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. 

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 million of 5% royalties has been paid, up to a maximum of $10 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 million has been paid.

On December 31, 2025, the Company entered into the Series J Exchange Agreement ("Exchange Agreement") with Mr. Jenkins and FatBoy Capital, L.P. to exchange future and accrued royalty rights of $2.7 million for an aggregate of 9,490 shares of the Company's newly designated Series J Convertible Preferred Stock, par value $0.0001 per share and stated value of $1,000 per share (see Note 12, Preferred Stock, for additional information). The Exchange Agreement was accounted for as an extinguishment of liabilities as the Company settled an outstanding contractual obligation through the issuance of shares of preferred stock. Therefore, the Company derecognized $2.7 million of royalties payable due to related parties and recognized the fair value of the Series J Convertible Preferred Stock of $5.3 million in additional paid-in capital in the consolidated balance sheets. The difference between the fair value of the Series J Convertible Preferred Stock and the fair value of the royalties payable due to related parties of $2.6 million was recorded as loss on debt extinguishment in the consolidated statements of operations.

All other royalties payable remain outstanding and are included under current portion of royalties payable due to related parties and royalties payable due to related parties in the condensed balance sheets. The Company recorded a gain for the change in the fair value of the royalties payable due to related parties of $5.7 million for the year ended December 31, 2025 and a loss of $2.2 million for the year ended December 31, 2024. The fair value of the royalties payable due to related parties totaled $0.8 million and $9.2 million as of  December 31, 2025 and December 31, 2024, respectively. 

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):

The Company is not actively marketing and selling the AMIGO System, such that there was no royalty expense recorded for the years ended December 31, 2025 and 2024 in relation to the AMIGO System.