PART I: FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements This section presents Adagio Medical Holdings Inc.'s unaudited condensed consolidated financial statements and notes for Q1 2025 (Successor) and Q1 2024 (Predecessor) Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Assets | | | | Cash and cash equivalents | $12,963 | $20,586 | | Total current assets | $17,373 | $25,349 | | Total assets | $41,338 | $48,448 | | Liabilities & Equity | | | | Total current liabilities | $6,006 | $6,659 | | Convertible notes payable, net | $17,652 | $17,180 | | Total liabilities | $28,939 | $28,536 | | Total stockholders' equity | $12,399 | $19,912 | | Total liabilities, convertible preferred stock, and stockholders' equity | $41,338 | $48,448 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | Item | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | $— | $26 | | Cost of revenue | $253 | $542 | | Research and development | $3,659 | $3,469 | | Selling, general, and administrative | $3,485 | $4,830 | | Total cost of revenue and operating expenses | $7,397 | $8,841 | | Loss from operations | $(7,397) | $(8,815) | | Convertible notes fair value adjustment | $190 | $1,673 | | Warrant liabilities fair value adjustment | $38 | $(80) | | Interest expense | $(662) | $(754) | | Interest income | $164 | $1 | | Net loss | $(7,713) | $(8,018) | | Basic net loss per share | $(0.50) | $(10.28) | | Diluted net loss per share | $(0.51) | $(10.28) | | Weighted-average shares used to compute net loss per common share, basic and diluted | 15,375,521 | 779,908 | Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) Changes in Stockholders' Equity (Deficit) for Three Months Ended March 31, 2025 (Successor) (in thousands) | Item | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | | :--------------------------------- | :-------------------- | :------------------ | :------------------------- | :------------------ | :------------------------------------------ | :------------------------- | | Balance as of December 31, 2024 | 15,198,232 | $2 | $90,495 | $(70,586) | $1 | $19,912 | | Foreign currency translation adjustment | — | — | — | $43 | $(61) | $(18) | | Issuance of Waiver Shares | 183,333 | — | — | — | — | — | | Stock-based compensation | — | — | $218 | — | — | $218 | | Net loss | — | — | — | $(7,713) | — | $(7,713) | | Balance as of March 31, 2025 | 15,381,565 | $2 | $90,713 | $(78,256) | $(60) | $12,399 | Changes in Stockholders' Equity (Deficit) for Three Months Ended March 31, 2024 (Predecessor) (in thousands) | Item | Convertible Preferred Stock Shares | Convertible Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders' Equity (Deficit) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------ | :------------------ | :------------------------- | :------------------ | :------------------------------------- | :------------------------------- | | Balance as of December 31, 2023 | 4,939,946 | $91,469 | 779,908 | $1 | $1,608 | $(135,205) | $17 | $(133,579) | | Foreign currency translation adjustment | — | — | — | — | — | — | $3 | $3 | | Stock option exercises | — | — | 161 | — | $1 | — | — | $1 | | Stock-based compensation | — | — | — | — | $110 | — | — | $110 | | Net loss | — | — | — | — | — | $(8,018) | — | $(8,018) | | Balance as of March 31, 2024 | 4,939,946 | $91,469 | 780,069 | $1 | $1,719 | $(143,223) | $20 | $(141,483) | Unaudited Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $(7,211) | $(6,739) | | Net cash used in investing activities | $(335) | $(162) | | Net cash provided by financing activities | $— | $9,571 | | Effect of foreign currency translation on cash and cash equivalents | $(77) | $30 | | Net change in cash and cash equivalents | $(7,623) | $2,700 | | Cash and cash equivalents, at beginning of period | $20,586 | $1,383 | | Cash and cash equivalents, at end of period | $12,963 | $4,083 | Notes to Condensed Consolidated Financial Statements This note details Adagio Medical's medical technology focus, recent Business Combination, and significant going concern uncertainties Note 1 - Description of Organization and Business Operations This note details Adagio Medical's medical technology focus, recent Business Combination, and significant going concern uncertainties - Adagio Medical Holdings Inc. is a medical technology company specializing in ablation technologies for cardiac arrhythmias, utilizing proprietary Ultra-Low Temperature Cryoablation (ULTC) and Pulsed Field Cryoablation (PFCA) platforms28 - The company's iCLAS™ Cryoablation System for atrial fibrillation received CE Mark in Europe in June 2020, and the vCLAS™ Cryoablation System for ventricular tachycardia received CE Mark in March 202428 - The vCLAS™ Cryoablation System is currently undergoing the FULCRUM-VT IDE Study to support FDA approval in the U.S28 - A Business Combination was consummated on July 31, 2024, with ARYA Sciences Acquisition Corp IV, leading to ListCo (now Adagio Medical Holdings, Inc.) becoming the Successor entity, with its common stock trading on Nasdaq under 'ADGM' since August 1, 2024293031 - The company has experienced recurring operating losses and negative cash flows since inception, with a cash balance of $13.0 million and an accumulated deficit of $78.3 million as of March 31, 20253334 Key Financials (in millions) | Metric | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net loss | $(7.7) | $(8.0) | | Net cash used in operating activities | $(7.2) | $(6.7) | - Management believes current cash and cash equivalents are insufficient to fund operations for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern35 - Mitigation plans include negotiating cash equity or debt financing, pursuing U.S. regulatory approvals, and executing cost-cutting measures, including a corporate prioritization initiative in February 2025 focusing on the FULCRUM-VT clinical trial and product design optimization3638 Note 2 - Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including U.S. GAAP basis, Business Combination accounting, and EGC status - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted, and should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 20244041 - Due to the Business Combination, ListCo is the accounting acquirer (Successor) and Legacy Adagio is the accounting acquiree (Predecessor), with the Successor period covering July 31, 2024, through March 31, 202542 - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards4647 - The company operates as one reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM) reviewing financial information on a consolidated basis50 - Revenue is primarily generated from the sale of cryoablation catheters (Consumables) and, to a lesser extent, lease revenue from loaned Consoles, recognized when control of goods is transferred to the customer (FOB Shipping Point)5457 - Inventory is valued at the lower of cost or net realizable value using the FIFO method, and property and equipment are recorded at cost less accumulated depreciation, with the useful life of Consoles changed from five to three years effective January 1, 20246566 - Intangible assets (IPR&D, developed technology) and goodwill are tested for impairment annually or when indicators arise; an $18.9 million impairment charge for intangible assets and a $30.3 million goodwill impairment charge were recorded in Q4 2024697071157160 - The company's financial instruments, including convertible notes payable and warrant liabilities, are measured at fair value using a three-tier hierarchy, with most classified as Level 3 due to unobservable inputs8485127128 - Research and development expenses are expensed as incurred and are expected to increase, while selling, general, and administrative expenses are expected to decrease slightly in FY2025 due to cost-cutting and reduced transaction costs8283312314 - The company has a full valuation allowance against its deferred tax assets, resulting in a 0.0% effective tax rate for the periods presented262263 Note 3 – Forward Merger This note details the Business Combination, including the merger structure, PIPE financing, and purchase price allocation with goodwill and intangible assets - The Business Combination was consummated on July 31, 2024, involving ARYA Sciences Acquisition Corp IV, ListCo (now Adagio Medical Holdings, Inc.), and Legacy Adagio106 - Holders of 2,707,555 ARYA Class A ordinary shares redeemed their shares for approximately $31.3 million in cash prior to the annual general meeting107 - The transaction involved the conversion of ARYA shares, Legacy Adagio warrants, convertible promissory notes, preferred stock, common stock, and options into shares of the Company's common stock and new options108 - A PIPE Financing of $64.5 million was committed by PIPE Investors, including cash investments and conversion of Bridge Financing Notes109110 - ListCo issued $20.0 million of 13% senior secured Convertible Securities Notes and 1,500,000 Convert Warrants to Convert Investors115 - The Business Combination was accounted for as a forward-merger using the acquisition method, with ListCo as the accounting acquirer and Legacy Adagio's assets and liabilities recorded at fair value117 Purchase Price Calculation (in thousands) | Item | Amount | | :--------------------------------- | :------- | | Total shares and stock options | 6,779,356 | | Multiplied by the Company's common stock price at the Closing | $6.64 | | Total | $45,015 | | Estimated fair value of PIPE Base Warrants issued in lieu of settling Bridge Financing Notes | $8,531 | | Total purchase price | $53,546 | Allocation of Purchase Price (in thousands) | Item | Amount | | :--------------------------------- | :------- | | Total assets acquired | $77,252 | | Total liabilities assumed | $23,706 | | Net total | $53,546 | | Intangible assets, net | $26,200 | | Goodwill | $44,291 | Note 4 – Fair Value Measurements This note details fair value measurements for financial instruments, including Level 3 convertible notes and warrant liabilities, and their adjustments - The company's financial instruments, including convertible notes payable and warrant liabilities, are carried at fair value, categorized within a three-tier hierarchy126127 Financial Instruments at Fair Value (in thousands) | Item | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Money market account (Level 1) | $11,469 | $19,014 | | Convertible Securities Notes (Level 3) | $17,652 | $17,180 | | Convert Warrants (Level 3) | $114 | $152 | - Legacy Adagio Convertible Notes (October 2022, April 2023, November 2023, February 2024, May 2024, June 2024, July 2024) were measured at fair value (Level 3) and converted upon the Business Combination129130131132133134135136 - Convertible Securities Notes (Successor) are measured at fair value (Level 3) using a binomial lattice model, with a fair value adjustment of $(190) thousand for the three months ended March 31, 2025138139 - Convert Warrants (Successor) are classified as derivative liabilities (Level 3) due to potential cash settlement and are valued using the Black-Scholes Merton option model, with a fair value adjustment of $(38) thousand for the three months ended March 31, 2025147148 - PIPE Pre-funded Warrants (Successor) were classified as derivative liabilities (Level 3) and were exercised on December 26, 2024, with none outstanding as of March 31, 2025149150151152 Note 5 - Inventory, net This note breaks down inventory by category, valued at the lower of cost or net realizable value using FIFO Inventory, net (in thousands) | Category | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Raw materials | $1,542 | $1,683 | | Work-in-Process | $105 | $388 | | Finished goods | $663 | $495 | | Total inventory | $2,310 | $2,566 | - Inventory is recorded net of obsolescence and manufacturing scrap of $0.2 million for both the three months ended March 31, 2025 (Successor) and March 31, 2024 (Predecessor)153 Note 6 - Property and Equipment This note details property and equipment, net, including Consoles and machinery, along with accumulated depreciation and expense Property and Equipment, net (in thousands) | Category | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Consoles | $3,336 | $3,060 | | Machinery and equipment | $842 | $709 | | Total property and equipment | $5,114 | $4,691 | | Less: accumulated depreciation | $(3,021) | $(2,730) | | Property and equipment, net | $2,093 | $1,961 | - Depreciation expense was $0.3 million for both the three months ended March 31, 2025 (Successor) and March 31, 2024 (Predecessor)154 Note 7 – Goodwill and Intangible Assets This note details intangible assets and goodwill, noting Q4 2024 impairment charges and no new charges in Q1 2025 Intangible Assets, net (in thousands) | Category | Useful Life | March 31, 2025 (Successor) Net Carrying Amount | | :--------------------------------- | :---------- | :------------------------------------------ | | IPR&D | Indefinite | $6,969 | | Total | | $6,969 | - During the fourth quarter of 2024, the company recorded an $18.9 million impairment charge on its indefinite-lived intangible assets due to a sustained decline in share price and market capitalization157 - No intangible assets impairment charges were recorded for the three months ended March 31, 2025 (Successor)158 Goodwill (in thousands) | Category | March 31, 2025 (Successor) Net Carrying Amount | | :--------------------------------- | :------------------------------------------ | | Goodwill | $13,967 | - During the fourth quarter of 2024, the company recorded a $30.3 million goodwill impairment charge due to a sustained decline in share price and market capitalization160 - No goodwill impairment charges were recorded for the three months ended March 31, 2025 (Successor)161 Note 8 - Accrued Liabilities This note provides a breakdown of accrued liabilities, primarily compensation and R&D expenses Accrued Liabilities (in thousands) | Category | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Compensation and related expenses | $1,931 | $2,622 | | Research and development expenses | $1,012 | $775 | | Other | $153 | $279 | | Total accrued liabilities | $3,096 | $3,676 | Note 9 - Debt This note details outstanding debt, including Successor Convertible Securities Notes and Predecessor notes converted or paid off Outstanding Debt (in thousands) | Category | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Convertible Securities Notes | $17,652 | $17,180 | | Total outstanding debt | $17,652 | $17,180 | - Legacy Adagio's October 2022 Convertible Notes ($9.5 million principal) were converted into 1,444,899 shares of the Company's common stock upon the Business Combination165170 - Various Bridge Financing Notes (April 2023, November 2023, May 2024, June 2024, July 2024) totaling $29.5 million principal plus accrued interest were converted into 4,372,607 shares of the Company's common stock and 3,540,000 Base Warrants as part of the PIPE Financing172175182184186188 - The February 2024 Convertible Notes ($7.0 million principal) were converted into $7.0 million Convertible Securities Notes and 525,000 Convert Warrants upon the Business Combination179181 - The SVB Term Loan (Predecessor) had an outstanding principal of $1.4 million as of March 31, 2024, and was paid at the Closing of the Business Combination191192 - The Successor issued $20.0 million of Convertible Securities Notes on July 31, 2024, with a 13% interest rate, a three-year and nine-month maturity, and a conversion price of $10.00 per share193194195 - Interest expense for the Convertible Securities Notes was $0.7 million for the three months ended March 31, 2025 (Successor)196 Note 10 - Warrants This note describes various warrants, including Predecessor terminations and Successor derivative and equity classified warrants - SVB Warrants (Predecessor) with an exercise price of $7.97 per share were terminated prior to the Business Combination as their fair market value was lower than the exercise price197198 - Series E Pre-funded Warrants (Predecessor) were converted into 34,680 shares of the Company's common stock upon the Business Combination199200 - The Successor issued 1,500,000 Convert Warrants with an exercise price of $24.00 per share, expiring on the seventh anniversary of issuance, classified as derivative liabilities due to potential cash settlement201 - The Successor issued 670,000 PIPE Pre-funded Warrants with an exercise price of $0.01 per share, which were exercised on a cashless basis for 663,096 shares of common stock on December 26, 2024, with none outstanding as of March 31, 2025202203204205 - The Successor issued 7,528,727 PIPE Base Warrants (including those from Bridge Financing Notes conversion and cash investment) with an exercise price of $10.00 per share, classified as equity206207209 Note 11 - Operating Leases This note outlines operating lease arrangements for facilities, including terms, cash flows, and future minimum payments - The company leases distribution and R&D facilities, and sub-leases office and manufacturing space, with lease expirations ranging from March 2026 to January 2030211 Operating Lease Information (in thousands) | Metric | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Operating cash flows paid for operating leases | $66 | $45 | | Weighted average remaining lease term (years) | 4.2 | 2.0 | | Weighted average discount rate | 8.0% | 8.0% | | Operating lease cost | $74 | $47 | Future Minimum Payments Under Non-Cancelable Operating Leases as of March 31, 2025 (in thousands) | Period | Amount | | :--------------------------------- | :------- | | Nine months ending December 31, 2025 | $243 | | Year ending December 31, 2026 | $223 | | Year ending December 31, 2027 | $197 | | Year ending December 31, 2028 | $206 | | Year ending December 31, 2029 | $214 | | Year ending December 31, 2030 | $18 | | Total undiscounted future cash flows | $1,101 | | Less: imputed interest | $(170) | | Total operating lease liability | $931 | Note 12 - Commitments and Contingencies The company is not currently involved in any material legal proceedings that would adversely affect its financial condition - The company is not currently party to any legal proceedings that, if determined adversely, would individually or in the aggregate have a material adverse effect on its business, financial condition, and results of operations214 Note 13 - Mezzanine Equity and Stockholders' Equity (Deficit) This note details the company's equity structure, including authorized shares, preferred stock conversion, and common stock issuance post-Business Combination - Prior to the Business Combination, Legacy Adagio's authorized shares included 6,594,946 common stock and 4,939,946 preferred stock215 - Legacy Adagio's convertible preferred stock was classified as temporary equity due to contingent redeemability and was converted into Legacy Adagio common stock, then into 789,337 shares of the Company's common stock upon the Business Combination216218 - As of March 31, 2025, the Successor company is authorized to issue up to 210,000,000 common stock and 20,000,000 preferred stock, with 15,381,565 common shares issued and outstanding233 - The company issued 1,147,500 Sponsor Earnout shares in September 2024, which vest upon the stock price reaching $24.00 for 20 trading days within a 30-day period or a company sale, and are classified as equity234236 Common Stock Outstanding Immediately Following Closing | Item | Number of Shares | | :--------------------------------- | :--------------- | | Contribution from PIPE Financing for cash | 3,287,018 | | Conversion of ARYA convertible promissory notes | 355,100 | | Conversion of ARYA Class A ordinary shares and Class B ordinary shares | 2,089,000 | | Conversion of Class A ordinary shares subject to redemption | 123,520 | | Shares issued in purchase consideration | 6,771,769 | | Additional shares issued and reclassification of Class A ordinary shares subject to non-redemption agreements and open market subscription agreements | 761,229 | | Total | 13,387,636 | Reserved Common Stock for Future Issuance (Successor) | Item | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :------------- | | Base Warrants | 7,528,727 | 7,528,727 | | Convertible Securities Notes | 3,231,327 | 3,231,327 | | Convert Warrants | 1,500,000 | 1,500,000 | | Company's common stock issuable upon the exercise of outstanding options | 7,587 | 7,587 | | Common stock reserved for future issuance under the 2024 Equity Incentive Plan | 6,197,737 | 4,472,592 | | Common stock reserved for future issuance under the 2024 Key Employee Equity Incentive Plan | 3,354,444 | 3,354,444 | | Common stock reserved for future issuance under the 2024 Employee Stock Purchase Plan | 441,293 | 441,293 | | Common stock reserved for future issuance | 22,261,115 | 20,535,970 | Note 14 - Stock-Based Compensation This note details stock-based compensation plans, including Predecessor and Successor plans, option activity, and compensation expense - Legacy Adagio's 2012 and 2022 Stock Incentive Plans permitted grants of ISOs and NSOs, with options generally vesting over four years and having a ten-year contractual term239240241242 - Upon the Business Combination, 45,544 In-the-Money Adagio Options were canceled and exchanged for 7,587 options to purchase the Company's common stock, and the 2022 Plan was terminated244 Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Research and development | $9 | $14 | | Selling, general, and administration | $209 | $96 | | Total stock-based compensation expense | $218 | $110 | - The Successor adopted the 2024 Equity Incentive Plan, authorizing up to 4,472,593 shares plus annual increases, and granted 4,868,965 awards under this plan during the three months ended March 31, 2025246247 - The 2024 Key Employee Equity Incentive Plan and 2024 Employee Stock Purchase Plan were also adopted, but no awards or purchase rights have been granted under these plans as of March 31, 2025248249250251 Stock Option Activity for Three Months Ended March 31, 2025 (Successor) | Item | Shares | Weighted Average Exercise Price Per Share | | :--------------------------------- | :------- | :------------------------------------ | | Outstanding, December 31, 2024 | 7,587 | $— | | Options granted | 4,868,965 | $0.97 | | Outstanding, March 31, 2025 | 4,876,552 | $0.97 | | Options vested, March 31, 2025 | 518,253 | $0.87 | | Options vested and exercisable, March 31, 2025 | 4,876,552 | $0.97 | Note 15 – Loss Per Share ("LPS") This note details Loss Per Share (LPS) calculation for Predecessor and Successor periods, including basic and diluted methods - For the Predecessor period, basic and diluted net loss per common share were the same due to net losses causing potential dilutive securities to be anti-dilutive253 Basic and Diluted Net Loss Per Share (Predecessor) (in thousands, except per share data) | Item | Three Months Ended March 31, 2024 | | :--------------------------------- | :-------------------------------- | | Net loss attributable to common stockholders | $(8,018) | | Weighted-average shares outstanding | 779,908 | | Net loss per share attributable to common stockholders - basic and diluted | $(10.28) | - For the Successor period, basic LPS is computed using the two-class method, and diluted LPS is disclosed under the if-converted method, as it resulted in a lower diluted LPS255258 Basic LPS (Successor) (in thousands, except per share data) | Item | Three Months Ended March 31, 2025 | | :--------------------------------- | :-------------------------------- | | Net loss | $(7,713) | | Weighted-average shares outstanding | 15,375,521 | | Net loss per share attributable to each class of participating securities – Basic | $(0.50) | Diluted LPS (Successor) (in thousands, except per share data) | Item | Three Months Ended March 31, 2025 | | :--------------------------------- | :-------------------------------- | | Net loss – Basic | $(7,713) | | Less: Adjustment for fair value changes to convertible securities notes | $(190) | | Net loss attributable to common stockholders – Diluted | $(7,903) | | Weighted-average shares outstanding – Basic | 15,375,521 | | Weighted-average effect of shares issuable to Convertible Securities Notes (if-converted method) | — | | Weighted-average shares outstanding – Diluted | 15,375,521 | | Net loss per share attributable to common shares – Diluted (if-converted method) | $(0.51) | - Potentially dilutive securities, including Base Warrants, Convert Warrants, Earn-out Shares, and stock options, totaling 10,183,814, were excluded from diluted LPS calculation for the Successor period as they were anti-dilutive261 Note 16 - Income Taxes This note explains income tax accounting, including the full valuation allowance and 0.0% effective tax rate due to deferred tax assets - The company maintains a full valuation allowance against its deferred tax assets, with no material change from the fiscal year ended December 31, 2024262 - The effective tax rate for the company's operations was 0.0% for both the three months ended March 31, 2025 (Successor) and March 31, 2024 (Predecessor), primarily due to the valuation allowance offsetting the tax benefit on pre-tax losses263 - The U.S. federal income tax years 2020-2023 and other foreign and state tax jurisdictions' years 2019-2023 remain open to examination264 Note 17 - Related Party Transactions This note details related party transactions, including shared services with Fjord Ventures and investments by Perceptive PIPE Investor - The company incurred $0.2 million (Q1 2025 Successor) and $0.4 million (Q1 2024 Predecessor) for finance, accounting, and administrative support services under a Shared Services Agreement with Fjord Ventures, a company owned by the former CEO265 - Legacy Adagio had a $0.5 million convertible promissory note with Fjordinvest, also owned by the former CEO268 - Perceptive PIPE Investor, the controlling party, received 4,372,607 shares of the Company's common stock and 3,540,000 Base Warrants in exchange for Bridge Financing Notes during the PIPE Financing270 - Perceptive PIPE Investor also made an additional cash investment of approximately $15.9 million, receiving 2,250,352 shares of the Company's common stock and 1,905,069 Base Warrants271 Note 18 – Segment Reporting This note confirms the company operates as a single reportable segment, managed on a consolidated basis by the CEO - The company operates as one reportable segment, managed on a consolidated basis by the Chief Executive Officer (CODM)272 - The CODM assesses performance and allocates resources based on consolidated net loss273 Note 19 - Subsequent Events This note discloses the subsequent appointment of Daniel George as Interim Chief Financial Officer on April 17, 2025 - On April 17, 2025, Daniel George was appointed as Interim Chief Financial Officer, principal financial officer, and principal accounting officer, with compensation at a rate of $400 per hour275 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of financial condition and results of operations, highlighting going concern uncertainties Overview This overview introduces Adagio Medical's ULTC technology for cardiac arrhythmias, its vCLAS™ system, and ongoing financial challenges - The company is a medical device company focused on developing and commercializing catheter-based Ultra-Low Temperature Cryoablation (ULTC) technology for cardiac arrhythmias, with an initial focus on ventricular tachycardia (VT)279 - The vCLAS™ Cryoablation System for VT has European CE Mark approval, and the 206-patient FULCRUM-VT IDE pivotal clinical trial is currently enrolling patients in the U.S. and Canada, with results expected in the second half of 2025 to support FDA approval282 - The company has also developed Pulsed Field Cryoablation (PFCA) technology, with early demonstrations in European trials for persistent atrial fibrillation and preclinical studies for VT ablations283 Key Financials (in millions) | Metric | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Accumulated deficit | $78.3 | $70.6 | | Cash and cash equivalents | $13.0 | $20.6 | | Net loss (Q1) | $(7.7) | $(8.0) | | Net cash used in operating activities (Q1) | $(7.2) | $(6.7) | Going Concern Recurring losses and negative cash flows raise substantial doubt about the company's ability to continue as a going concern - The company's recurring operating losses and negative cash flows since inception raise substantial doubt about its ability to continue as a going concern for the next twelve months from the filing date285 - Current cash and cash equivalents of $13.0 million as of March 31, 2025, are not sufficient to fund operations for at least the next 12 months284285 - Mitigation strategies include negotiating cash equity or debt financing, pursuing necessary regulatory approvals for U.S. market launch, and executing cost-cutting measures286 Description of the Merger This section describes the July 2024 Business Combination, including share redemptions, PIPE financing, and public company implications - The Business Combination was consummated on July 31, 2024, with ARYA Sciences Acquisition Corp IV and Legacy Adagio merging, and ListCo (now Adagio Medical Holdings, Inc.) becoming the combined public entity287288 - Prior to the merger, $31.3 million in ARYA Class A ordinary shares were redeemed289 - The PIPE Financing committed $64.5 million, involving various investors purchasing shares and warrants, and converting existing convertible notes292293298 - The company issued $20.0 million of 13% senior secured Convertible Securities Notes and 1,500,000 Convert Warrants to Convert Investors295 - As a public company, Adagio Medical Holdings, Inc. expects to incur additional ongoing expenses for compliance, directors' and officers' liability insurance, and administrative resources296 Recent Developments In February 2025, the company initiated a corporate prioritization to focus on the FULCRUM-VT trial and product design - In February 2025, the company implemented a corporate prioritization initiative to focus all resources on the FULCRUM-VT clinical trial activities and a new product design optimization program300 - One-time expenses related to this initiative were incurred during the three months ended March 31, 2025300 Key Factors Affecting Our Performance Performance is driven by innovation, regulatory approvals, clinical success, market expansion, reimbursement, and intellectual property protection - Continued success depends on innovation, regulatory clearances/approvals, demonstrating safety and effectiveness in clinical trials, expanding sales force, obtaining adequate reimbursement, attracting and retaining skilled personnel, and protecting intellectual property301302303304 - The industry is intensely competitive, with significant competition from large, well-capitalized companies306 - Commercial success relies heavily on the availability of adequate financial coverage and reimbursement from third-party payors in both U.S. and international markets307 Key Components of Results of Operations This section defines key components of operations, including revenue, expenses, fair value adjustments, and interest income/expense - Revenue is generated from the sale of cryoablation catheters and implied rental of loaned consoles, recognized under ASC Topic 606309 - Cost of revenue includes raw materials, labor, manufacturing overhead, shipping, and depreciation of loaned consoles310 - Research and development expenses are expensed as incurred and are expected to increase due to ongoing product development and clinical trials311312 - Selling, general and administrative expenses are expensed as incurred and are expected to decrease slightly in FY2025 due to lower payroll from the corporate prioritization initiative and the absence of Business Combination-related transaction costs314 - Fair value adjustments are recorded for convertible notes and warrant liabilities, reflecting changes in their estimated fair value315316 - Interest expense primarily arises from outstanding debt obligations, while interest income is earned on cash and cash equivalents317318 Results of Operations This section analyzes Q1 2025 (Successor) versus Q1 2024 (Predecessor) results, noting revenue decline and expense changes Summary of Results of Operations (in thousands) | Item | 2025 (Successor) | 2024 (Predecessor) | Change ($) | Change (%) | | :--------------------------------- | :--------------- | :----------------- | :--------- | :--------- | | Revenue | $— | $26 | $(26) | (100)% | | Cost of revenue | $253 | $542 | $(289) | (53)% | | Research and development | $3,659 | $3,469 | $190 | 5% | | Selling, general, and administrative | $3,485 | $4,830 | $(1,345) | (28)% | | Loss from operations | $(7,397) | $(8,815) | $1,418 | (16)% | | Convertible notes fair value adjustment | $190 | $1,673 | $(1,483) | (89)% | | Warrant liabilities fair value adjustment | $38 | $(80) | $118 | (148)% | | Interest expense | $(662) | $(754) | $92 | (12)% | | Interest income | $164 | $1 | $163 | 16,300% | | Net loss | $(7,713) | $(8,018) | $305 | (4)% | | Comprehensive loss | $(7,774) | $(8,015) | $241 | (3)% | - Revenue decreased by $26 thousand (100%) to nil for Q1 2025, primarily due to the repurchase of previously sold inventory and a pause in European commercial activity322 - Cost of revenue decreased by $0.2 million (53%) due to a change in the estimated useful life of Consoles and the impact of an inventory buyback323 - Research and development expenses increased by $0.2 million (5%) to $3.7 million, driven by higher product development and clinical trial costs, partially offset by reduced quality assurance and operations costs324 - Selling, general and administrative expenses decreased by $1.3 million (28%) to $3.5 million, mainly due to lower payroll and headcount resulting from a corporate prioritization initiative326 - Interest income increased significantly by $163 thousand, from $1 thousand to $164 thousand, primarily due to increased cash balances in an asset management account330 Liquidity and Capital Resources This section discusses liquidity, capital resources, historical financing, and the going concern risk due to insufficient cash - The company has financed operations primarily through equity securities sales, convertible promissory notes, and the SVB Term Loan, experiencing recurring operating losses and negative cash flows since inception333 Cash and Net Cash Used in Operating Activities (in millions) | Metric | March 31, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $13.0 | $20.6 | | Net cash used in operating activities (Q1) | $(7.2) | $(6.7) | - Current cash and cash equivalents are not sufficient to fund operations for at least the next 12 months, raising substantial doubt about the company's ability to continue as a going concern335 - Future funding requirements are substantial and depend on factors such as revenue growth, R&D efforts, sales and marketing activities, clinical trial outcomes, intellectual property, and personnel needs339344 - Predecessor debt, including October 2022 Convertible Notes, various Bridge Financing Notes, and the SVB Term Loan, were either converted into equity/warrants or paid off in connection with the Business Combination340345348351353355358361 - The Successor issued $20.0 million of Convertible Securities Notes with a 13% interest rate and a $10.00 per share conversion price, maturing in three years and nine months362363 Cash Flows This section summarizes cash flow activities for Q1 2025 (Successor) and Q1 2024 (Predecessor), detailing operating, investing, and financing flows Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (Successor) | Three Months Ended March 31, 2024 (Predecessor) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | $(7,211) | $(6,739) | | Net cash used in investing activities | $(335) | $(162) | | Net cash provided by financing activities | $— | $9,571 | | Effect of foreign currency translation on cash | $(77) | $30 | | Net change in cash and cash equivalents | $(7,623) | $2,700 | - Net cash used in operating activities increased to $7.2 million in Q1 2025 (Successor) from $6.7 million in Q1 2024 (Predecessor), primarily due to net loss adjusted by non-cash items and changes in operating assets and liabilities366 - Net cash used in investing activities increased to $0.3 million in Q1 2025 (Successor) from $0.2 million in Q1 2024 (Predecessor) due to increased purchases of property and equipment367 - Net cash provided by financing activities was nil in Q1 2025 (Successor), compared to $9.6 million in Q1 2024 (Predecessor), which included $10.0 million from the issuance of convertible notes payable368 Off-Balance Sheet Arrangements The company had no off-balance sheet arrangements during the periods presented - The company did not have any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements during the periods presented369 Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting policies and estimates from the 2024 Annual Report - The preparation of financial statements requires management to make estimates and assumptions based on current facts, historical experience, and other reasonable factors370 - No material changes to critical accounting policies were made during the three months ended March 31, 2025, from those disclosed in the 2024 Annual Report372 Emerging Growth Company and Smaller Reporting Company Status The company maintains its Emerging Growth Company and Smaller Reporting Company status, allowing for reduced disclosure requirements - The company is an Emerging Growth Company (EGC) and has elected to use the extended transition period for complying with new or revised accounting standards373 - As an EGC, the company benefits from reduced disclosure requirements, including exemptions from auditor attestation for internal controls and reduced executive compensation disclosures374 - The company will remain an EGC until the earliest of December 31, 2026, reaching $1.235 billion in annual gross revenue, having $700.0 million in outstanding securities held by non-affiliates, or issuing over $1.0 billion in non-convertible debt375 - The company is also a 'smaller reporting company,' which provides similar reduced disclosure obligations376 Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements - Refer to Note 2 - Summary of Significant Accounting Policies for a description of recent accounting pronouncements applicable to the company's financial statements377 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Adagio Medical Holdings Inc. is exempt from market risk disclosures - As a smaller reporting company, Adagio Medical Holdings Inc. is not required to provide quantitative and qualitative disclosures about market risk378 Item 4. Controls and Procedures This section addresses the effectiveness of disclosure controls and remediation of a material weakness in internal control Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were deemed effective at a reasonable assurance level as of March 31, 2025 - The company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2025381 Changes in Internal Control over Financial Reporting A material weakness in internal control over financial reporting was remediated as of May 15, 2025 - A material weakness in internal control over financial reporting, identified in the 2024 Annual Report concerning inadequate review of third-party valuation reports for debt and equity instruments, was remediated as of May 15, 2025382 - No other changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period383 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings with a material adverse effect - The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, and results of operations386 Item 1A. Risk Factors This section updates risk factors, including international trade policies, corporate prioritization, and FDA breakthrough device designation limitations Risks Related to Our Business Business risks include international trade policies impacting costs and supply chain, and potential negative impacts from corporate prioritization - International trade policies, including tariffs and trade barriers, particularly those affecting China, may adversely affect the company's business by increasing costs, reducing profitability, and complicating supply chain adjustments388389390 - The company's ability to pass increased costs to customers is limited by fixed pricing terms in medical device pricing and reimbursement systems391 - The corporate prioritization initiative implemented in February 2025, focusing on the FULCRUM-VT clinical trial and product design optimization, may result in unintended consequences such as loss of institutional knowledge, attrition, decreased morale, and difficulty pursuing new opportunities395 Risks Related to our Products FDA breakthrough device designation for vCLAS does not guarantee faster development or approval - The FDA's breakthrough device designation for the vCLAS Cryoablation System does not guarantee a faster development, regulatory review, or approval process, nor does it increase the likelihood of ultimate PMA approval396 - Even if a product qualifies as a breakthrough device, the FDA may later decide that it no longer meets the conditions for qualification396 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds from registered securities were reported - None398 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - None399 Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Not applicable400 Item 5. Other Information No other information is reported for the period - None401 Item 6. Exhibits This section lists all exhibits filed or incorporated by reference into the Quarterly Report on Form 10-Q - The section lists exhibits filed or furnished with, or incorporated by reference into, the Quarterly Report on Form 10-Q, including the Business Combination Agreement, Amended and Restated Certificate of Incorporation, By-Laws, various Warrant Agreements, and certifications402403404 SIGNATURES The report is signed by the Chief Executive Officer and Interim Chief Financial Officer on May 15, 2025 - The report is signed by Todd Usen, Chief Executive Officer, and Dan George, Interim Chief Financial Officer, on May 15, 2025408
Adagio Medical Holdings, Inc.(ADGM) - 2025 Q1 - Quarterly Report