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

Motus GI Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(unaudited, in thousands, except share and per share amounts)

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

Motus GI Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(unaudited, in thousands, except share and per share amounts)

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

Motus GI Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

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

Motus GI Holdings, Inc. and Subsidiaries

Notes to the Interim Condensed Consolidated Financial Statements

(unaudited, in thousands, except share and per share amounts)

Note 1 – Description of Business

Motus GI Holdings, Inc. (the “Company”) was incorporated in Delaware, U.S.A. in September 2016. The Company and its subsidiaries, Motus GI Technologies, Ltd. and Motus Inc.GI, LLC., are collectively referred to as “Motus GI” or the “Company”.

The Company has developed the Pure-Vu System, (the “Pure-Vu System”), a medical device that has received 510(k) clearance frombeen cleared by the U.S. Food and Drug Administration (the “FDA”). In June 2019, to help facilitate the 510(k) premarket notification for the second-generationcleansing of the Pure-Vu System was revieweda poorly prepared gastrointestinal tract during colonoscopy and cleared by the FDA.to help facilitate upper gastrointestinal (“GI”) endoscopy procedures.  The second-generation of the Pure-Vu System has received a CE Mark approval in the European Economic Area.EU for use in colonoscopy.  The Pure-Vu System is indicated to help facilitate the cleaning of a poorly prepared colon during the colonoscopy procedure. The device integrates with standard and slim colonoscopes, as well as gastroscopes, to enable safeimprove visualization during colonoscopy and rapid cleansing during the procedureupper GI procedures while preserving established procedural workflow and techniques by irrigatingtechniques.  Through irrigation and evacuation of debris, the colon and evacuating the irrigation fluid (water), feces and other bodily fluids and matter.Pure-Vu System is designed to provide better-quality exams. The Company began commercialization in the fourth quarter of 2019, with the first commercial placements of its second generation Pure-Vu System as part of its initial U.S. market launch targeting early adopter hospitals. As a result of the COVID-19 pandemic, the initial launch of the Pure-Vu System was impacted, particularly in the second quarter of 2020. In the latter half of the third quarter of 2020, the Company saw  colonoscopy procedural volumes, hospital access and physician availability and engagement begin to improve. The Company does not expect to generate significant revenue from product sales until the CompanyCOVID-19 pandemic has fully subsided and it expands its commercialization efforts for the Pure-Vu System, which is subject to significant uncertainty.

Note 2 – Basis of Presentation and Going Concern

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 20192020 10-K filed with the SEC on March 30, 2020.16, 2021. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 20192020 balance sheet information was derived from the audited financial statements as of that date.

To date, the Company has generated minimal revenues, experienced negative operating cash flows and has incurred substantial operating losses from its activities. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources, future product sales, and through the issuance of debt or equity. Since March 2020, we have been evaluating the actual and potential business impacts related to the COVID-19 pandemic. While the full impact of the COVID-19 pandemic continues to evolve, the financial markets have been subject to significant volatility that adversely impacts the Company’s ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing initiatives. The uncertain financial markets, potential disruptions in supply chains, mobility restraints, and changing priorities could also affect the Company’s ability to enter into key agreements. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as certain medical services and supplies, have spiked, while demand for other goods and services have fallen. The future progression of the outbreak and its effects on the Company’s business and operations are uncertain. The Company and its third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to the Company’s research and development activities, including, for example, medical and laboratory supplies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak. These disruptions havemay negatively impactedimpact the Company’s sales, its results of operations, financial condition, and liquidity in 2020.2021.

The Company has financed its operations primarily through sales of equity-related securities. As of SeptemberJune 30, 2020,2021, the Company had an accumulated deficit of $99,323,$113,112, total current assets of $25,912$28,017 and total current liabilities of $10,515$10,401 resulting in working capital of $15,397.$17,616. For the three and ninesix months ended SeptemberJune 30, 2020,2021 the Company incurred a net loss of $3,938 and $14,859 respectively.$9,391. As of SeptemberJune 30, 2020,2021, the Company had cash and cash equivalents of $23,687. Under$26,379. As of June 30, 2021, under the terms of the loan agreement with Silicon Valley Bank (“SVB”), the Company mustwas required to maintain unrestricted cash in accounts held at SVB of at least $10,000 (the “Liquidity Covenant”). The Company will needAs described in greater detail below, in connection with entering into the Kreos Loan Agreement, as defined in Note 12- Subsequent Events, we have terminated the SVB Loan Agreement as of July 16, 2021 and are no longer subject to raise additional capital or generate substantial revenue in order to ensure compliance with the Liquidity Covenant to support its development and commercialization efforts. If adequate funds are not available to the Company on a timely basis, or at all, it may breach the Liquidity Covenant, in which case, the Company would be required to immediately pledge to the bank and thereafter maintain in a separate account, unrestricted and unencumbered cash in an amount equal to the amount then outstanding under the loan agreement.Covenant.

Management’s plan, inclusive of its cost reduction plan (the “2020 Plan”) in 2020, includes revenue generation through the sale of products and raising funds from outside investors. However, there is no assurance that such sale of products will occur or that outside funding will be available to the Company, will be obtained on favorable terms or will provide the Company with sufficient capital to meet its objectives.

Such conditions, as well as the terms of its Liquidity Covenant and the uncertainty of the impact of the COVID-19 pandemic, raise substantial doubts about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

Note 3 – Summary of Significant Accounting Policies

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and ninesix months ended SeptemberJune 30, 20202021 are consistent with those discussed in Note 3 to the consolidated financial statements in the Company’s 20192020 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies during the three and ninesix months ended SeptemberJune 30, 2020.2021.

Basis of presentation and principles of consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries, Motus Ltd., an Israel corporation, which has operations in Tirat Carmel, Israel, and Motus Inc., a Delaware corporation, which has operations in the U.S. All inter-company accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition

Sales contracts executed for the second generation Pure-Vu System are accounted for in accordance with ASC Topic 606 - Revenue from Contracts with Customers (“ASC 606”) to depict the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled to. The Pure-Vu System consists of a Workstation and single use disposable sleeves (“Disposables”). For contracts outside the scope of ASC 606, the Company determines income for proposed supply arrangements under 1) ASC 842 as it pertains to an embedded lease of the Workstation within a proposed supply arrangement and 2) ASC 606 for the sale of the Disposables within the proposed supply arrangement. The Company allocates the transaction price to the performance obligations within the proposed supply arrangements using the total estimated purchases method for both (i) arrangements that contain minimum purchase commitments and (ii) those arrangements that do not contain a minimum purchase commitment, but instead offer a volume discount for purchases that exceed a specified tier. During the three months ended June 30, 2021, the Company recognized revenue of $100, which primarily consisted of $72 in accordance with ASC 606 and $28 in accordance with ASC 842. During the three months ended June 30, 2020, the Company recognized revenue of $1 in accordance with ASC 606. During the six months ended June 30, 2021, the Company recognized revenue of $151, which primarily consisted of $108 in accordance with ASC 606 and $43 in accordance with ASC 842. During the six months ended June 30, 2020, the Company recognized revenue of $29 in accordance with ASC 606.

Basic and diluted net loss per share

Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year, plus the number of common shares that would have been outstanding if all potentially dilutive ordinary shares had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”. Potentially dilutive common shares were excluded from the calculation of diluted loss per share for all periods presented due to their anti-dilutive effect due to losses in each period.

Net loss attributable to common stockholders consists of net income or loss, as adjusted for actual and deemed preferred stock dividends declared, amortized or accumulated. The Company recorded a deemed dividend for the issuance of warrants during the three and six months ended June 30, 2021 of $0 and $6,145, respectively. The deemed dividend is added to the net loss in determining the net loss available to common stockholders.

Income taxes

The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of SeptemberJune 30, 2020,2021, and December 31, 2019,2020, the Company had a full valuation allowance against its deferred tax assets.

For the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company recorded zero income tax expense. No tax benefit has been recorded in relation to the pre-tax loss for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.

Restructuring charges

Restructuring charges are comprised of severance costs related to workforce reductions and other costs directly related to the 2020 Plan, including lease exit and fixed asset impairment. The Company recognizes restructuring charges when the liability is incurred. Employee termination benefits are accrued at the date management has committed to a plan of termination and employees have been notified of their termination dates and expected severance payments, see Note 12.

Recently Adopted Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on its consolidated financial statements and disclosures.

In August 2018,December 2019, the FASB issued ASU 2018-13, “Changes2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, or ASU 2019-12, which is intended to Disclosure Requirementssimplify the accounting for Fair Value Measurements”, which willincome taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements, and is effective for all entities for fiscal years ending after December 15, 2019.consistent application. The Companynew standard was adopted ASU 2018-13 on January 1, 2020.2021. The adoption of ASU 2018-132019-12 did not have a material impact on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-15, “Internal-Use Software (Subtopic 350-40) — Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service”. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license), by requiring a customer in a cloud computing arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project, and is effective for public business entities for fiscal years beginning after December 15, 2019. The Company adopted ASU 2018-15 on January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments —– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments — CreditInstruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments — CreditInstruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments —- Credit LossesLoss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”,” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until January 1, 2023. The Company will continue to evaluate the effect thatof adopting ASU 2016-13 will have on the Company’s financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The ASU is intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

Note 4 – Investments and Fair Value of Financial InstrumentsMeasurements

Investments consist of available-for-sale securities, which are carried at fair value. Interest and dividends on investments are included in finance income, net.

As of September 30, 2020, the Company did not have any investments. The following table summarizes, by major security type, the Company’s investments as of December 31, 2019:

The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data;

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

There were no changes in the fair value hierarchy leveling during the three and nine months ended September 30, 2020 and during the year ended December 31, 2019.

The following table summarizes the fair value of the Company’s financial assetsAssets and liabilities that were accounted formeasured and recorded at fair value on a recurring basis by level withinconsisted of the fair value hierarchy, as of Septemberfollowing at June 30, 20202021 and December 31, 2019:2020:

Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, and certain other current liabilities, due to their short-term nature.

Contingent Royalty Obligation

In estimatingChanges in the fair value of the Company’srecurring fair value measurements using significant unobservable inputs (Level 3), which solely consisted of a contingent royalty obligation, (see Note 9),during the Company used the discounted cash flow method as of September 30, 2020 and December 31, 2019. Based on the fair value hierarchy, the Company classified contingent royalty obligation within Level 3 because valuation inputs are based on projected revenues discounted to a present value.

The following table sets forth a summary of changes in the estimated fair value of the Company’s Level 3 contingent royalty obligation for the ninesix months ended SeptemberJune 30, 2020:2021 was as follows:

The contingent royalty obligation is re-measured at each balance sheet date using several assumptions, including the following assumptions:following: 1) estimated sales growth, 2) length of product cycle, 3) patent life, 4) discount rate (21% as of 21% at both SeptemberJune 30, 20202021 and December 31, 2019,2020), and 2)5) rate of royalty payment (3% as of 3% at both SeptemberJune 30, 20202021 and December 31, 2019.2020).

In accordance with ASC-820-10-50-2(g), the Company performed a sensitivity analysisanalyses of the liability, which was classified as a Level 3 financial instrument. The contingent royalty obligation estimate may be significantly impacted by changes in assumptions used in these analyses. For example, the Company recalculated the fair value of the liability by applying a +/- 2% change to the input variable in the discounted cash flow model; the discount rate. A 2% decrease in the discount rate would increase the liability by $171approximately $204 and a 2% increase in the discount rate would decrease the liability by $152.

approximately $144.

9

Note 5 – Inventory

Inventory is stated at lower of cost or net realizable value using the weighted average cost method and is evaluated at least annually for impairment. Write-downs for potentially obsolete or excess inventory are made based on management’s analysis of inventory levels, historical obsolescence and future sales forecasts. For the three and nine months ended September 30, 2020, noThere were 0 inventory write-down charge was recorded; and,charges for the three and ninesix months ended SeptemberJune 30, 2019, an inventory write-down charge of $572021 and $76, respectively, was recorded.2020.

Inventory consistsat June 30, 2021 and December 31, 2020 consisted of the following:

Note 6 – Fixed assets, net

Fixed assets, net, consistssummarized by major category, consist of the following:following for the years ended:

Depreciation and amortization expense for the three and ninesix months ended SeptemberJune 30, 20202021 was $154$102 and $279,$200, respectively. Depreciation and amortization expense for the three and ninesix months ended SeptemberJune 30, 20192020 was $58$125 and $157$201, respectively. The Company incurred a loss on the impairment of fixed assets in the amount of $0$9 and $18 for the three and ninesix months ended SeptemberJune 30, 2020, respectively. The Company incurred a loss on the impairment of fixed assets in the amount of $35 for the three and nine months ended September 30, 2019.

Note 7 – Leases

The Company leases an office in Fort Lauderdale, Florida under an operating lease. The term expires November 2024. The annual base rent is subject to annual increases of 2.75%. As described within Note 10, the Company shares this space with a related party pursuant to the Shared Space Agreement, as defined below.

The Company leases an office in Israel under an operating lease. The term expires on December 31, 2022. The annual base rent is subject to increases of 4%.

The Company leases vehicles under operating leases that expire at various dates through 2022.

Many of these leases provide for payment by the Company, as the lessee, of taxes, insurance premiums, costs of maintenance and other costs which are expenses as incurred. Certain operating leases include escalation clauses and some of which may include options to extend the leases for up to 3 years.

The components of lease cost and supplemental balance sheet information for the Company’s lease portfolio were as follows: 

The Company records operating lease payments to lease expense using the straight-line method. The Company’s lease expense was $66$62 and $229$124 for the three and ninesix months ended SeptemberJune 30, 2021, included in general and administrative expenses which is net of the related party license fee of $47 and $94 for the three and six months ended June 30, 2021, respectively (see Note 10). The Company’s lease expense was $79 and $163 for the three and six months ended June 30, 2020, respectively, included in general and administrative expenses, which is net of the related party license fee of $47$44 and $126$79 for the three and ninesix months ended SeptemberJune 30, 2020, respectively (see Note 10). The Company’s lease expense was $127 and $356 for the three and nine months ended September 30, 2019, respectively, included in general and administrative expenses.respectively.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2019 were as follows:

Future minimum receipts under the related party license fee as of September 30, 2020 were as follows:

Note 8 – Term Debt

On December 13, 2019 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “Loan Debt”Agreement”) for $8,000 (the “Term Debt”) with Silicon Valley Bank (the “Bank” or “SVB”). On April 10, 2020, the Company entered into a Deferral Agreement (the “Deferral Agreement”) with SVB, effective April 2, 2020, which amends certain provisions of the Loan and Security Agreement, between the Company and SVB.

Pursuant to and among other changes effected by, the Deferral Agreement, as of April 2, 2020, the originally scheduled period of monthly interest-only payments under the Loan Agreement, and the originally scheduled maturity date of the Loan Agreement, have each been extended by six months. As a result, pursuant to the Deferral Agreement, the Loan Agreement now provides for monthly interest-only payments through June 30, 2022, followed by monthly payments of principal and interest until June 1, 2024.

The Term Debt of $8,000 bears an interest rate equal to the greater of (i) one-half of one percent (0.50%) above the Prime Rate and (ii) five and one-half percent (5.50%). At SeptemberJune 30, 2020,2021, the interest rate was 5.50%. The Term Debt is collateralized by substantially all assets of the Company. Additionally, the Company has pledged 65% of the outstanding capital stock in the Company’s foreign subsidiary, Motus GI Medical Technologies, Ltd., to collateralize the Term Debt.

Interest payments have commenced on January 1, 2020, following each month until the maturity date. Principal payments will commence July 1, 2022 and continuing for 24 consecutive months thereafter. The Company may prepay all, but not less than all, of the outstanding principal balance of the Term Debt subject to prepayment premium of $240, plus all other sums, if any, that shall have become due and payable.

The Company incurred $50 of debt issuance costs related to the Term Debt. For the three and ninesix months ended SeptemberJune 30, 2021, $2 and $4 of debt issuance costs was amortized to interest expense, respectively, using the effective interest method. For the three and six months ended June 30, 2020, $2 and $23$21 of debt issuance costs was amortized to interest expense, respectively, using the effective interest method. The effective interest rate on the Term Debt for the three months ended SeptemberJune 30, 20202021 was 5.69%. The Company accounts for its bank indebtedness at amortized cost.

Further, under the terms of the agreement, the Company must maintain unrestricted cash in accounts with the Bank of at least $10,000. The covenant was met by the Company as of SeptemberJune 30, 2020.2021. The Company’s cash forecast indicates that it will need to raise additional funds during 2021, which is part of the current operating plan, in order to meet this liquidity requirement covenant during the coming year.

The Term Debt includes a subjective acceleration clause. Since March 2020, theThe Company has been continuously evaluating the actual and potential business impacts related to the COVID-19 pandemic. In response to the pandemic, certain measures were taken by authorities that could result in adverse financial impacts to the Company, including requiring Company workers to stay home. The Company considered the probability of a further slow-down of its sales team and the related impact on the potential to trigger the Liquidity Covenant, along with the tighteningvolatility of the capital markets, which could cause SVB to exercise the subjective acceleration clause in determining the classification of the Company’s Term Debt. When considering these factors, the Company determined the likelihood of acceleration could be probable ifas the pandemic continues, and therefore the Company has classified the Term Debt in current liabilities.

Future maturities under the amended terms of the Term Debt are as follows:

Term Loan Refinancing

On July 16, 2021 (the “Effective Date”), the Company entered into a loan facility (the “Kreos Loan Agreement”) with Kreos Capital VI (Expert Fund) LP (the “Lender”). Under the Kreos Loan Agreement, Lender will provide the Company with access to term loans in an aggregate principal amount of up to $12,000 (the “Loan”). Please see Note 12- Subsequent Events for additional information regarding the Kreos Loan Agreement.

On the Effective Date, the Company used a portion of the proceeds from the Loan to repay in full all amounts outstanding under, and discharge all obligations in respect of, the Loan Agreement, between the Company and Silicon Valley Bank. The payment amount of approximately $8,200 included a negotiated prepayment premium of $220 under the terms of the payoff arrangement with SVB. As a result, the SVB Loan Agreement, together with all documents and agreements executed in connection therewith, including the Liquidity Covenant, have terminated and all liens associated therewith have been released as of the Effective Date.

Note 9 – Commitments and Contingencies

Royalties to the IIA

The Company has received, and may receive in the future, grants from the Government of the State of Israel through the Israeli National Authority for Technical Innovation (the “IIA”) for the financing of a portion of its research and development expenditures.expenditures pursuant to the Israeli Law for the Encouragement of Research, Development and Technological Innovation in Industry 5744-1984 (the “Research Law”), and the regulations previously promulgated thereunder, as well as the IIA’s rules and benefit tracks which apply to companies receiving IIA funding (collectively, including the Research Law, the “IIA Regulations”) The total amount that was received and recorded between the periods ending December 31, 2011 through 2016 was $1,332.  No amounts were received during the three and six months ended SeptemberJune 30, 20202021 and 2019.2020. The Company has a contingent obligation to the IIA for the total amount received along with the accumulated LIBOR interest to date in the amount of $1,405$1,413 and $1,396$1,407 as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. This obligation is repaid in the form of royalties on revenues generated in any fashion from know-how developed using IIA grants, with a rate that is currently at 4% (which may be increased under certain circumstances). The Company may be obligated to pay, up to 100% (which may be increased under certain circumstances) of the U.S. dollar-linked value of the grants received, plus interest at the rate of 12-month LIBOR.

Repayment of the grants is contingent upon the successful completion of the Company’s R&D programs and generating sales. The Company has no obligation to repay these grants if the R&D program fails, is unsuccessful, or aborted, or if no sales are generated. The Company has recorded an immaterial expense for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, and an immaterial liability at SeptemberJune 30, 20202021 and 2019.December 31, 2020.

Royalty Payment Rights on Royalty Payment Rights Certificates

The Company filed a Certificate of Designation of Preferences, Rights and Limitations (the “Certificate of Designation”), establishing the rights and preferences of the holders of the Series A Convertible Preferred Stock, including certain directors and officers of the Company (the “Royalty Payment Rights”). As set forth in the Certificate of Designation, the Royalty Payment Rights initially entitled the holders in aggregate, to a royalty in an amount of:

In addition, in connection with completion of the 2017 Private Placement, the Company issued the placement agent royalty payment rights certificates (the “Placement Agent Royalty Payment Rights Certificates”) which grants the placement agent, and its designees, the right to receive, in the aggregate, 10% of the amount of payments paid to the holders of the Series A Convertible Preferred Stock, or the holders of the Royalty Payment Rights Certificates (the “Royalty Payment Rights Certificates”), upon the conversion of the Series A Convertible Preferred Stock into shares of the Company’s common stock. The Placement Agent Royalty Payment Rights Certificates are on substantially similar terms as the Royalty Payment Rights of the Series A Convertible Preferred Stock.

The Royalty Payment Rights Certificate obligation and Placement Agent Royalty Payment Rights Certificate obligation (the “Contingent Royalty Obligation”) was recorded as a liability at fair value as “Contingent royalty obligation” in the consolidated balance sheets at SeptemberJune 30, 20202021 and December 31, 20192020 (see Contingent Royalty Obligation below). The fair value at inception was allocated to the royalty rights and the residual value was allocated to the preferred shares and recorded as equity.

The Company amended its Certificate of Designation to modify the Royalty Payment Rights when the Company consummated its Initial Public Offering (“IPO”) on February 16, 2018, at which time the Company converted the Series A Convertible Preferred Stock into shares of the Company’s common stock and issued the Royalty Payment Rights Certificates. Pursuant to the terms of the Royalty Payment Rights Certificates, if and when the Company generates sales of the current and potential future versions of the Pure-Vu System, including disposables, parts, and services, or if the Company receives any proceeds from the licensing of the current and potential future versions of the Pure-Vu System, then the Company will pay to the holders of the Royalty Payment Rights Certificates a royalty (the “Royalty Amount”) equal to, in the aggregate, in royalty payments in any calendar year for all products:

The Royalty Amount will be payable up to the later of (i) the latest expiration date of the Company’s patents issued as of December 22, 2016, or (ii) the latest expiration date of any pending patents as of December 22, 2016 that have since been issued or may be issued in the future (which is currently April 2035)May 2036). Following the expiration of all such patents, the holders of the Royalty Payment Rights Certificates and the holders of the Placement Agent Royalty Payment Rights Certificates will no longer be entitled to any further royalties for any period following the latest to occur of such patent expiration.

On February 16, 2018, the date of the closing of the IPO, (1) the amendment to the Certificate of Designation became effective, (2) all outstanding shares of Series A Convertible Preferred Stock were converted into shares of the Company’s common stock pursuant to a mandatory conversion, and (3) the Royalty Payment Rights Certificates were issued to the former holders of the Series A Convertible Preferred Stock.

Contingent Royalty Obligation

The Contingent Royalty Obligation was recorded as a non-current liability at fair value in the consolidated balance sheets at SeptemberJune 30, 20202021 and December 31, 20192020 in the amount of $1,624$1,734 and $1,872,$1,617, respectively. A loss on change in fair value of Contingent Royalty Obligation of $37 and $117 was recorded for the three and six months ended June 30, 2021, respectively. A loss on change in fair value of Contingent Royalty Obligation of $77 and a gain on change in fair value of Contingent Royalty Obligation of $3 and $248 were$245 was recorded for the three months and ninesix months ended SeptemberJune 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recorded a gain on change in fair value of Contingent Royalty Obligation in the amount of $127 and $68, respectively.

Other Commitments and Contingencies

The Company has a severance contingency for severance payments to its CEO, COO, and CFO in the aggregate of $1,319,approximately $1,408, in the event that they are terminated without cause or leave due to good reason, as outlined in their employee agreements. Management estimates that the likelihood of payment is remote; therefore, no liability was reflected in these condensed consolidated financial statements.

Any serious disruption with the Company’s operations due to the COVID-19 outbreak could impair the Company’s ability to generate sufficient cash to repay its debt obligations when they become due and payable, either when they mature, or in the event of a default, which will cause the Company to breach its covenants and may negatively impact the Company’s business operations, financial condition, and results of operations. The Company is unable to predict the outcome of these matters and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.

Note 10 – Related Party Transactions

Shared Space Agreement

In January 2020, the Company entered into a license agreement (the “Shared Space Agreement”) with Orchestra BioMed, Inc., formerly a greater than 5% holder of the Company’s common stock and entity in which David Hochman, the Chairman of the Company’s board of directors, serves as the Chairman of the board of directors and Chief Executive Officer, and Darren Sherman, a member of the Company’s board of directors, serves as a director and as President and Chief Operating Officer. As of September 30, 2020, the Company has a related party receivable in the amount of $2 in relation to the Shared Space Agreement. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recorded license fee of $47 and $126,$94, respectively, in relation to the Shared Space Agreement. This amount is netted with rent expense in general and administrative expenses. During the three and six months ended June 30, 2020, the Company recorded license fee of $44 and $79, respectively, in relation to the Shared Space Agreement. This amount is netted with rent expense in general and administrative expenses. As of June 30, 2021 and December 31, 2020, the Company recorded a related party receivable of $2 and $0, respectively.

Orchestra BioMed, Inc. will continue to pay a monthly license fee based on the shared space to the Company until the expiration of the Shared Space Agreement in September 2024. Aggregate license fees will range from $162 to $198 in any given calendar year during the term of the Shared Space Agreement.

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Note 11 – Stock-based compensation

Issuance of Common Stock

On July 10, 2020,January 13, 2021, the non-employee members of the Board of Directors were granted an aggregate of 44,60052,317 fully vested shares of Common Stock as compensation, in lieu of $55 of cash compensation, for service as directors during the secondfourth quarter of 2020, pursuant to the Company’s non-employee director compensation policy. The Company recorded $56 in accrued expenses as of September 30,December 31, 2020 in relation to the service as directors for director services during the three months ended September 30,December 31, 2020. On October 10, 2020, the non-employee members of the Board of Directors were granted an aggregate of 58,804 shares of Common Stock as compensation, in lieu of cash compensation, for service as directors during the third quarter of 2020, pursuant to the Company’s non-employee director compensation policy. The number of shares granted to the Company’s directors, in lieu of cash compensation, iswas determined by the dollar amount of quarterly fees due under the non-employee director compensation policy divided by the fair market value of a share of Common Stock as of the grant date.date which was $1.08.

On September 1, 2020February 17, 2021, the Company completedCompany’s Compensation Committee approved a securities purchase agreement (the “Securities Purchase Agreement”)modification to the non-employee director compensation policy to permit payment of the fees for service as directors for 2021 in which it sold and issued, in a registered direct offering, an aggregate of 3,200,000 sharesgrants of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and pre-funded warrants to purchasein lieu of cash compensation. Non-employee members of the Board of Directors were granted an aggregate of 5,533,625121,237 fully vested shares of Common Stock (the “Pre-Funded Warrants”). The offering price was $1.145 for each share of Common Stock and $1.144 for each Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisablecommon stock at a price of $.0001equal to $1.78 per share of Common Stock. Pursuant to the Securities Purchase Agreement,common stock, as compensation, in a concurrent private placement,lieu of $216 of cash compensation, for service as directors for 2021. On June 22, 2021, the Company has also agreedgranted to sell and issue to the purchasers warrants to purchase up to 8,733,625its newly appointed director an aggregate of 18,209 fully vested shares of Common Stock. These warrants are immediately exercisablecommon stock at an exercisea price of $1.30equal to $1.04 per share and expire on the fifth anniversary of the datecommon stock, as compensation, in lieu of issuance. In connection with the closing$19 of the offering,cash compensation, for service as a director for 2021. As of June 30, 2021, the Company received gross proceedsrecorded $121 in prepaid board of $9,994 before deducting placement agent feesdirectors’ compensation. For the three and other offering expenses of $830, from the issuance of the Common Stock and the Pre-Funded Warrants.

Issuance of Warrants to Purchase Common Stock

Onsix months ended June 6, 2018,30, 2021, the Company entered into a consultant agreement with a service provider which shall continue until the agreement is terminated by the Company or service provider by providing at least five business days’ prior written notice. Pursuant to the agreement, the Company (a) issued a warrant on June 6, 2018 to purchase 10,000 sharesrecorded $60 and $114 of the Company’s common stock, with an exercise price of $5.25 per share, at which time a measurement date was reached (b) issued a warrant on October 6, 2018 to purchase 10,000 shares of the Company’s common stock, with an exercise price of $6.25 per share at which time a measurement date was reached, and (c) issued a warrant on February 6, 2019 to purchase 10,000 shares of the Company’s common stock, with an exercise price of $7.25 per share (collectively, such warrants referred to as the “Consultant Warrants”). The Consultant Warrants each have a five-year term, vest immediately, and provide for cashless exercise. The Company recorded $0 and $10 as general and administrative expense, in the accompanying condensed consolidated statement of comprehensive lossrespectively, in relation to the 30,000 warrants for the three and nine months ended September 30, 2019, respectively.board of directors’ compensation.

On July 2, 2018, the Company entered into a consultant agreement with a service provider which continued until February 28, 2019. Pursuant to the agreement, the Company (i) issued a fully-vested and nonforfeitable warrant on July 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company’s common stock, with an exercise price of $7.39 per share, and expired 12 months from the date of agreement, (ii) issued a fully-vested and nonforfeitable warrant on July 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company’s common stock, with an exercise price of $7.39 per share, and expires 18 months from the date of the agreement, (iii) issued a fully-vested and nonforfeitable warrant on October 2, 2018 (at which point a measurement date was reached) to purchase 25,000 shares of the Company’s common stock with an exercise price of $8.75 per share, and expires 18 months from the date of the agreement and (iv) issued a fully-vested and nonforfeitable warrant on January 2, 2019 to purchase 25,000 shares of common stock of the Company with an exercise price of $10.00 per share, and expires 24 months from the date of the agreement. The warrants issued under this agreement are callable by the Company and it will have the right to require the consultant to exercise all or any warrants still unexercised for a cash exercise or the Company may re-purchase the warrant at a price of $0.01 per warrant share if the Company’s stock trades above a closing floor price ranging from $9.00 to $13.00 per share for ten (10) consecutive trading days. In accordance with ASC 480, “Distinguishing Liabilities from Equity”, the call feature is a conditional obligation upon an event not certain to occur that becomes mandatorily redeemable if that event occurs, the condition is resolved, or that event becomes certain to occur. Because the conditional event is within control of the Company, the call feature is not recognized for accounting purposes until the Company exercises its rights under agreement. The Company recorded $0 and $31 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the three and nine months ended September 30, 2019, respectively.

On July 3, 2018,March 2021, the Company entered into an amendmentEquity Distribution Agreement (the “Equity Distribution Agreement”) , or at- the- market offering, with Oppenheimer & Co. Inc. (“Oppenheimer”), under which it may offer and sell from time to a consulting agreement dated May 27, 2017 as a continuationtime common shares having an aggregate offering price of investor relation and consulting servicesup to extend$25,000. On April 30, 2021, the termination of the agreement to July 2019 and issued 30,000Company sold 1,340,870 shares of common stock whichpursuant to the above-described Equity Distribution Agreement, resulting in net cash proceeds of $1,826, after deducting issuance costs of $74.

On May 17, 2021, we issued an aggregate of 50,000 fully vested immediately and a warrant to purchase 90,000 shares of common stock which vested immediately. The warrants are exercisable at $8.50to a consultant in consideration for services that were performed during the three months ended June 30, 2021 under a consulting agreement, with fair value of $53, based on a price of $1.06 per share and expire five years fromof common stock, which was the closing price of the Company’s stock at the date of issuance. The Company recorded $139 and $276 as general and administrative$53 of expense in the accompanying condensed consolidated statement of comprehensive loss for the three and ninesix months ended SeptemberJune 30, 2019, respectively. 2021, in relation to the consulting agreement.

On January 1, 2019, the Company entered into an amended and restated consultant agreementIssuance of Warrants to restate and replace the existing consultant agreement dated October 1, 2018 with a service provider which shall continue until September 30, 2019, unless and until sooner terminated by the Company or service provider by providing at least thirty days prior written notice. Pursuant to the agreement, the Company issued a fully-vested and nonforfeitable warrant on February 13, 2019 to purchase 50,000 shares of the Company’s common stock, with an exercise price of $5.00 per share, and expires March 20, 2022. The Company recorded $30 and $60 as general and administrative expense in the accompanying condensed consolidated statement of comprehensive loss for the three and nine months ended September 30, 2019, respectively.Purchase Common Stock