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Note 8 - Royalties Payable
6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Royalties Payable [Text Block]

Note 8. Royalties Payable

 

LockeT Royalty

 

On January 9, 2023, prior to the consummation of the Merger, Old Catheter entered in an agreement with its Convertible Promissory Noteholders (“Noteholders”), which substantially consisted of amounts due to David A. Jenkins, previously Old Catheter's Chairman of the Board of Directors prior to the Merger, and, currently, the Company’s Executive Chairman of the Board of Directors and Chief Executive Officer, to forgive all accrued interest and future interest expense in exchange for a future royalty right. Under these agreements, the Company is obligated to pay the Noteholders a total royalty equal to 11.82% of net sales of its LockeT device on a quarterly basis, commencing upon the first commercial sale, which occurred in April 2024, through December 31, 2035.  As of   June 30, 2025 and December 31, 2024, the fair value of the royalty payable related to the agreement with the Noteholders was $12.0 million and $9.2 million, respectively. 

 

An additional royalty will be paid to the inventor of the LockeT device as detailed in the Royalty Agreement. In exchange for the assignment and all rights to LockeT and starting with the year ending December 31, 2022, the Company will initially pay a 5% royalty on net sales up to $1.0 million in royalties, payable annually in arrears. After $1.0 million has been paid, due to the issuance of the patent described below, the Company must pay an additional royalty at a rate of 2% of net sales, until total cumulative royalties of $10.0 million have been paid.

 
In April 2025, a US patent was granted by the United States Patent and Trademark Office, after which the Company is obligated to pay an additional royalty of 2% of net sales only after the initial $1.0 million of 5% royalties has been paid, up to a maximum of $10.0 million in additional royalties. These royalty payments apply to revenues through December 31, 2033 and will terminate at that date regardless of whether the full $10.0 million has been paid. This led to a $0.9 million increase in the royalty payable due to related parties as of June 30, 2025 as compared to December 31, 2024.
 
The Company recorded  losses for the change in the fair value of the royalty payable of  $1.7 million and  $2.8 million for the  three and six months ended June 30, 2025, respectively, and $1.5  million and  $1.6 million for the three and six months ended June 30, 2024, respectively. The Company accrued  $542 thousand and $177 thousand under current portion of royalties payable due to related parties as of  June 30, 2025, and December 31, 2024, respectively. These amounts represent actual royalty liabilities incurred and accrued by the Company as well as estimated future royalty payments payable within the next 12 months. 
 
AMIGO System Royalty

 

During 2006 and 2007, Old Catheter entered into two investment grant agreements with a non-profit foundation for the purpose of funding the initial development of Old Catheter's AMIGO System, receiving a total of $1.6 million from the foundation. The agreement calls for the payment of the following sales-based royalties by Old Catheter to the foundation upon successful commercialization of the AMIGO System (in thousands, except for percentages):

 

  

Until Royalty Payment

 

Royalty Percentage

 

Reaches a Total of

 

4%

 $1,589 

2%

 $3,179 

1%

 

In perpetuity

 

 

The Company is not actively marketing and selling the AMIGO System, such that there was no royalty expense recorded for the three and six months ended June 30, 2025 and 2024 in relation to the AMIGO System.