Adagio Medical Holdings, Inc.(ADGM) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section provides administrative details of the Form 10-Q filing, including company classification and reporting period Filing Details This document is a Quarterly Report on Form 10-Q for Adagio Medical Holdings, Inc., filed for the quarterly period ended June 30, 2025, classifying the company as a non-accelerated filer, a smaller reporting company, and an emerging growth company - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Adagio Medical Holdings, Inc. is registered in Delaware with Commission file number 001-42199[2] Registrant Classification | Classification | Status | | :------------- | :----- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | Cautionary Note Regarding Forward-Looking Statements This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties, which may differ from actual results Nature of Forward-Looking Statements This section highlights that the report contains forward-looking statements about the company and its industry, which involve substantial risks and uncertainties, are not predictions of future events, and actual results may differ materially due to various factors - The report contains forward-looking statements that involve substantial risks and uncertainties, and should not be relied upon as predictions of future events[8][9] - The company operates in a competitive and rapidly changing environment, with new risks and uncertainties emerging over time[9] - The company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the report date, except as required by law[10] Key Areas of Forward-Looking Statements Forward-looking statements cover a broad range of business aspects, including product development, regulatory approvals, clinical trials, market expansion, reimbursement, personnel, manufacturing, market opportunity, intellectual property, supply chains, corporate initiatives, capital access, and the company's ability to continue as a going concern - Ability to develop innovative, proprietary products that address significant clinical needs safely and effectively - Ability to obtain and maintain regulatory clearances or approvals - Ability to demonstrate safety and effectiveness in sponsored and third-party clinical trials - Ability to expand sales force across key markets to increase physician awareness - Ability to obtain and maintain coverage and adequate reimbursement for procedures using products - Ability to attract and retain skilled research, development, sales, and clinical personnel - Ability to cost-effectively manufacture, market, and sell products - Estimates of market opportunity and scope of intellectual property protection - Timing and results from clinical trials and other studies, and regulatory filings and feedback - Competition in served markets and expectations of product reliability and performance - Impact of proposed tariffs on business, including gross margins and demand - Factors impacting supply chains, including tariffs, raw material availability, and skilled labor costs - Reliance on a limited number of suppliers, including sole source suppliers - Ability to sustain or increase demand for products - Estimates regarding costs and risks associated with international operations and expansion - Effects of corporate prioritization initiative and ability to retain/recruit key personnel - Ability to access capital markets and fund working capital requirements - Compliance with, and cost of, federal, state, and foreign regulatory requirements - Factors impacting financial results and anticipated trends/challenges in business and markets - Ability to continue as a going concern PART I: FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Adagio Medical Holdings, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit), and Statements of Cash Flows, along with detailed notes explaining the company's accounting policies, business combination, fair value measurements, and other financial details Condensed Consolidated Balance Sheets This section provides the company's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Assets (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :-------------------- | :------------------------ | :-------------------------- | | Cash and cash equivalents | $8,200 | $20,586 | | Total current assets | $12,227 | $25,349 | | Total assets | $35,876 | $48,448 | | Total current liabilities | $4,884 | $7,763 | | Convertible notes payable, net | $16,945 | $16,076 | | Total liabilities | $27,210 | $28,536 | | Total stockholders' equity | $8,666 | $19,912 | | Total liabilities and stockholders' equity | $35,876 | $48,448 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss This section presents the unaudited condensed consolidated statements of operations and comprehensive loss for the reported periods Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | (in thousands) | Three Months Ended June 30, 2025 (Successor) | Three Months Ended June 30, 2024 (Predecessor) | Six Months Ended June 30, 2025 (Successor) | Six Months Ended June 30, 2024 (Predecessor) | | :--------------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Revenue | $— | $254 | $— | $280 | | Cost of revenue | $342 | $682 | $595 | $1,224 | | Research and development | $1,971 | $2,865 | $5,630 | $6,334 | | Selling, general, and administrative | $2,404 | $3,366 | $5,976 | $8,196 | | Loss from operations | $(4,717) | $(6,659) | $(12,201) | $(15,474) | | Net loss | $(3,947) | $(5,734) | $(11,660) | $(13,043) | | Basic net loss per share | $(0.26) | $(7.35) | $(0.76) | $(16.72) | | Diluted net loss per share | $(0.35) | $(7.35) | $(0.86) | $(16.72) | Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) This section details changes in the company's convertible preferred stock and stockholders' equity (deficit) for the specified periods Stockholders' Equity (Deficit) (in thousands) | (in thousands) | Balance as of March 31, 2025 (Successor) | Balance as of June 30, 2025 (Successor) | | :--------------- | :--------------------------------------- | :-------------------------------------- | | Common Stock Amount | $2 | $2 | | Additional Paid-in Capital | $90,713 | $90,947 | | Accumulated Deficit | $(78,256) | $(82,184) | | Total Stockholders' Equity | $12,399 | $8,666 | Stockholders' Equity (Deficit) (in thousands) | (in thousands) | Balance as of December 31, 2024 (Successor) | Balance as of June 30, 2025 (Successor) | | :--------------- | :---------------------------------------- | :-------------------------------------- | | Common Stock Amount | $2 | $2 | | Additional Paid-in Capital | $90,495 | $90,947 | | Accumulated Deficit | $(70,586) | $(82,184) | | Total Stockholders' Equity | $19,912 | $8,666 | Unaudited Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Six Months Ended June 30, 2025 (Successor) | Six Months Ended June 30, 2024 (Predecessor) | | :--------------- | :----------------------------------------- | :----------------------------------------- | | Net cash used in operating activities | $(11,867) | $(13,684) | | Net cash used in investing activities | $(345) | $(337) | | Net cash provided by financing activities | $— | $14,643 | | Net change in cash and cash equivalents | $(12,386) | $662 | | Cash and cash equivalents, at end of period | $8,200 | $2,045 | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes explaining the company's accounting policies, business combination, fair value measurements, and other financial details Note 1 - Description of Organization and Business Operations Adagio Medical Holdings, Inc. is a medical technology company focused on developing and commercializing ablation technologies for cardiac arrhythmias, particularly ventricular tachycardia (VT) with its vCLAS™ Cryoablation System, which received FDA Breakthrough Device designation in April 2025, but faces substantial doubt about its ability to continue as a going concern beyond Q4 2025 due to limited revenue, recurring operating losses, and negative cash flows - Adagio Medical Holdings, Inc. is a medical technology company developing and commercializing ablation technologies for cardiac arrhythmias, with an initial focus on ventricular tachycardia (VT)[27] - The vCLAS™ Cryoablation System received FDA Breakthrough Device designation in April 2025 for drug-refractory, recurrent, sustained monomorphic VT in patients with structural heart disease[27] - The company completed a business combination on July 31, 2024, and its common stock began trading on Nasdaq under 'ADGM' on August 1, 2024[28][29][30] - The company has limited revenue, recurring operating losses, and negative cash flows, leading to substantial doubt about its ability to continue as a going concern beyond the fourth quarter of 2025[31][32][33] - Management plans to mitigate going concern risks through cash equity/debt financing, pursuing U.S. market regulatory approvals, and executing cost-cutting measures[34] Note 2 - Summary of Significant Accounting Policies This note outlines the significant accounting policies, including the basis of presentation under U.S. GAAP, the treatment of the Business Combination as an acquisition where ListCo is the accounting acquirer and Legacy Adagio is the predecessor, and the company's status as an emerging growth company, detailing policies for revenue recognition, inventory, property and equipment, intangible assets, goodwill, fair value measurements, warrants, debt, stock-based compensation, and income taxes - The financial statements are prepared in accordance with U.S. GAAP, with ListCo treated as the accounting acquirer and Legacy Adagio as the predecessor following the Business Combination on July 31, 2024[38][40] - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[44][45] - 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[52][55] - No revenue was recognized for the three and six months ended June 30, 2025 (Successor), while revenue for the same periods in 2024 (Predecessor) was solely from European markets[60] - The company operates as one reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM) reviewing consolidated financial information[48] Note 3 – Forward Merger This note details the Business Combination completed on July 31, 2024, where ARYA Sciences Acquisition Corp IV merged with Legacy Adagio, with ListCo (now Adagio Medical Holdings, Inc.) as the parent, involving redemptions of ARYA shares, conversion of various Legacy Adagio securities into Company common stock and warrants, and a $64.5 million PIPE Financing, with ListCo identified as the accounting acquirer and the $53.5 million purchase price allocated to acquired assets and assumed liabilities, resulting in $44.3 million in goodwill and $26.2 million in 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 Adagio[28][29][104] - Holders of 2,707,555 ARYA Class A ordinary shares redeemed their shares for approximately $31.3 million[105] - The PIPE Financing committed $64.5 million, including cash investments and conversion of Bridge Financing Notes into Company common stock and Base Warrants[108][111][112] - ListCo was treated as the accounting acquirer, and the acquisition method of accounting was applied[115] Business Combination Purchase Price Allocation (in thousands) | Item | Amount (in thousands) | | :---------------------------------------- | :-------------------- | | Total purchase price | $53,546 | | Total assets acquired | $77,252 | | Total liabilities assumed | $23,706 | | Net total | $53,546 | | Intangible assets, net (acquired) | $26,200 | | Goodwill (acquired) | $44,291 | Note 4 – Fair Value Measurements This note details the fair value measurements of the company's financial instruments, including cash equivalents, convertible notes payable, and warrant liabilities, categorized into a three-tier hierarchy, with Convertible Securities Notes and Convert Warrants classified as Level 3 liabilities due to significant unobservable inputs, and changes in their fair value recognized in the statements of operations - The company's financial instruments, including convertible notes and warrant liabilities, are measured at fair value and categorized into a three-tier hierarchy (Level 1, 2, 3)[124][125][87] - Convertible Securities Notes and Convert Warrants are classified as Level 3 measurements due to significant unobservable inputs[138][147] Convertible Securities Notes Fair Value (in thousands) | (in thousands) | June 30, 2025 (Successor) | | :--------------- | :------------------------ | | Balance (beginning of period)* | $17,180 | | Accrued interest | $1,382 | | Fair value measurement adjustments | $(1,617) | | Balance (end of period) | $16,945 | Convert Warrants Fair Value (in thousands) | (in thousands) | Six Months Ended June 30, 2025 (Successor) | | :--------------- | :--------------------------------------- | | Balance (beginning of period) | $152 | | Additions | $— | | Fair value measurement adjustments | $103 | | Balance (end of period) | $255 | Note 5 - Inventory, net Inventory, valued at the lower of cost or net realizable value using the first-in first-out method, decreased from $2.6 million at December 31, 2024, to $1.8 million at June 30, 2025, primarily in work-in-process and finished goods, with all inventory related to VT products and Consoles Inventory, net (in thousands) | (in thousands) | June 30, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------- | :------------------------ | :-------------------------- | | Raw materials | $1,564 | $1,683 | | Work-in-Process | $92 | $388 | | Finished goods | $185 | $495 | | Total inventory | $1,841 | $2,566 | - Inventory is valued at the lower of cost or net realizable value using the first-in first-out method[63] - All inventory as of June 30, 2025, is related to VT products and Consoles[151] Note 6 - Property and Equipment Net property and equipment decreased slightly from $1.96 million at December 31, 2024, to $1.88 million at June 30, 2025, following a change in the estimated useful life of Consoles from five years to three years effective January 1, 2024 Property and Equipment, net (in thousands) | (in thousands) | June 30, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------- | :------------------------ | :-------------------------- | | Consoles | $3,336 | $3,060 | | Total property and equipment | $5,259 | $4,691 | | Less: accumulated depreciation | $(3,377) | $(2,730) | | Property and equipment, net | $1,882 | $1,961 | - Depreciation expense was $0.5 million for the six months ended June 30, 2025 (Successor), compared to $0.6 million for the same period in 2024 (Predecessor)[152] - Effective January 1, 2024, the useful life of Consoles was changed from five years to three years to better reflect their estimated service periods[64] Note 7 – Goodwill and Intangible Assets The company's intangible assets, primarily In-Process Research and Development (IPR&D), remained at $6.97 million as of June 30, 2025, with no amortization, and goodwill also remained at $13.97 million, with no further impairment recorded in the current period after significant impairment charges in Q4 2024 Intangible Assets, net (in thousands) | (in thousands) | June 30, 2025 (Successor) | | :--------------- | :------------------------ | | IPR&D | $6,969 | | Total | $6,969 | Goodwill (in thousands) | (in thousands) | June 30, 2025 (Successor) | | :--------------- | :------------------------ | | Goodwill | $13,967 | - During Q4 2024, the company recorded an $18.9 million impairment charge on intangible assets and a $30.3 million goodwill impairment charge, driven by a sustained decline in share price and market capitalization[155][158] - No intangible asset or goodwill impairment charges were recorded for the three and six months ended June 30, 2025 (Successor)[156][159] Note 8 - Accrued Liabilities Total accrued liabilities decreased from $3.68 million at December 31, 2024, to $3.36 million at June 30, 2025, primarily due to a reduction in compensation and related expenses, partially offset by an increase in research and development expenses Accrued Liabilities (in thousands) | (in thousands) | June 30, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------- | :------------------------ | :-------------------------- | | Compensation and related expenses | $1,690 | $2,622 | | Research and development expenses | $1,343 | $775 | | Other | $331 | $279 | | Total accrued liabilities | $3,364 | $3,676 | Note 9 - Debt The company's outstanding debt primarily consists of $16.9 million in Convertible Securities Notes as of June 30, 2025, issued on July 31, 2024, with a 13% interest rate and a maturity of three years and nine months, convertible into common stock at $10.00 per share Outstanding Debt (in thousands) | (in thousands) | June 30, 2025 (Successor) | December 31, 2024 (Successor) | | :--------------- | :------------------------ | :-------------------------- | | Convertible Securities Notes (including accrued interest) | $16,945 | $17,180 | | Total outstanding debt | $16,945 | $17,180 | - The $20.0 million Convertible Securities Notes were issued on July 31, 2024, with a 13% interest rate, a maturity of three years and nine months, and are convertible into common stock at $10.00 per share[193][194][195] - Legacy Adagio's $29.5 million Bridge Financing Notes and accrued interest were converted into 4,372,607 shares of Company common stock and 3,540,000 Base Warrants as part of the PIPE Financing[188] - The $7.0 million February 2024 Convertible Notes were converted into $7.0 million Convertible Securities Notes and 525,000 Convert Warrants upon the Business Combination[179][365] Note 10 - Warrants The company has various warrants, including 1.5 million Convert Warrants (exercisable at $24.00/share, classified as derivative liabilities) and 7.5 million PIPE Base Warrants (exercisable at $10.00/share, classified as equity), while 670,000 PIPE Pre-funded Warrants were exercised in December 2024 and Legacy Adagio's SVB Warrants and Series E Pre-funded Warrants were terminated or converted during the Business Combination - 1,500,000 Convert Warrants were issued with the Convertible Securities Notes, exercisable at $24.00 per share, and are classified as derivative liabilities due to potential cash settlement outside the company's control[201][146] - 7,528,727 PIPE Base Warrants were issued in the PIPE Financing, exercisable at $10.00 per share, and are classified as equity because they meet ASC 815-40 indexation guidance[206][207][209] - 670,000 PIPE Pre-funded Warrants were issued and subsequently exercised on a cashless basis for 663,096 shares of common stock on December 26, 2024, with none outstanding as of June 30, 2025[202][204][205] - Legacy Adagio's SVB Warrants were terminated, and Series E Pre-funded Warrants were converted into Company common stock prior to or upon the Business Combination[198][200] Note 11 - Operating Leases The company leases facilities under operating leases expiring between March 2026 and January 2030, with a weighted-average remaining lease term of 4.2 years and an 8.0% discount rate as of June 30, 2025, and operating lease costs for the six months ended June 30, 2025, were $107 thousand, a decrease from $181 thousand in the prior year period - The company leases facilities under operating leases with expirations ranging from March 2026 to January 2030[211] - As of June 30, 2025, the weighted average remaining lease term was 4.2 years, and the weighted average discount rate was 8.0%[212] Operating Lease Costs (in thousands) | Period | Operating Lease Cost (Successor) | | :----- | :------------------------------- | | Three months ended June 30, 2025 | $107 | | Six months ended June 30, 2025 | $181 | Note 12 - Commitments and Contingencies The company is not currently involved in any material legal proceedings that would significantly impact its business, financial condition, or results of operations, and litigation costs are expensed as incurred - The company is not currently party to any material legal proceedings[214] - Costs related to legal proceedings are expensed as incurred[214] Note 13 - Mezzanine Equity and Stockholders' Equity (Deficit) Prior to the Business Combination, Legacy Adagio's convertible preferred stock was classified as temporary equity, but upon the Business Combination, all Legacy Adagio preferred and common stock converted into Company common stock, with the Company now authorized to issue 210 million common shares, of which 15.4 million are issued and outstanding (including 1.1 million Sponsor Earnout shares), and 22.3 million common shares are reserved for future issuance - Legacy Adagio's convertible preferred stock was classified as temporary equity due to redemption features outside its control[216] - Upon the Business Combination, Legacy Adagio's 4,732,044 convertible preferred stocks were converted into 789,337 shares of the Company's common stock[218] - As of June 30, 2025, the Company is authorized to issue up to 210,000,000 shares of common stock and 20,000,000 shares of preferred stock[233] - 15,381,565 shares of common stock were issued and outstanding as of June 30, 2025, including 1,147,500 Sponsor Earnout shares subject to vesting conditions[233][234] Common Stock Reserved for Future Issuance (Successor, June 30, 2025) | Item | Number of Shares | | :-------------------------------------------------------------------------------- | :--------------- | | Base Warrants | 7,528,727 | | Convertible Securities Notes | 3,231,327 | | Convert Warrants | 1,500,000 | | Company's common stock issuable upon the exercise of outstanding options | 7,587 | | Common stock reserved for future issuance under the 2024 Equity Incentive Plan | 6,197,737 | | Common stock reserved for future issuance under the 2024 Key Employee Equity Incentive Plan | 3,354,444 | | Common stock reserved for future issuance under the 2024 Employee Stock Purchase Plan | 441,293 | | Total common stock reserved for future issuance | 22,261,115 | Note 14 - Stock-Based Compensation Stock-based compensation expense for the six months ended June 30, 2025 (Successor), was $452 thousand, an increase from $221 thousand in the prior year period (Predecessor), following the adoption of the 2024 Equity Incentive Plan and the termination of Legacy Adagio's prior plans upon the Business Combination Total Stock-Based Compensation Expense (in thousands) | (in thousands) | Three Months Ended June 30, 2025 (Successor) | Three Months Ended June 30, 2024 (Predecessor) | Six Months Ended June 30, 2025 (Successor) | Six Months Ended June 30, 2024 (Predecessor) | | :--------------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Research and development | $79 | $15 | $88 | $29 | | Selling, general, and administration | $155 | $96 | $364 | $192 | | Total stock-based compensation expense | $234 | $111 | $452 | $221 | - The 2024 Equity Incentive Plan was adopted on July 26, 2024, authorizing up to 4,472,593 shares plus annual increases, and 5,687,965 awards were granted under this plan during the six months ended June 30, 2025[248][249] - Legacy Adagio's 2012 and 2022 Stock Incentive Plans were terminated upon the Business Combination, with 45,544 in-the-money options exchanged for 7,587 options to purchase Company common stock[245] Note 15 – Loss Per Share ("LPS") For the six months ended June 30, 2025 (Successor), basic net loss per share was $(0.76) and diluted net loss per share was $(0.86), compared to $(16.72) for the same period in 2024 (Predecessor), with potentially dilutive securities excluded from diluted LPS calculations for the Successor period as their inclusion would be anti-dilutive Basic Net Loss Per Share (Successor) | (in thousands, except share and per share data) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------------------- | :------------------------------- | :----------------------------- | | Net loss | $(3,947) | $(11,660) | | Weighted-average shares outstanding | 15,381,565 | 15,378,543 | | Net loss per share attributable to each class of participating securities – Basic | $(0.26) | $(0.76) | Diluted Net Loss Per Share (Successor) | (in thousands, except share and per share data) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------------------- | :------------------------------- | :----------------------------- | | Net loss attributable to common stockholders – Diluted | $(5,374) | $(13,277) | | Weighted-average shares outstanding – Diluted | 15,381,565 | 15,378,543 | | Net loss per share attributable to common shares – Diluted (if-converted method) | $(0.35) | $(0.86) | - Potentially dilutive securities, including Base Warrants (7.5M), Convert Warrants (1.5M), and Earn-out Shares (1.1M), were excluded from diluted LPS calculations for the Successor period as their impact would be anti-dilutive[262] Note 16 - Income Taxes The company maintains a full valuation allowance against its deferred tax assets, resulting in a 0.0% effective tax rate for the three and six months ended June 30, 2025 (Successor) and 2024 (Predecessor), and is currently assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) - The company has a full valuation allowance against its deferred tax assets, indicating uncertainty about their future realization[264] - The effective tax rate was 0.0% for the three and six months ended June 30, 2025 (Successor) and 2024 (Predecessor), primarily due to the valuation allowance[265] - The company is currently assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements[267] Note 17 - Related Party Transactions The company incurred $0.4 million in shared services expenses with Fjord Ventures for the six months ended June 30, 2025, a decrease from $0.8 million in the prior year period, and also engaged in related party transactions involving the issuance of Convertible Securities Notes and shares/warrants in the PIPE Financing to Perceptive PIPE Investor Shared Services Agreement Expenses (in thousands) | Period | Shared Services Expense (Successor) | Shared Services Expense (Predecessor) | | :----- | :---------------------------------- | :------------------------------------ | | Three months ended June 30, 2025 | $200 | $400 | | Six months ended June 30, 2025 | $400 | $800 | - The company issued a $7.0 million Convertible Securities Note to Perceptive PIPE Investor (controlling party) in exchange for their investment in Legacy Adagio's February 2024 Convertible Notes[272] - Perceptive PIPE Investor also received 4,372,607 shares of common stock and 3,540,000 Base Warrants for Bridge Financing Notes, and an additional 2,250,352 shares and 1,905,069 Base Warrants for a $15.9 million cash investment[273][274] Note 18 – Segment Reporting The company operates as a single reportable segment, focusing on the design, development, and commercialization of ablation technologies for cardiac arrhythmias, with the Chief Executive Officer reviewing financial information on a consolidated basis for operating decisions and performance assessment - The company operates as one reportable segment, managed on a consolidated basis by the Chief Executive Officer (CODM)[275] - The segment focuses on the design, development, and commercialization of ablation technologies for cardiac arrhythmias[275] Summary of Segment Net Loss (in thousands) | (in thousands) | Three Months Ended June 30, 2025 (Successor) | Three Months Ended June 30, 2024 (Predecessor) | Six Months Ended June 30, 2025 (Successor) | Six Months Ended June 30, 2024 (Predecessor) | | :--------------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Revenue | $— | $254 | $— | $280 | | Net loss | $(3,947) | $(5,734) | $(11,660) | $(13,043) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting the impact of the July 2024 Business Combination, its focus on ULTC technology for cardiac arrhythmias, and key factors affecting performance such as innovation, regulatory approvals, competition, and reimbursement, while also covering revenue, operating expenses, fair value adjustments, interest, and liquidity, emphasizing ongoing net losses and the 'going concern' uncertainty Overview This section provides an overview of Adagio Medical Holdings, Inc.'s business, its focus on ULTC technology for cardiac arrhythmias, and its financial status, including recurring net losses and going concern uncertainty - Adagio Medical Holdings, Inc. is a medical device company focused on developing and commercializing products for cardiac arrhythmias using its proprietary Ultra-Low Temperature Cryoablation (ULTC) technology, initially targeting ventricular tachycardia (VT)[281] - The vCLAS™ Cryoablation System received FDA Breakthrough Device designation in April 2025 for drug-refractory, recurrent, sustained monomorphic VT[282] - The company's FULCRUM-VT IDE pivotal clinical trial is currently enrolling 206 patients across 20 centers in the U.S. and Canada, with results expected in H2 2025 to support FDA approval[284] - The company has incurred net losses since inception, with an accumulated deficit of $82.2 million as of June 30, 2025, and cash of $8.2 million, raising substantial doubt about its ability to continue as a going concern[286][287][32] Description of the Merger This section details the Business Combination completed on July 31, 2024, involving ARYA Sciences Acquisition Corp IV, ListCo (now Adagio Medical Holdings, Inc.), and Legacy Adagio, which resulted in the conversion of various shares and notes into Company common stock and a $64.5 million PIPE Financing - The Business Combination was consummated on July 31, 2024, involving ARYA Sciences Acquisition Corp IV, ListCo (now Adagio Medical Holdings, Inc.), and Legacy Adagio[290][291] - The merger resulted in the conversion of ARYA Class A and B ordinary shares, Legacy Adagio convertible notes, preferred stock, and common stock into shares of the Company's common stock[293][298] - The PIPE Financing committed $64.5 million, including cash investments and conversion of Bridge Financing Notes into Company common stock and Base Warrants[295][296][299] Key Factors Affecting Our Performance This section outlines key factors influencing the company's performance, including innovation, regulatory approvals, growth investments, competition, and reimbursement - Innovation: Developing new products and differentiating from competitors, with increasing R&D expenditures - Regulatory: Obtaining and maintaining regulatory clearances/approvals (e.g., FDA) and complying with requirements - Investments in Growth: Expanding sales and marketing infrastructure, recruiting and training personnel, and increasing marketing efforts - Competition: Operating in an intensely competitive industry with large, well-capitalized competitors - Reimbursement and Insurance Coverage: Securing adequate financial coverage and reimbursement from third-party payors in both U.S. and international markets Key Components of Results of Operations This section describes the main components of the company's results of operations, including revenue from cryoablation catheters and loaned consoles, cost of revenue, research and development expenses, selling, general, and administrative expenses, and other income/expense items such as fair value adjustments, interest, and foreign currency gains/losses - Revenue is primarily from sales of cryoablation catheters and, to a lesser extent, lease revenue from loaned consoles, recognized when control is transferred[310] - Cost of revenue includes raw materials, direct labor, manufacturing overhead, shipping, and depreciation of loaned consoles[311] - Research and development expenses, expensed as incurred, are expected to increase due to ongoing ULTC product development and clinical trials[312][313] - Selling, general and administrative expenses are expected to decrease slightly in FY2025 due to lower payroll from a corporate prioritization initiative and absence of Business Combination transaction costs[315] - Other income/expense items include fair value adjustments for convertible notes and warrant liabilities, interest expense from debt obligations, interest income from cash balances, and foreign currency gains/losses[316][317][318][319][320] Results of Operations Comparison This section compares the company's financial results for the three and six months ended June 30, 2025, and 2024, across key revenue and expense categories, highlighting significant decreases in revenue, cost of revenue, R&D, and SG&A expenses, alongside fair value adjustments and increased interest income Summary of Results of Operations (in thousands) | (in thousands) | Three Months Ended June 30, 2025 (Successor) | Three Months Ended June 30, 2024 (Predecessor) | Six Months Ended June 30, 2025 (Successor) | Six Months Ended June 30, 2024 (Predecessor) | | :--------------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Revenue | $— | $254 | $— | $280 | | Cost of revenue | $342 | $682 | $595 | $1,224 | | Research and development | $1,971 | $2,865 | $5,630 | $6,334 | | Selling, general, and administrative | $2,404 | $3,366 | $5,976 | $8,196 | | Loss from operations | $(4,717) | $(6,659) | $(12,201) | $(15,474) | | Net loss | $(3,947) | $(5,734) | $(11,660) | $(13,043) | - Revenue: Decreased by $0.3 million (100%) for both three and six months ended June 30, 2025, due to inventory repurchase and pause in European commercial activity[323][324] - Cost of Revenue: Decreased by $0.3 million (50%) for three months and $0.6 million (51%) for six months, primarily due to reduced commercial activity in Europe[325][326] - Research and Development Expenses: Decreased by $0.9 million (31%) for three months and $0.7 million (11%) for six months, driven by reductions in quality assurance, operations, product development, and payroll costs[330][331] - Selling, General and Administrative Expenses: Decreased by $1.0 million (29%) for three months and $2.2 million (27%) for six months, mainly due to lower headcount and reduced payroll/personnel expenses[332][333] - Convertible Notes Fair Value Adjustment: Resulted in a gain of $1.4 million for three months and $1.6 million for six months in 2025, compared to gains of $1.6 million and $4.0 million in 2024, respectively[334][335] - Warrant Liabilities Fair Value Adjustment: Resulted in a loss of $141 thousand for three months and $103 thousand for six months in 2025, compared to gains of $94 thousand and $14 thousand in 2024, respectively[336][337] - Interest Income: Increased significantly by $100 thousand for three months and $263 thousand for six months, primarily due to higher cash balances in an asset management account[338][339] Liquidity and Capital Resources This section discusses the company's liquidity and capital resources, highlighting that operations have been financed primarily through equity and convertible notes, resulting in recurring operating losses and negative cash flows, with current cash and cash equivalents of $8.2 million insufficient to fund operations for the next 12 months, raising substantial doubt about its ability to continue as a going concern - The company's operations have been financed primarily through equity securities, convertible promissory notes, and a term loan, resulting in recurring operating losses and negative cash flows[340] Cash and Cash Equivalents (in thousands) | Period | Cash and Cash Equivalents | | :----- | :------------------------ | | June 30, 2025 (Successor) | $8,200 | | December 31, 2024 (Successor) | $20,600 | - Net cash used in operating activities was $11.9 million for the six months ended June 30, 2025 (Successor), compared to $13.7 million for the same period in 2024 (Predecessor)[341][371][372] - Current cash and cash equivalents are not sufficient to fund operations for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern[342] - Future funding requirements depend on revenue growth, R&D efforts, sales/marketing, clinical trial outcomes, reimbursement, intellectual property, personnel, and potential acquisitions[344][349] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Adagio Medical Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[384] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective at a reasonable assurance level as of June 30, 2025, with a material weakness in internal control over financial reporting identified as of December 31, 2024, related to management's review controls over third-party valuation reports, having been remediated as of May 15, 2025 - As of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[387] - A material weakness in internal control over financial reporting, identified as of December 31, 2024, regarding management's review controls over third-party valuation reports, was remediated as of May 15, 2025[388] PART II - OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, sales of equity, defaults, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings that would have a significant adverse effect on its business, financial condition, or results of operations - The company is not currently a party to any legal proceedings that would individually or in the aggregate have a material adverse effect on its business, financial condition, and results of operations[392] Item 1A. Risk Factors This section updates the risk factors from the 2024 Annual Report, highlighting new or materially changed risks, including the adverse impact of international trade policies on global supply chains and profitability, potential unintended consequences from the corporate prioritization initiative, and the uncertainty that FDA Breakthrough Device designation for vCLAS™ will lead to faster development or approval - International trade policies, including tariffs and trade barriers, may adversely affect the company's business, financial condition, and results of operations due to reliance on a global supply chain and foreign manufacturers[394][395][396] - The corporate prioritization initiative, implemented in February 2025, may not achieve its intended outcome and could result in adverse consequences such as loss of expertise, decreased morale, or inability to pursue new opportunities[400] - FDA Breakthrough Device designation for vCLAS™ may not lead to a faster development, regulatory review, or approval process, nor does it guarantee ultimate PMA approval[401] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds from registered securities to report during the period - No unregistered sales of equity securities or use of proceeds from registered securities to report[402] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - No defaults upon senior securities to report[403] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[404] Item 5. Other Information During the last fiscal quarter, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[405] Item 6. Exhibits This section lists the exhibits filed or furnished with, or incorporated by reference into, this Quarterly Report on Form 10-Q, including the Business Combination Agreement, Amended and Restated Certificate of Incorporation, By-Laws, an Offer Letter, and various certifications (31.1, 31.2, 32.1, 32.2) and XBRL documents - Business Combination Agreement (Exhibit 2.1, 2.2) - Amended and Restated Certificate of Incorporation (Exhibit 3.1) - Amended and Restated By-Laws (Exhibit 3.2) - Offer Letter (Exhibit 10.1) - Certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) - Inline XBRL Instance Document and Taxonomy Extensions (Exhibits 101.INS, 101.CAL, 101.SCH, 101.DEF, 101.LAB, 101.PRE, 104)