ii) termination of agreements between Legacy Adagio and ARYA in connection with a non-binding summary of the Business Combination, or (iii) the termination or lapse of the exclusivity period as defined in the non-binding term sheet as mentioned above (the “November 2023 Notes”). The November 2023 Notes accrued simple interest at eight percent (8.0%) per annum. Additionally, Legacy Adagio obtained the right to issue up to $6.0 million of Delayed Draw Commitment available beginning one month after November 28, 2023, through the occurrence of an ARYA stockholder vote with regard to the Business Combination.
In December 2023, the November 2023 Notes were amended to permit the issuance of a Delayed Draw Commitment in the original amount of $6.0 million. On December 13, 2023, and December 28, 2023, Legacy Adagio drew the principal amount of $1.0 million and $2.0 million, respectively. As of September 30, 2024, Legacy Adagio drew the remaining principal amount of $3.0 million. The combined $6.0 million convertible promissory notes were issued pursuant to the clause and terms in the November 2023 Notes agreement (refer to Note 9- Debt in our condensed consolidated financial statements for additional details).
May 2024 Convertible Notes
On May 21, 2024, Legacy Adagio issued a $3.0 million convertible promissory note (“May 2024 Notes”) to Perceptive PIPE Investor that matures upon the termination of the Business Combination Agreement in accordance with its terms. It accrues simple interest at eight percent (8.0%) per annum.
June 2024 Notes
On June 25, 2024, Legacy Adagio issued a $2.5 million convertible promissory note (“June 2024 Notes”) to Perceptive PIPE Investor that matures upon the termination of the Business Combination Agreement in accordance with its terms. It accrues simple interest at eight percent (8.0%) per annum.
July 2024 Notes
On July 23, 2024, Legacy Adagio issued a $1.0 million convertible promissory note (“July 2024 Notes”) to Perceptive PIPE Investor that matures upon the termination of the Business Combination Agreement in accordance with its terms. It accrues simple interest at eight percent (8.0%) per annum.
Pursuant to the Business Combination Agreement, the outstanding $29.5 million principal along with the accrued but unpaid interest of the Bridge Financing Notes, was converted in exchange for 4,372,607 shares of the Company’s Common Stock and 3,540,000 Base Warrants as part of the PIPE Financing.
February 2024 Convertible Notes
On February 13, 2024, the Legacy Adagio issued to Perceptive PIPE Investor a principal of $7.0 million convertible promissory note that matures upon the termination of the Business Combination Agreement in accordance with its terms. The February 2024 Convertible Notes accrues simple interest at eight percent (8.0%) per annum.
Upon the consummation of the Business Combination, the February 2024 Convertible Notes was automatically transferred to the Company in connection with the issuance of the Convertible Securities Notes to Perceptive PIPE Investor, pursuant to, and in accordance with, the note purchase agreement and the Convertible Security Subscription Agreement (as defined below), dated February 13, 2024, by and among the Company, ARYA, Legacy Adagio and Perceptive PIPE Investor. Any interest accrued on the principal amount of the February 2024 Convertible Notes will be forfeited in connection with the transfer of the notes to the Company.
On the Closing Date, the $7.0 million of February 2024 Convertible Notes were converted into $7.0 million Convertible Securities Notes and 525,000 Convert Warrants.
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SVB Term Loan
In February 2023, Legacy Adagio entered into an agreement with Silicon Valley Bank to borrow an initial term loan advance of $3.0 million and a right to borrow a subsequent term loan advance of $2.0 million (“SVB Term Loan”). The loans matured on January 1, 2025. In conjunction with the SVB Term Loan, Legacy Adagio issued warrants to acquire 32,720 shares of common stock in February 2023 and distributed additional warrants to acquire 16,360 shares of common stock as of September 30, 2023 (“SVB Warrant”). Prior to the Closing of the Business Combination, the existing SVB Term Loan of Legacy Adagio as on July 30, 2024 had a net balance of $1.0 million, including $1.0 million of principal payment due within twelve months with an unamortized debt discount of $9.7 thousand. The unpaid principal and accrued interest were carried as assumed liabilities to the Company and paid at the Closing. (Refer to Note 9-Debt in our condensed consolidated financial statements for additional details).
Debt Obligations (Successor)
Convertible Securities Notes
In connection with the execution of the Business Combination Agreement, Convert Investors executed the Convertible Security Subscription Agreement dated February 13, 2024, which was amended on June 20, 2024, with ListCo. In accordance with the agreement, ListCo issued on the Closing Date to the Convert Investors $20.0 million of Convertible Securities Notes and 1,500,000 Convert Warrants.
The total of $20.0 million Convertible Securities Notes will be convertible into shares of the Company’s Common Stock at a conversion price of $10.00 per share, subject to adjustment per the terms of the agreement, and the total of 1,500,000 warrants, each of which will be exercisable on a cashless basis or for one share of the Company’s Common Stock at $24.00 per share, subject to adjustment. The Convertible Securities Notes have a maturity of three years and nine months after the Closing and interest will be payable in cash or compound as additional principal outstanding which accrues on a quarterly basis.
The conversion of the February 2024 Convertible Notes was carried out on the same terms as the other Convert Investors executing the Convertible Security Subscription Agreement.
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Cash Flows
The following table shows a summary of our cash flows for each of the periods shown below:
Nine Months Ended September 30, | ||||||||||
2024 | 2023 | |||||||||
Successor | Predecessor | Predecessor | ||||||||
July 31 to September 30 | January 1 to July 30 | January 1 to September 30 | ||||||||
Net cash used in operating activities | $ | (6,358) | $ | (15,990) | $ | (18,561) | ||||
Net cash used in investing activates |
| (578) |
| (368) |
| (320) | ||||
Net cash provided by financing activities | — | 15,633 | 15,297 | |||||||
Effect of Foreign Currency Translation on cash | 42 | 24 | 18 | |||||||
Net change in cash and cash equivalents | $ | (6,894) | $ | (701) | $ | (3,566) | ||||
Comparison for the periods from January 1, 2024 to July 30, 2024 (Predecessor), from July 31, 2024 to September 30, 2024 (Successor), to the nine months ended September 30, 2023 (Predecessor)
Cash Flows Used in Operating Activities
Net cash used in operating activities for the period from July 31, 2024 to September 30, 2024 (Successor) was $6.4 million, consisting primarily of net income of $3.6 million, net by non-cash items of $7.9 million, and net by change in our net operating assets and liabilities of $2.1 million. Non-cash items primarily consisted of $0.3 million in depreciation and amortization; offset by a gain of $3.3 million from the change in fair value of convertible notes payable and a gain of $5.0 million from the change in fair value of warrant liabilities. Changes in our net operating assets and liabilities were primarily due to a $0.3 million increase in other accrued liabilities which was primarily driven by interest payable on the convertible note; offset by $1.3 million increase in prepaid expenses and other current assets, $0.4 million decrease in accounts payable, and a $0.7 million decrease in accrued liabilities.
Net cash used in operating activities for the period from January 1, 2024 to July 30, 2024 (Predecessor) was $16.0 million consisting primarily of a net loss of $21.3 million, adjusted by non-cash items of $0.8 million, and net with the change in our net operating assets and liabilities of $6.1 million. Non-cash items primarily consisted of $0.6 million in depreciation and amortization, $0.6 million in stock-based compensation, noncash operating lease expense of $0.1 million, and loss on disposal of property and equipment of $0.1 million; offset by a gain of $2.1 million from the change in fair value of convertible notes payable, and a gain of $0.2 million from the change in fair value of warrant liabilities. Changes in our net operating assets and liabilities were primarily due to a $7.4 million increase in accrued transaction costs, the increase in accrued liabilities of $0.5 million and a $1.7 million increase in other accrued liabilities, which were primarily driven by the increase in transaction costs related to the Business Combination, the increase in accrued variable compensation related to the Business Combination, and the increase in interest related the convertible notes; offset by a $2.6 million decrease in accounts payable, $0.8 million increase in inventory, which were primarily driven by the payment of accounts payable related to the Business combination and an increase in inventory purchases.
Net cash used in operating activities for the nine months ended September 30, 2023 (Predecessor), was $18.6 million, consisting primarily of a net loss of $28.0 million net by non-cash items of $5.0 million, and net by the change in our net operating assets and liabilities of $4.4 million. Non-cash items primarily consisted of a loss of $4.1 million related to the change in fair value of convertible notes payables, $0.4 million in depreciation and amortization, $0.3 million in stock-based compensation, and $0.1 million in noncash operating lease expenses. Changes in our net operating assets and liabilities, were primarily due to a $1.1 million increase in accrued liabilities, $0.9 million increase in operating leases liabilities, $0.4 million decrease in prepaid expenses and other current assets, a $0.2 million increase in accrued transaction costs, and a $1.8 million increase in other accrued liabilities which was primarily driven by the increase in interest related the convertible notes, and the increase in transaction costs related to the Business Combination; offset by a $0.1 million decrease in other long-term liabilities and a $0.1 million increase in accounts receivable.
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Cash Flow Used in Investing Activities
Net cash used in investing activities for the period from July 31, 2024 to September 30, 2024 (Successor) and the period from January 1, 2024 to July 30, 2024 (Predecessor) was $0.6 million and $0.4 million, respectively. Net cash used in investing activities for the for the nine months ended September 30, 2023 (Predecessor) was $0.3 million. The increase was due to the increased purchase of property.
Cash Flow Provided by Financing Activities
Net cash provided by financing activities for the period from July 31, 2024 to September 30, 2024 (Successor) was nil.
Net cash provided by financing activities for the period from January 1, 2024 to July 30, 2024 (Predecessor) was $15.6 million. It is primarily due to receiving $16.5 million from the issuance of the $7.0 million 2024 Bridge Financing Note, $3.0 million May 2024 Convertible Notes, $2.5 million June 2024 Convertible Notes, $1.0 million from the July 2024 Convertible Notes, and the draw of $3.0 million November 2023 Convertible Notes, net by a $0.9 million repayment of SVB Term Loan.
Net cash provided by financing activities for the nine months ended September 30, 2023 (Predecessor) was $15.3 million. It is due to receiving $13.0 million and $3.0 million from the issuance of convertible notes payable and SVB term loan, respectively, offset by a decrease of $11.0 thousand and $0.7 million related to exercise of common stock options in 2023 and repayment of SVB Term Loan, respectively.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to the financing, liquidity, market, or credit risk that could arise if we had engaged in those types of relationships.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our audited consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10. We base our estimates on historical experience, current business factors and various other assumptions that we believe are necessary to consider forming a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses and the disclosure of contingent assets and liabilities. We are subject to uncertainties such as the impact of future events, economic and political factors, and changes in our business environment; therefore, actual results could differ from these estimates.
Accordingly, the accounting estimates used in the preparation of our audited consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to our audited consolidated financial statements.
On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2-Summary of Significant Accounting Policies to our consolidated financial statements. These are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
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Stock-Based Compensation
We recognize compensation expense for all stock-based awards issued to employees and non-employees based on the estimated grant-date fair value, which is recognized as expense on a straight-line basis over the requisite service period. We have elected to recognize forfeitures as they occur. The fair value of stock options is determined using the Black-Scholes option-pricing model. The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to our common stock valuation. The assumptions used in calculating the fair value of stock-based awards represent our best estimates and involve inherent uncertainties and the application of our judgment.
All stock-based compensation costs are recorded in cost of products sold, research and development expense or selling, general, and administrative expense in the consolidated statements of operations and comprehensive income (loss) based upon the respective employee’s or non-employee’s roles.
Common Stock Valuations (Predecessor)
Due to the absence of a public trading market, we determined the fair value of our common stock by considering numerous objective and subjective factors. The factors considered include, but are not limited to:
(i)the results of contemporaneous independent third-party valuations of our common stock;
(ii)the prices, rights, preferences and privileges of our preferred stock relative to those of our common stock;
(iii)the lack of marketability of our common stock;
(iv)actual operating and financial results;
(v)current business conditions and projects; and
(vi)the likelihood of achieving a liquidity event.
As of December 31, 2023, the fair value of our common stock was determined with probability weighted expected return method (“PWERM”), which assessed the probability weighted depending on different scenarios. As of June 30, 2024, the valuation was based on the scenario (i) bankruptcy/suboptimal sale scenario reflecting a zero return to common shareholders, with 0% probability, (ii) an “as converted” merger with a 95% probability, and (iii) a delayed but successful liquidity event per the option pricing method, with 5% probability. As of December 31, 2023, the valuation was based on the scenario (i) the bankruptcy/suboptimal sale scenario reflecting a zero return to common shareholders, with 20% probability (ii) a consummation of a business combination transaction with a SPAC, with 40% probability, and (iii) a delayed but successful liquidity event per the option pricing method, with 40% probability. As of December 31, 2023, in determining the value under the consummation of a business combination transaction with a SPAC scenario, we utilized the preliminary terms of the letter of intent with such SPAC that (i) the transaction based on diluted equity value of $38.8 million and (ii) all dilutive instruments are expected to convert or be exercised resulting in 6,369,633 total common shares outstanding.
The valuation under the scenario of a delayed but successful liquidity event per the option pricing method was determined by the fair value per share at a marketable basis applied by a discount for lack marketability (“DLOM”). The fair value per share at a marketable basis was determined using the interval option value allocation approach. The DLOM was determined based on Finnerty put option model, marketability factors and restricted stock studies.
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The significant unobservable inputs into the valuation model include:
•the timing of potential events (for example, a consummation of a business combination transaction with a SPAC) and their probability of occurring;
•the selection of guideline public company multiples; and
•a discount for the lack of marketability of the common stock.
An increase or decrease in any of the unobservable inputs in isolation could result in a material change. In the future, depending on the weight of evidence and valuation approaches used, these or other inputs may have a more significant impact on the estimated fair value.
Convertible Notes Valuation (Predecessor)
As permitted under ASC 825, Financial Instruments (“ASC 825”), the Company elected the fair value option to account for the October 2022 Convertible Notes, the April 2023 Convertible Notes, the November 2023 Convertible Notes, the 2024 Bridge Financing Note, the May 2024 Convertible Notes, the June 2024 Convertible Notes, and the July 2024 Convertible Notes in order to measure those liabilities at amounts that more accurately reflect the current economic environment in which Legacy Adagio operates.
The change in fair value of the convertible promissory notes, excluding amounts related to interest, is recorded in “Convertible notes fair value adjustment,” while amounts related to interest are recorded as interest expense in the consolidated statements of operations and comprehensive income (loss). As a result of applying the fair value option, direct costs and fees related to the issuance of the convertible notes were expensed as incurred (i.e., not recognized as deferred costs). Refer to Note 3-Fair Value Measurements in our condensed consolidated financial statements for additional detail.
As of December 31, 2023, Adagio calculated the value of the convertible notes based on the equity value from 409(a) valuations, considering the expected payoff of the convertible notes upon different types of events.
Utilizing the PWERM, Adagio assessed the probability that the October 2022 Convertible Notes would be converted to common stock through the result of mandatory prepayment, Private Investment in PIPE Financing, or no PIPE Financing and no Qualified Financing, weighted with a probability of 20%, 40% and 40%, respectively, as of December 31, 2023.
Utilizing the PWERM, Adagio assessed the probability that the April 2023 Notes and the November 2023 Notes would be converted to common stock as a result of a liquidation event, PIPE Financing, or no PIPE Financing & no Qualified Financing, weighted with a probability of 20%, 40% and 40% as of December 31, 2023. Adagio also implied a credit spread by calibrating the value of the April 2023 Notes at issuance to the par value and then adjusted the calibrated credit spread for seniority difference and the market related movements as appropriate.
Additional assumptions used to estimate the fair value include: (i) the expected timing of the conversion, (ii) the amount subject to equity conversion, the sum of the notes’ principal and unpaid accrued interest, (iii) expected volatility, (iv) risk-free interest rate, and (v) the discount rate, based on the observed option-adjusted spread (OAS) data of traded bonds rated CCC-.
In determining the fair value of the convertible notes as of July 31, 2024 prior to the Closing, the Company used the observed closing stock price of ARYA as of July 31, 2024 multiplied by the actual number of shares that the convertible notes converted into.
SVB Term Loan (Predecessor)
Legacy Adagio accounts for the SVB Term Loan at residual value on the date of issuance. The expected life of the SVB Term Loan is the contractual term ending on the maturity date. Legacy Adagio classifies the term loan as current liabilities within twelve months of the maturity date or when otherwise due. Interest expense is recognized in the consolidated statements of operations and comprehensive income (loss) over the contractual term of the loan. See Note 9-Debt in our condensed consolidated financial statements for additional information related to the SVB Term Loan.
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SVB Warrants (Predecessor)
Adagio accounts for SVB Warrants outstanding as warrant liabilities at fair value, determined using the Black-Scholes option pricing model based on the common stock value from 409(a) valuation. The assumption used to estimate the fair value include: (i) expected volatility, (ii) risk-free interest rate, (iii) expected dividend yield, and (iv) expected term.
The liability is subject to re-measurement at each reporting period and any change in fair value is recognized in the condensed consolidated statements of operations and comprehensive income (loss). See Note 10-Warrants in our condensed consolidated financial statements for additional information related to the warrants.
Series E Pre-funded Warrants (Predecessor)
On June 25, 2024, Legacy Adagio issued to a certain investor the pre-funded warrants to purchase Legacy Adagio’s Series E Preferred Stock (“Series E Pre-funded Warrant”), in exchange of the investor’s existing holding of Series E Preferred Stock. The exercise price of the pre-funded warrants is $0.001 per warrant share. Legacy Adagio measured the Series E Pre-funded Warrants at fair value based on the indicated fair value of Series E Preferred Stock, which is not observable in the market.
Convertible Preferred Stock (Predecessor)
Prior to the Closing, Legacy Adagio recorded convertible preferred stock at fair value on the dates of issuance, net of issuance costs. Upon the occurrence of certain events that are outside our control, including a deemed liquidation event, holders of the convertible preferred stock can cause redemption for cash. As the preferred stock is considered to be contingently redeemable, the preferred stock has been classified outside of permanent equity. The preferred stock will be accreted to its redemption value if the deemed liquidation events are considered probable of occurring. Upon the consummation of the Business Combination, the Legacy Adagio’s convertible preferred stocks was converted into shares of Legacy Adagio’s common stock on a one-to-one basis prior to Adagio Merger Effective Time and then converted into the Company’s Common Stock at the Closing based on the exchange ratio set forth in the Business Combination Agreement.
Convertible Securities Notes (Successor)
The Company measures the Convertible Securities Notes at fair value based on significant inputs not observable in the market, which caused them to be classified as Level 3 measurements within the fair value hierarchy. The change in fair value of the convertible promissory notes, excluding amounts related to interest, is recorded in “Convertible notes fair value adjustment,” while amounts related to interest are recorded as interest expense in the consolidated statements of operations and comprehensive income (loss).
The Company utilized the binomial lattice model to value the Convertible Securities Notes at the Closing Date and as of September 30, 2024. See Note 9- Debt in our condensed consolidated financial statements for additional information related to the SVB Term Loan.
Convert Warrants (Successor)
On July 31, 2024, the Company issued 1,500,000 Convert Warrants in connection with the issuance of the $20.0 million Convertible Securities Notes.
As set forth in the agreement of the Convertible Securities Notes, the Convert Warrants are exercisable on a cashless basis or on a gross basis for one share of the Company’s Common Stock at $24.0 per share, subject to adjustments. The Company may be required to cash settle the Convert Warrants when it fails to timely deliver shares to the holder who exercises the Convert Warrants or upon the occurrence of a fundamental transaction. It is determined that the Convert Warrants do not meet the equity classification requirements under ASC 815 as the Covert Warrants may require cash settlement outside of the Company’s control upon a failure of timely delivery of shares or a fundamental transaction, and therefore the Convert Warrants are accounted for as derivative liabilities, and measured at fair value both initially and subsequently with changes in fair value recognized as warrant liabilities fair value adjustment within the condensed consolidated statements of operations and comprehensive income (loss).
The Convert Warrants are classified as Level 3 measurements within the fair value hierarchy. The Company utilized the Black-Scholes Merton option model to value the Convertible Securities Notes at the Closing Date and as of September 30, 2024.
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PIPE Base Warrants (Successor)
On the Closing Date, the Company issued Base Warrants (“PIPE Base Warrants”) along with the Company’s Common Stock in connection with the PIPE Financing.
The Base Warrants can be exercised to the Company’s Common Stock at any time during the period from the issuance date to the expiration date which is the fifth anniversary from the date of issuance. The warrants can be exercised on a gross or net basis at an exercise price of $10 per share.
The Base Warrants were fair valued at $2.41 per unit on the date of issuance based on the assumptions including (i) the value of the Company’s Common Stock is $6.64 per share; (ii) a risk-free rate at 3.93%; (iii) zero dividend yield; (iv) the common stock volatility at 84.0% and a volatility haircut of 10%; (v) the remaining term is 5 years.
According to the ASC 815, it is determined that the Base Warrants associated with the PIPE Financing are indexed to the Company’s Common Stock under and are accounted for as equity, which is initially measured at fair value. The Base Warrants are classified as equity in the financial statements because they meet the ASC 815-40 indexation guidance. Specifically, 1) the Base Warrants can be exercised at any time during the exercise period without contingencies; 2) the Base Warrants can be settled in a fixed number of shares upon exercise with any adjustments, such as antidilution and alternative issuance adjustments, consistent with ASC 815 guidance, which does not preclude equity classification. Additionally, the Company has sufficient authorized shares available to settle the Base Warrants, and all the adjustments are in the control of the Company, further supporting the equity classification.
Sponsor Earnout (Successor)
In September 2024, the Company issued 1,147,500 shares of the Company’s Common Stock (such issuance, the “Sponsor Earnout”) to the AYRA Sponsor under the Sponsor Letter Agreement dated February 13, 2024 (“the Sponsor Letter Agreement”). Pursuant to the agreement, the Sponsor Earnout shall be unvested and vests upon the earlier of: i) During the period from the effective time to the 10th anniversary of the Closing Date (the “Earn-Out Period”), the stock price of the Company’s Common Stock equals to or exceeds $24.00 per share (the “Trigger Price”) for any 20 trading days within any 30 trading day period from and after the Closing Date (the “Earn-Out Target”), and ii) immediately prior to the consummation of a company sale during the Earn-Out Period.
As of the reporting date, the vesting of the Sponsor Earnout was not considered probable.
According to ASC 815, it is determined that the Sponsor Earnout is indexed to the Company’s Common Stock and classified as equity and is initially measured at fair value and not subsequently remeasured. The Sponsor Earnout vests when the Company’s stock price meets a stated price or there is a company sale during the earnout period. Upon meeting either vesting condition, the same number of the Company’s Common Stock would be issued and no longer subject to forfeiture or cancellation. The Sponsor Earnout meets the ASC 815-40 indexation guidance. Specifically, the stated stock price and company sale, as the exercise contingencies, do not preclude equity indexation and there is no variability in the number of shares issuable under the Sponsor Earnout. Additionally, the Sponsor Earnout at the issuance meets the ASC 815-40 equity classification criterion as the Company has sufficient authorized shares available to settle the Sponsor Earnout and all the antidilution adjustments are in the control of the Company.
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PIPE Pre-funded Warrants (Successor)
On July 31, 2024, the Company issued 670,000 pre-funded warrants in exchange for cash proceeds in PIPE Financing to certain Other PIPE Investors (“PIPE Pre-funded Warrants”).
As set forth in the agreement of the PIPE Pre-funded Warrants, the PIPE Pre-funded Warrants are exercisable on a cashless basis or on a gross basis for one share of the Company’s Common Stock at $0.01 per share, subject to adjustments. The Company may be required to cash settle the PIPE Pre-funded Warrants when it fails to timely deliver shares to the holder who exercises the PIPE Pre-funded Warrants or upon the occurrence of a fundamental transaction. It is determined that the PIPE Pre-funded Warrants do not meet the equity classification requirements under ASC 815 as the PIPE Pre-funded Warrants may require cash settlement outside of the Company’s control upon a failure of timely delivery of shares or a fundamental transaction, and therefore the PIPE Pre-funded Warrants are accounted for as derivative liabilities, and measured at fair value both initially and subsequently with changes in fair value recognized as warrant liabilities fair value adjustment within the condensed consolidated statements of operations and comprehensive income (loss).
The PIPE Pre-funded Warrants are classified as Level 3 measurements within the fair value hierarchy. The fair value of the PIPE Pre-funded Warrants is based on the fair value of the Company’s Common Stock minus the exercise price.
Strategic Realignment of Resources and Corporate Restructuring
On December 1, 2023, Legacy Adagio approved a strategic realignment of resources and corporate restructuring (the “RIF”) designed to reallocate capital, conformant to its business focus for the next two years.
As part of the RIF, Legacy Adagio initiated a reduction in its workforce of 20 employees, representing approximately 19% of Legacy Adagio’s employees, which was completed on December 15, 2023. Legacy Adagio made no payment for severance or related benefit costs. Legacy Adagio made no payment of retention bonuses.
Emerging Growth Company Status
We are an emerging growth company (“EGC”), as defined in the JOBS Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.
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Recent Accounting Pronouncements
See Note 2- Summary of Significant Accounting Policies in our condensed consolidated financial statements for a description of recent accounting pronouncements applicable to our financial statements.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
We have operations primarily within the United States and we are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We do not believe that inflation has had a material effect on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
Our revenue generated in Europe, as well as costs and expenses denominated in Euro, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. We are exposed to foreign currency risks related to our revenue and operating expenses, along with certain intercompany transactions, denominated in Euro. Accordingly, changes in exchange rates may negatively affect our future revenue and other operating results as expressed in U.S. dollars. We do not believe that foreign currency exchange risk has had a material effect on our business, results of operations or financial condition.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness the design and operation of our disclosure controls and procedures prior to the filing of this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2024, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to the material weaknesses in our internal control over financial reporting related to the inadequate design and operation of management’s review controls over valuation reports prepared by third-party specialists in conjunction with the accounting for certain debt and equity instruments, resulting in the conclusion that the Company’s internal control over financial reporting and the Company’s disclosure controls and procedures were not effective as of September 30, 2024.
We are currently implementing our remediation plan to address the material weaknesses identified above. Such measures include:
1) additional review of third-party valuation reports utilized in the accounting for certain debt and equity instruments;
2) additional review of the manual journal entries based on externally generated reports and agreements with regard to accounting issues in certain debt and equity instruments;
3) enhanced oversight controls on the work performed by third-party specialists.
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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we detected all of our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
Other than in connection with executing upon the continued implementation of the remediation measures referenced above, there have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We are currently not a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our filings with the SEC, including the the Company's Current Report on Form 8-K filed with the SEC on August 6, 2024. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Except as set forth below, there have been no material changes to the risk factors previously described in the Company's Current Report on Form 8-K filed with the SEC on August 6, 2024.
We are a medical device company that has incurred net losses in every period to date and expect to continue to incur significant losses as we develop our business.
We are a medical device company that has incurred net losses in each quarterly and annual period since inception and that has not yet generated any meaningful revenue. We expect to incur increasing costs as we continue to devote substantially all of our resources towards the development and anticipated further commercialization of our products, including iCLAS, vCLAS and Cryopulse. We cannot be certain if we will ever generate meaningful revenue or if or when we will produce sufficient revenue from operations to support our costs. Even if profitability is achieved, we may not be able to sustain profitability. Adagio Medical incurred net losses of $38.1 million and $23.7 million in 2023 and 2022, respectively. As of December 31, 2023, Adagio Medical had an accumulated deficit of $135.2 million. We expect to incur substantial losses and negative cash flows for the foreseeable future. In addition, as a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company. These increased expenses make it harder for us to achieve and sustain future profitability. We may incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in this report and in our other filings with the SEC. These conditions raise substantial doubt about our ability to continue as a going concern.
We have identified material weaknesses in our internal controls over financial reporting. If we are unable to remediate these material weaknesses, if management identifies additional material weaknesses in the future or if we otherwise fail to maintain effective internal controls over financial reporting, we may not be able to accurately or timely report our financial position or results of operations, which may adversely affect our business and stock price or cause our access to the capital markets to be impaired.
We have identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company’s management identified a material weakness related to the inadequate design and operation of management’s review controls over valuation reports prepared by third-party specialists in conjunction with the accounting for certain debt and equity instruments, resulting in the conclusion that the Company’s internal control over financial reporting and the Company’s disclosure controls and procedures were not effective as of December 31, 2023, March 31, 2024 and June 30, 2024 and in a material misstatement to Adagio’s financial statements. Accordingly, we determined that these control deficiencies constitute material weaknesses.
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We are in the early stages of designing and implementing a plan to remediate the material weaknesses identified. Our plan for remediation includes: 1) additional review of third-party valuation reports utilized in the accounting for certain debt and equity instruments; 2) additional review of the manual journal entries based on externally generated reports and agreements with regard to accounting issues in certain debt and equity instruments; and 3) enhanced oversight controls on the work performed by third-party specialists. We cannot assure you that these measures will significantly improve or remediate the material weaknesses described above. The implementation of these remediation measures is in the early stages and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles and, as a result, the timing of when we will be able to fully remediate the material weaknesses is uncertain. If the steps we take do not remediate the material weaknesses in a timely manner, there could be a reasonable possibility that these control deficiencies or others may result in another material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis. This, in turn, could jeopardize our ability to comply with our reporting obligations, limit our ability to access the capital markets and adversely impact our stock price.
We and our independent registered public accounting firm were not required to perform an evaluation of our internal control over financial reporting as of December 31, 2023 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404.
Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products and services to new and existing customers.
However, if we identify future deficiencies in our internal control over financial reporting or if we are unable to comply with the demands that are placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely or effective manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected.
Our current controls and any new controls that we develop may also become inadequate because of poor design or changes in our business, including increased complexity resulting from any international expansion, and weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods, undermine investor confidence in us and adversely affect the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities.
None.
Item 3.Defaults upon Senior Securities.
None.
Item 4.Mine Safety Disclosures.
Not applicable.
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10.11 | ||
10.12 | ||
10.13 | ||
10.14 | ||
10.15 | ||
10.16 | ||
10.17 | ||
10.18 | ||
10.19 | ||
10.20 | ||
10.21 | ||
10.22 | ||
10.23 | ||
10.24* | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | Inline XBRL Instance Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
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101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
*Filed herewith
**Furnished herewith
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ADAGIO MEDICAL HOLDINGS, INC. | ||
Date: November 14, 2024 | /s/ Olav Bergheim | |
Name: | Olav Bergheim | |
Title: | Chief Executive Officer | |
Date: November 14, 2024 | /s/ John Dahldorf | |
Name: | John Dahldorf | |
Title: | Chief Financial Officer | |
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