0001558370-23-018829 | 10-Q | XBRL Viewer | Orchestra Biomed Holdings INC

Warrants - Other (Details) $ / shares in Units, $ in Millions		9 Months Ended
	Jan. 26, 2023 USD ($) employee shares	Sep. 30, 2023 $ / shares shares	Dec. 31, 2022 shares
Warrants
Warrants outstanding (in shares)		1,934,258	3,077,074
Price per share (in dollars per share) \| $ / shares		$ 11.50
HSAC2
Warrants
Insider shares subject to lock up period	4,000,000
Private shares subject to lock up period	450,000
Share lock up period	12 months
Number of warrants issued	750,000
Number of employees and directors, warrants issued \| employee	11
HSAC2 \| Minimum
Warrants
Share lock up period	6 months
HSAC2 \| Maximum
Warrants
Share lock up period	12 months
HSAC2 \| Exercisable 24 months after the Closing
Warrants
Warrants exercisable term	24 months
Warrants exercisable (as a percent)	50.00%
HSAC2 \| Exercisable 36 months after the Closing
Warrants
Warrants exercisable term	36 months
Warrants exercisable (as a percent)	50.00%
Private Warrants Held by Sponsor
Warrants
Warrants outstanding (in shares)	1,500,000	750,000	1,500,000
Price per share (in dollars per share) \| $ / shares		$ 11.50
Warrants exercisable term		30 days
Warrants expiry term		5 years
Private Warrants Held by Sponsor \| Minimum
Warrants
Warrants expiry term		4 years 3 months 25 days
Private Warrants Held by Sponsor \| Maximum
Warrants
Warrants expiry term		4 years 6 months 25 days
Private Warrants Held by Sponsor \| HSAC2
Warrants
Warrants outstanding (in shares)	1,500,000
Sponsor warrant forfeiture (as percent)	50.00%
Number of warrants forfeiture by sponsor	750,000
Consideration for forfeiture of warrants \| $	$ 0.0

Subsequent Events	9 Months Ended
Sep. 30, 2023
Subsequent Events
Subsequent Events	16. Subsequent Events On October 6, 2023, the Company terminated and repaid the 2022 Loan and Security Agreement (as defined in Note 14 above). In connection with the repayment and termination, the Company repaid $10 million of principal and issued warrants to purchase 27,707 shares of Company Common Stock at an exercise price of $7.67 per share in lieu of a cash payment of approximately $212,500 due with respect to certain fees under the 2022 Loan and Security Agreement. The Company also paid approximately $849,000 of net interest, prepayment fees, and legal fees.

Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events

Subsequent Events

16. Subsequent Events

On October 6, 2023, the Company terminated and repaid the 2022 Loan and Security Agreement (as defined in Note 14 above). In connection with the repayment and termination, the Company repaid $10 million of principal and issued warrants to purchase 27,707 shares of Company Common Stock at an exercise price of $7.67 per share in lieu of a cash payment of approximately $212,500 due with respect to certain fees under the 2022 Loan and Security Agreement. The Company also paid approximately $849,000 of net interest, prepayment fees, and legal fees.

Balance Sheet Components - Schedule of property and equipment, net (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Schedule of Property and Equipment, Net
Property and equipment, gross	$ 2,348	$ 2,267
Less accumulated depreciation and amortization	(993)	(778)
Total Property and equipment, net	1,355	1,489
Equipment
Schedule of Property and Equipment, Net
Property and equipment, gross	1,783	1,712
Office furniture
Schedule of Property and Equipment, Net
Property and equipment, gross	367	364
Leasehold Improvements
Schedule of Property and Equipment, Net
Property and equipment, gross	$ 198	$ 191

Stock-Based Compensation - Other (Details) - Legacy Orchestra	9 Months Ended
	Sep. 30, 2023 shares
2018 Plan
Stock-Based Compensation
Number of shares authorized	5,200,000
2018 Plan \| Maximum
Stock-Based Compensation
Expiration period (in years)	10 years
Vesting period (in years)	3 years
2023 Plan
Stock-Based Compensation
Number of shares authorized	3,561,678
Percentage of shares outstanding	4.80%
Shares available for future issuance	3,036,722

Balance Sheet Components

9 Months Ended

Sep. 30, 2023

Balance Sheet Components

Balance Sheet Components

8. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Equipment	$	1,783	$	1,712
Office furniture		367		364
Leasehold improvements		198		191
Property and equipment, gross		2,348		2,267
Less accumulated depreciation and amortization		(993)		(778)
Total Property and equipment, net	$	1,355	$	1,489

Depreciation and amortization expense was $71,000 and $54,000 for the three months ended September 30, 2023 and 2022, respectively. Depreciation and amortization expense was $215,000 and $152,000 for the nine months ended September 30, 2023 and 2022, respectively.

Accrued Expenses

Accrued expenses consist of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Accrued compensation	$	2,571	$	2,480
Clinical trial accruals		956		1,003
Other accrued expenses		774		1,893
Total accrued expenses	$	4,301	$	5,376

Summary of Significant Accounting Policies - Schedule of property and equipment (Details)	Sep. 30, 2023
Manufacturing Equipment Member
Schedule of Property and Equipment, Net
Total asset category	10 years
Office furniture \| Minimum
Schedule of Property and Equipment, Net
Total asset category	3 years
Office furniture \| Maximum
Schedule of Property and Equipment, Net
Total asset category	7 years
Research And Development Equipment Member
Schedule of Property and Equipment, Net
Total asset category	7 years

Warrants - Assumed Legacy Orchestra Warrants (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023
Warrants
Warrants beginning balance (Number)			3,077,074				3,077,074
Warrants closing balance	1,934,258						1,934,258
Warrants beginning balance (Amount)			$ 2,089	$ 1,909	$ 624	$ 635	$ 2,089
Warrants exercised (Amount)			(10)		(15)	(156)
Forfeiture of warrants (Amount)					(38)
Issuance of warrants related to Legacy Orchestra preferred stock financing (Amount)					620
Amendments of existing warrants (Amount)					810
Other (Amount)					(335)
Change in the fair value of warrants (Amount)			294		243	145
Warrants reclassified to equity (Amount)			$ (2,373)
Warrants closing balance (Amount)				$ 1,909	$ 1,909	$ 624
Preferred Warrants
Warrants
Warrants beginning balance (Number)					206,997	206,997
Amendments of existing warrants					(206,997)
Other
Warrants closing balance						206,997
Commons Warrants
Warrants
Warrants beginning balance (Number)			1,327,074	1,328,237	1,120,575	1,189,162	1,327,074
Exercise of warrants			(1,163)		(4,650)	(68,587)
Forfeiture of warrants					(4,650)
Issuance of warrants related to Legacy Orchestra preferred stock financing					159,965
Amendments of existing warrants					206,997
Other					(150,000)
Warrants reclassified to equity			(1,325,911)
Warrants closing balance				1,328,237	1,328,237	1,120,575

Stock-Based Compensation - Schedule of estimated grant-date fair value calculated using Black-Scholes option pricing model (Details) - Stock option - $ / shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Stock-Based Compensation
Expected term	6 years 1 month 2 days	6 years
Expected volatility	46.00%	49.00%
Risk-free interest rate	3.86%	2.96%
Expected dividend yield	0.00%	0.00%
Fair value of common stock	$ 8.19	$ 8.58

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

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+ Details

Marketable Securities and Strategic Investments

9 Months Ended

Sep. 30, 2023

Marketable Securities and Strategic Investments

Marketable Securities and Strategic Investments

7. Marketable Securities and Strategic Investments

Marketable Securities

The following is a summary of the Company’s marketable securities as of September 30, 2023 and December 31, 2022:


	September 30, 2023
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost Basis		Gains		Losses		Value
Corporate debt securities	$	25,625	$	—	$	(24)	$	25,601
Government debt securities		63,862		1		(54)		63,809
Total	$	89,487	$	1	$	(78)	$	89,410


	December 31, 2022
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost Basis		Gains		Losses		Value
Corporate debt securities	$	52,242	$	7	$	—	$	52,249
Government debt securities		11,681		—		(15)		11,666
Total	$	63,923	$	7	$	(15)	$	63,915

The Company believes it is more likely than not that its marketable securities in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not recorded any allowance for credit losses on its investment securities. The Company determined that the unrealized losses were not attributed to credit risk but were primarily driven by the broader change in interest rates.

For the nine months ended September 30, 2023, the Company recognized realized losses on its marketable securities of $102,000 but did not recognize any realized gains or losses for the three months ended September 30, 2023. For the three and nine months ended September 30, 2022, the Company did not recognize any realized gains or losses on its marketable securities.

Strategic Investments

The Company values the Motus GI investment by measuring fair value using the listed share price on the Nasdaq Capital Market on each valuation date.

Aggregate gains of $293,000 and $276,000 for the three and nine months ended September 30, 2023, respectively, were recorded to adjust the strategic investments in equity securities of Motus GI to its fair value of $362,000 at September 30, 2023. This was primarily the result of an agreement entered into on September 12, 2023 between the Company and Motus GI to exchange previously held royalty certificates, which had a de minimis carrying value, for 701,522 additional shares of Motus GI common stock. Aggregate losses of $327,000 and $707,000 during the three and nine months ended September 30, 2022, respectively, were recorded to adjust the strategic investments in equity securities of Motus GI to its fair value of $86,000 at December 31, 2022, which is classified as strategic investments within current assets on the accompanying condensed consolidated balance sheets.

The Company’s long-term strategic investments as of September 30, 2023 represent investments made in Vivasure in 2020, 2021 and 2022 that were originally recorded at cost. There were no observable price changes, other than as described below, or impairments identified during the three and nine months ended September 30, 2023 or the three and nine months ended September 30, 2022 related to these investments.

In May 2022, Vivasure announced a Series D private placement, in which it received a material investment from Haemonetics Corporation, a new strategic investor. In conjunction with a €30 million investment in Vivasure, Haemonetics Corporation also secured an option to acquire Vivasure based on the achievement of certain milestones. As a result, Legacy Orchestra’s existing convertible redeemable notes converted into Series D Preferred Stock of Vivasure in May 2022. The investment in the Vivasure Series D Preferred Stock represents an observable price change in an orderly transaction for an identical instrument of the same issuer, and accordingly, the Company recognized a gain on its strategic investment in Vivasure of $1.9 million in the second quarter of 2022. This amount represents a portion of the previously impaired investment balance described below.

During the fourth quarter of 2019, the Company identified indicators of impairment of Vivasure strategic investments held at that time as a result of adverse changes in Vivasure’s business operations, including liquidity concerns. As a result, the Company recorded an impairment charge in the fourth quarter of 2019 of $5.8 million, which represents the cumulative impairment charges recorded on Vivasure strategic investments to date.

Stock-Based Compensation - Schedule of cost related to stock-based compensation (Details) - 2023 Plan - Legacy Orchestra - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Stock option
Stock-Based Compensation
Total stock-based compensation	$ 1,001	$ 2,193	$ 3,185	$ 2,391
Unrecognized stock-based compensation expense for options	7,600		$ 7,600
Expected period to be recognized			3 years
Stock option \| Research and development
Stock-Based Compensation
Total stock-based compensation	391	101	$ 1,206	192
Stock option \| Selling, general and administrative
Stock-Based Compensation
Total stock-based compensation	610	2,092	1,979	2,199
Restricted Stock
Stock-Based Compensation
Total stock-based compensation	2,238	30	2,785	121
Unrecognized stock-based compensation expense for options	10,600		$ 10,600
Expected period to be recognized			2 years
Restricted Stock \| Research and development
Stock-Based Compensation
Total stock-based compensation	643		$ 643
Restricted Stock \| Selling, general and administrative
Stock-Based Compensation
Total stock-based compensation	1,595	$ 30	2,142	$ 121
Warrant
Stock-Based Compensation
Total stock-based compensation	270		736
Unrecognized stock-based compensation expense for options	2,800		$ 2,800
Expected period to be recognized			3 years
Warrant \| Research and development
Stock-Based Compensation
Total stock-based compensation	120		$ 328
Warrant \| Selling, general and administrative
Stock-Based Compensation
Total stock-based compensation	$ 150		$ 408

Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2023

Organization and Basis of Presentation

Organization and Basis of Presentation

1. Organization and Basis of Presentation

Orchestra BioMed Holdings, Inc. (collectively, with its subsidiaries, “Orchestra” or the “Company”) (formerly known as Health Sciences Acquisitions Corporation 2) is a biomedical innovation company accelerating high-impact technologies to patients through risk-reward sharing partnerships with leading medical device companies. The Company’s partnership-enabled business model focuses on forging strategic collaborations with leading medical device companies to drive successful global commercialization of products it develops. The Company’s lead product candidate is BackBeat Cardiac Neuromodulation Therapy (“BackBeat CNT”) for the treatment of hypertension (“HTN”), a significant risk factor for death worldwide. The Company is also developing Virtue Sirolimus AngioInfusion Balloon (“Virtue SAB”) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide.

Prior to January 26, 2023, the Company was a special purpose acquisition company formed for the purpose of entering into a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. On January 26, 2023 (the “Closing Date”), the Company consummated the business combination contemplated by the Agreement and Plan of Merger, dated as of July 4, 2022 (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated July 21, 2022, and Amendment No. 2 to Agreement and Plan of Merger, dated November 21, 2022, the “Merger Agreement”) by and among Health Sciences Acquisitions Corporation 2, a special purpose acquisition company incorporated as a Cayman Islands exempted company in 2020 (“HSAC2”), HSAC Olympus Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HSAC2 (“Merger Sub”), and Orchestra BioMed, Inc. (“Legacy Orchestra”). Pursuant to the Merger Agreement, (i) HSAC2 deregistered in the Cayman Islands in accordance with the Companies Act (2022 Revision) (As Revised) of the Cayman Islands and domesticated as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law (the “Domestication”) and (ii) Merger Sub merged with and into Legacy Orchestra, with Legacy Orchestra as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of Orchestra (the “Merger” and, together with the Domestication and the other transactions contemplated by the Merger Agreement, the “Business Combination”). As part of the Domestication, the Company’s name was changed from “Health Sciences Acquisitions Corporation 2” to “Orchestra BioMed Holdings, Inc.” See Note 3 for additional information.

Legacy Orchestra, the Company’s wholly owned subsidiary, was incorporated in Delaware in January 2017 and was formed to acquire operating and other assets as well as to raise capital conducted through private placements. In May 2018, Legacy Orchestra concurrently completed its formation mergers (the “Formation Mergers”) with Caliber Therapeutics, Inc., a Delaware corporation, BackBeat Medical, Inc., a Delaware Corporation, and FreeHold Surgical, Inc., a Delaware corporation. Legacy Orchestra completed the conversions of BackBeat Medical, Inc. to BackBeat Medical, LLC (“BackBeat”), a Delaware limited liability company, of FreeHold Surgical, Inc. to FreeHold Surgical, LLC (“FreeHold”) and of Caliber Therapeutics, Inc. to Caliber Therapeutics, LLC (“Caliber”), a Delaware limited liability company, in 2019.

Caliber

Caliber Therapeutics, Inc. was incorporated in Delaware in October 2005 and began development of its lead product Virtue SAB in 2008. Virtue SAB is a patented drug/device combination product candidate for the treatment of artery disease that delivers a proprietary extended release formulation of sirolimus called SirolimusEFR to the vessel wall during balloon angioplasty without any coating on the balloon surface or the need for leaving a permanent implant such as a stent in the artery. In 2019, Legacy Orchestra entered into a distribution agreement with Terumo Medical Corporation (“Terumo”) for global development and commercialization of Virtue SAB (the “Terumo Agreement”) (See Note 4).

BackBeat

BackBeat Medical, Inc. was incorporated in Delaware in January 2010 and began development of its lead product BackBeat CNT that same year. BackBeat CNT is a patented implantable cardiac stimulation-based treatment for

hypertension that is designed to immediately, substantially and persistently lower blood pressure while simultaneously modulating autonomic nervous system responses that normally drive and maintain blood pressure higher. Refer to Note 5 for details regarding the Exclusive License and Collaboration Agreement, dated as of June 30, 2022, by and among, Legacy Orchestra, BackBeat and Medtronic, Inc. (an affiliate of Medtronic plc) (the “Medtronic Agreement”).

FreeHold

FreeHold Surgical, Inc. was incorporated in Delaware in May 2010 and began development of its hands-free, intracorporeal retractor device for minimally-invasive surgery in 2012. FreeHold is engaged in the development, sales and marketing of its retractor products that provide optimized visual and total surgeon control during laparoscopic and robotic procedures.

Basis of Presentation and Liquidity

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulation of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. These condensed statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to fairly present the results of the interim periods. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date. Operating results and cash flows for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our report for the year ended December 31, 2022 together with the related notes thereto, filed as Exhibit 99.1 to the Company’s Form 8-K/A filed with the SEC on March 24, 2023.

The Company has a limited operating history and the sales and income potential of its businesses and markets are unproven. As of September 30, 2023, the Company had an accumulated deficit of $236.0 million and has experienced net losses each year since its inception. The Company expects to incur substantial operating losses in future periods and will require additional capital as it seeks to advance its products to commercialization. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biomedical device industry, such as uncertainty of clinical trial outcomes, uncertainty of additional funding, and history of operating losses.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern, which requires management to assess the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Based on the available balance of cash and cash equivalents and marketable securities as of September 30, 2023, management has concluded that sufficient capital is available to fund its operations and meet cash requirements through the one-year period subsequent to the issuance date of these financial statements. Management may consider plans to raise capital beyond the one-year period subsequent to the issuance date of these financial statements through issuance of equity securities, debt securities, and/or additional development and commercialization partnerships for other products within the Company’s development pipeline. The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of the Company’s research and development programs.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Compensation

Stock-Based Compensation

11. Stock-Based Compensation

As of September 30, 2023, the only equity compensation plan from which the Company may currently issue new awards is the Company’s 2023 Equity Incentive Plan (the “2023 Plan”), as more fully described below.

Orchestra BioMed, Inc. 2018 Stock Incentive Plan

Prior to the Merger, Legacy Orchestra maintained the 2018 Plan, under which Legacy Orchestra granted incentive stock options, non-qualified stock options and restricted stock awards to its employees and certain non-employees, including consultants, advisors and directors. The maximum aggregate shares of Legacy Orchestra Common Stock that was subject to awards and issuable under the 2018 Plan was 5.2 million shares prior to the Merger. Employees, consultants, and directors were eligible for awards granted under the 2018 Plan, which generally have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the Board. Vesting generally occurs over a period of not greater than three years.

As described in Note 3, in connection with the Merger, each Legacy Orchestra Option that was outstanding and unexercised immediately prior to the time that the Merger became effective (the “Effective Time”) (whether vested or unvested) was assumed by the Company and converted into an option to purchase an adjusted number of shares of Company Common Stock at an adjusted exercise price per share, based on the Exchange Ratio, and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former option. Each Exchanged Option is exercisable for a number of whole shares of Company Common Stock equal to the product of the number of shares of Legacy Orchestra Common Stock underlying such Legacy Orchestra Options multiplied by the Exchange Ratio, and the per share exercise price of such Exchanged Option is equal to the quotient determined by dividing the exercise price per share of the Legacy Orchestra Option by the Exchange Ratio. Following the closing of the Merger, no new awards may be made under the 2018 Plan.

The Company accounted for the Exchanged Options as a modification of the existing options. Incremental compensation costs, measured as the excess, if any, of the fair value of the modified options over the fair value of the original options immediately before its terms are modified, is measured based on the fair value of the underlying shares and other pertinent factors at the modification date. The impact of the option modifications were de minimis.

Orchestra BioMed Holdings, Inc. 2023 Equity Incentive Plan

At the Effective Time, the Company adopted the 2023 Plan which permits the granting of incentive stock options, non-qualified options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based award to employees, directors, and non-employee consultants and/or advisors. As of September 30, 2023, 3,561,678 shares of Company Common Stock are authorized for issuance pursuant to awards under the 2023 Plan.

The pool of available shares will be automatically increased on the first day of each calendar year, beginning January 1, 2024 and ending January 1, 2032, by an amount equal to the lesser of (i) 4.8% of the outstanding shares of our Common Stock determined on a fully-diluted basis as of the immediately preceding December 31 and (ii) 3,036,722 shares of Common Stock, and (iii) such number of shares of Common Stock determined by the Board or the Compensation Committee prior to January 1st of a given year.

In addition, any awards outstanding under the 2018 Plan upon the Closing, after adjustment for the Business Combination, remain outstanding. If any of those awards subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares after the closing of the Business Combination, the shares of Company Common Stock underlying those awards will automatically become available for issuance under the 2023 Plan.

Total stock-based compensation related to option issuances was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	391	$	101	$	1,206	$	192
Selling, general and administrative		610		2,092		1,979		2,199
Total stock-based compensation	$	1,001	$	2,193	$	3,185	$	2,391

As of September 30, 2023, there was approximately $7.6 million of unrecognized stock-based compensation expense associated with the stock options noted above that is expected to be recognized over a weighted average period of three years.

Total stock-based compensation related to restricted stock awards and restricted stock units was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	643	$	—	$	643	$	—
Selling, general and administrative		1,595		30		2,142		121
Total stock-based compensation	$	2,238	$	30	$	2,785	$	121

As of September 30, 2023, there was approximately $10.6 million of unrecognized restricted stock-based compensation expense associated with the restricted stock noted above that is expected to be recognized over a weighted average period of approximately two years.

As previously discussed in Note 3 and Note 10, pursuant to the terms of the Merger Agreement, immediately following the Sponsor Forfeiture and prior to the Closing, the Company issued 750,000 warrants to purchase Company Common Stock to eleven specified employees and directors of Legacy Orchestra (the “Officer and Director Warrants”). The Officer and Director Warrants have substantially similar terms to the forfeited Private Warrants, except that 50% of the Officer and Director Warrants will become exercisable 24 months after the Closing and the remaining 50% will become exercisable 36 months after the Closing. The estimated grant-date fair value of these warrant awards issued concurrent with the close of the Business Combination was calculated using the Black-Scholes option pricing model. Assumptions used were an expected term (in years) of 5.00, expected volatility of 50%, risk-free interest rate of 3.54%, expected dividend yield of 0%, and fair value of common stock of $10.63. During the nine months ended September 30, 2023, 75,000 of these warrants were forfeited resulting in a remaining 675,000 warrants outstanding.

Total stock-based compensation related to warrants was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	120	$	—	$	328	$	—
Selling, general and administrative		150		—		408		—
Total stock-based compensation	$	270	$	—	$	736	$	—

As of September 30, 2023, there was approximately $2.8 million of unrecognized stock-based compensation expense associated with the warrants noted above that is expected to be recognized over a weighted average period of approximately three years.

Stock Option Activity

The following table summarizes the stock option activity of the Company under the 2018 Plan and the 2023 Plan:


		Weighted	Weighted	Aggregate
	Shares	Average	Average	Intrinsic
	Underlying	Exercise	Remaining	Value
	Options	Price	Term (years)	(in thousands)
Outstanding at January 1, 2023	7,868,448	3.51	8.35		—
Retroactive application of Reverse Recapitalization (Note 3)	(4,209,620)	4.05	—		—
Outstanding at January 1, 2023, effect of Merger	3,658,828	7.56	8.35		—
Granted	1,080,875	8.19	—		—
Exercised	(18,790)	4.17	—		—
Forfeited/canceled	(141,848)	9.22	—		—
Outstanding September 30, 2023	4,579,065	7.72	8.03	$	7,495
Exercisable at September 30, 2023	2,432,159	6.90	6.97	$	5,794

The following table summarizes the restricted stock awards and restricted stock units activity of the Company under the Plan:



		Restricted Stock
		Awards/Units
		Outstanding
Outstanding January 1, 2023		158,589
Granted		1,695,222
Vested		(67,689)
Forfeited/canceled		(45,901)
Outstanding September 30, 2023		1,740,221

During the nine months ended September 30, 2023, the Company granted 1,695,222 restricted stock units at a weighted-average grant date fair value of $7.42, all of which were service-based restricted stock awards. No performance-based restricted stock awards were granted in the nine months ended September 30, 2023.

Determination of Stock Option Awards Fair Value

The estimated grant-date fair value of all the Company’s option awards was calculated using the Black-Scholes option pricing model, based on the following weighted average assumptions:


	Nine Months Ended September 30,
	2023			2022
Expected term (in years)		6.09			6.00
Expected volatility		46	%		49	%
Risk-free interest rate		3.86	%		2.96	%
Expected dividend yield		0	%		0	%
Fair value of common stock	$	8.19		$	8.58

The fair value of each stock option grant was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment and estimation by management.

Expected Term — The expected term represents the period that stock-based awards are expected to be outstanding. The Company’s historical share option exercise information is limited due to a lack of sufficient data points and did not

provide a reasonable basis upon which to estimate an expected term. The expected term for option grants is therefore determined using the “simplified” method, as prescribed in the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 107. The simplified method deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards.

Expected Volatility — The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company’s industry that are considered to be comparable to the Company’s business over a period equivalent to the expected term of the stock-based awards since there has been no trading history of the Legacy Orchestra Common Stock and limited trading history of the Company Common Stock.

Risk-Free Interest Rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the stock-based awards’ expected term.

Expected Dividend Yield — The expected dividend yield is zero as neither the Company nor Legacy Orchestra has paid, and the Company does not anticipate paying, any dividends on its common stock in the foreseeable future.

Fair Value of Common Stock — Prior to the Business Combination, as the Legacy Orchestra Common Stock has not historically been publicly traded, its board of directors periodically estimated the fair value of the Company’s common stock considering, among other things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Subsequent to the Business Combination, the Company utilizes the price of its publicly-traded Company Common Stock to determine the grant date fair value of awards.

Leases (Tables)

9 Months Ended

Sep. 30, 2023

Leases

Schedule of recognized as an asset and operating lease liabilities


As of September 30, 2023:
Weighted average remaining lease term – operating leases, in years	3.60
Weighted average discount rate – operating leases	6.25	%

Schedule of future minimum rental payments, exclusive of taxes, insurance and other costs, under the leases


	Operating
	Leases
Year ending December 31:	(in thousands)
2023 (remaining three months)	$	208
2024		727
2025		352
2026		352
2027		352
Thereafter		88
Total future minimum lease payments	$	2,079
Imputed interest		(215)
Total liability	$	1,864

Medtronic Agreement

9 Months Ended

Sep. 30, 2023

Medtronic Agreement

Medtronic Agreement

5. Medtronic Agreement

In June 2022, Legacy Orchestra, BackBeat and Medtronic entered into the Medtronic Agreement for the development and commercialization of BackBeat CNT for the treatment of hypertension (“HTN”) in patients indicated for a cardiac pacemaker (the “Primary Field”). Under the terms of the Medtronic Agreement, the Company will sponsor a multinational pivotal study to support regulatory approval of BackBeat CNT in the Primary Field and be financially responsible for development, clinical and regulatory costs associated with this pivotal study. Medtronic is currently working with the Company to integrate BackBeat CNT into its top-of-the-line, commercially available dual-chamber pacemaker system for use in the pivotal trial and will provide development, clinical and regulatory resources in support of the pivotal trial, for which the Company will reimburse Medtronic at cost.

Under the terms of the Medtronic Agreement, Medtronic will have exclusive rights to commercialize BackBeat CNT-enabled pacing systems globally following receipt of regulatory approval. Medtronic would be entirely responsible for global commercialization following receipt of regulatory approvals, including manufacturing, sales, marketing and distribution costs.

The Company is expected to receive between $500 and $1,600 per BackBeat CNT-enabled device sold based on a formula of the higher of (1) a fixed dollar amount per BackBeat CNT-enabled device (amount varies materially on a country-by-country basis) or (2) a percentage of the BackBeat CNT-generated sales. Procedures using the BackBeat CNT-enabled pacemakers are expected to be billed under existing reimbursement codes.

Medtronic has a right of first negotiation through FDA approval of BackBeat CNT in the Primary Field, to expand its global rights to BackBeat CNT for the treatment of HTN patients not indicated for a pacemaker.

The Company assessed whether the Medtronic Agreement fell within the scope of ASC 808 and concluded that the Medtronic Agreement is a collaboration within the scope of ASC 808. In addition, the Company determined that Medtronic is a customer for a good or service that is a distinct unit of account, and therefore, the transactions in the Medtronic Agreement should be accounted for under ASC 606.

The Company has concluded that the license granted to Medtronic is not distinct from the development and implementation services that will be provided to Medtronic through the completion of the development of HTN indication, as Medtronic cannot obtain the benefit of the license without the related development and implementation services. ASC 606-10-55-65 includes an exception for the recognition of revenue relating to licenses of intellectual property with sales-based or usage-based royalties. Under this exception, royalty revenue is not recorded until the subsequent sale or usage occurs, or the performance obligation has been satisfied, whichever is later.

The Company concluded that the exemption applies and therefore, the royalty revenue associated with these performance obligations will be recognized as the underlying sales occur. Additionally, pursuant to the Medtronic Agreement, expenses incurred by Medtronic in connection with clinical device development and regulatory activities performed will be reimbursed by the Company. The Company will record such expenses as research and development expenses as incurred. During the three and nine months ended September 30, 2023, the Company incurred approximately $854,000 and $3.1 million, respectively, of research and development costs related to these reimbursements pursuant to the Medtronic Agreement, of which $1.4 million is included within accounts payable and accrued expenses in the Company’s September 30, 2023 condensed consolidated balance sheet. During the three and nine months ended September 30, 2022, the Company incurred approximately $530,000 of research and development costs related to these reimbursements pursuant to the Medtronic Agreement.

Concurrently with the close of the Medtronic Agreement, Legacy Orchestra also received a $40 million investment from Medtronic in connection with Legacy Orchestra’s Series D-2 Preferred Stock financing. The equity was purchased at a fair value consistent with the price paid by other investors at that time, and accordingly, the proceeds received were recorded as an equity investment.

Through September 30, 2023, there have been no amounts recognized as revenue under the Medtronic Agreement.

Stock-Based Compensation - Schedule of stock option activity (Details) - 2018 and 2023 Plan $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023 USD ($) $ / shares shares	Dec. 31, 2022 $ / shares shares
Shares Underlying Options
Shares Underlying Options, Beginning \| shares	3,658,828
Shares Underlying Options, Granted \| shares	1,080,875
Shares Underlying Options, Exercised \| shares	(18,790)
Shares Underlying Options, Forfeited/canceled \| shares	(141,848)
Shares Underlying Options, Ending \| shares	4,579,065	3,658,828
Shares Underlying Options, Exercisable \| shares	2,432,159
Weighted Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning at January 1, 2023 \| $ / shares	$ 7.56
Weighted Average Exercise Price, Granted \| $ / shares	8.19
Weighted Average Exercise Price, Exercised \| $ / shares	4.17
Weighted Average Exercise Price, Forfeited/canceled \| $ / shares	9.22
Weighted Average Exercise Price, Outstanding June 30, 2023 \| $ / shares	7.72	$ 7.56
Weighted Average Exercise Price, Exercisable at June 30, 2023 \| $ / shares	$ 6.90
Weighted Average Remaining Term (years) and Aggregate Intrinsic Value
Weighted Average Remaining Term (years), Outstanding June 30, 2023	8 years 10 days	8 years 4 months 6 days
Weighted Average Remaining Term (years), Exercisable at June 30, 2023	6 years 11 months 19 days
Aggregate Intrinsic Value Outstanding \| $	$ 7,495
Aggregate Intrinsic Value, Exercisable at June 30, 2023 \| $	$ 5,794
Previously Reported
Shares Underlying Options
Shares Underlying Options, Beginning \| shares	7,868,448
Shares Underlying Options, Ending \| shares		7,868,448
Weighted Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning at January 1, 2023 \| $ / shares	$ 3.51
Weighted Average Exercise Price, Outstanding June 30, 2023 \| $ / shares		$ 3.51
Weighted Average Remaining Term (years) and Aggregate Intrinsic Value
Weighted Average Remaining Term (years), Outstanding June 30, 2023		8 years 4 months 6 days
Retroactive application of Reverse Recapitalization
Shares Underlying Options
Shares Underlying Options, Beginning \| shares	4,209,620
Shares Underlying Options, Ending \| shares		4,209,620
Weighted Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning at January 1, 2023 \| $ / shares	$ 4.05
Weighted Average Exercise Price, Outstanding June 30, 2023 \| $ / shares		$ 4.05

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (36,302)	$ (23,858)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	215	152
Shares issued as compensation for consulting services		38
Stock-based compensation	6,706	2,512
Loss on fair value adjustment of warrant liability	294	1,124
Gain on fair value of strategic investments	(276)	(1,196)
Accretion and interest related to marketable securities	(3,181)
Loss on debt extinguishment		682
Non-cash lease expense	473	419
Amortization of deferred financing fees	109	127
Changes in operating assets and liabilities:
Accounts receivable	10	25
Inventory	139	(262)
Prepaid expenses and other assets	(458)	(475)
Accounts payable, accrued expenses and other liabilities	(348)	2,294
Operating lease liabilities - current and non-current	(516)	(196)
Deferred revenue	(2,018)	(1,931)
Net cash used in operating activities	(35,153)	(20,545)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(81)	(537)
Sales of marketable securities	115,690
Purchases of marketable securities	(138,073)	(208)
Net cash used in investing activities	(22,464)	(745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt financing, inclusive of debt extinguishment costs		(6,446)
Proceeds from Avenue term loan		10,000
Proceeds from exercise of warrants	23	79
Proceeds from exercise of stock options	78	121
Effect of merger, net of transaction costs (Note 3)	56,810
Proceeds from private placement financing		109,830
Deferred financing, offering and merger costs		(5,237)
Net cash provided by financing activities	56,911	108,347
Net (decrease) increase in cash and cash equivalents	(706)	87,057
Cash and cash equivalents, beginning of the period	19,784	9,938
Cash and cash equivalents, end of the period	19,078	96,995
Cash paid during the nine months ended September 30:
Interest	$ 1,098	1,040
Non-cash financing activities:
Deferred offering and merger costs in accounts payable and accrued expenses		5,682
Warrants issued pursuant to private placement financing		620
Warrants issued pursuant to debt financing		$ 178

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Schedule of property and equipment useful lives


Asset category		Depreciable life
Manufacturing equipment		10 years
Office equipment		3 – 7 years
Research and development equipment		7 years

Financial Instruments and Fair Value Measurements - Schedule of financial assets and liabilities measured at fair value (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Financial assets and liabilities measured at fair value
Total assets	$ 103,390	$ 72,709
Total liabilities		2,089
Assets transfers within levels	0
Liabilties transfers within levels	0
Money market fund
Financial assets and liabilities measured at fair value
Total assets	13,618	8,708
Investment in Motus GI
Financial assets and liabilities measured at fair value
Total assets	362	86
Marketable securities (Corporate and Government debt securities)
Financial assets and liabilities measured at fair value
Total assets	89,410	63,915
Warrant liability.
Financial assets and liabilities measured at fair value
Total liabilities		2,089
Level 1
Financial assets and liabilities measured at fair value
Total assets	13,980	8,794
Level 1 \| Money market fund
Financial assets and liabilities measured at fair value
Total assets	13,618	8,708
Level 1 \| Investment in Motus GI
Financial assets and liabilities measured at fair value
Total assets	362	86
Level 2
Financial assets and liabilities measured at fair value
Total assets	89,410	63,915
Level 2 \| Marketable securities (Corporate and Government debt securities)
Financial assets and liabilities measured at fair value
Total assets	$ 89,410	63,915
Level 3
Financial assets and liabilities measured at fair value
Total liabilities		2,089
Level 3 \| Warrant liability.
Financial assets and liabilities measured at fair value
Total liabilities		$ 2,089

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Reverse Recapitalization

The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, HSAC2 is treated as the “acquired” company, and Legacy Orchestra

is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Orchestra issuing stock for the net assets of HSAC2, accompanied by a recapitalization. As a result, the consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Legacy Orchestra. Additionally, the shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based the exchange ratio established in the Merger Agreement (the “Exchange Ratio”). For additional information on the Business Combination and the Exchange Ratio, see Note 3 to these unaudited condensed consolidated financial statements.

Emerging Growth Company and Smaller Reporting Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, it is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

The Company will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the closing of the initial public offering of HSAC2, (2) the last day of the fiscal year in which the Company has total annual gross revenue of at least $1.235 billion, (3) the last day of the fiscal year in which the Company is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of the common stock of the Company (“Company Common Stock”) held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (4) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

The Company is also a “smaller reporting company” as defined in the Exchange Act. The Company may continue to be a smaller reporting company even after the Company is no longer an emerging growth company. The Company may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of the Company’s voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of the Company’s second fiscal quarter, or (ii)(a) the Company’s annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of the Company’s voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of the Company’s second fiscal quarter.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the condensed consolidated financial statements and accompanying notes.

Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. Areas where significant estimates exist include, but are not limited to, the fair value of stock-based compensation, research and development costs incurred, the fair value of the warrant liability, and the estimated costs to complete the combined performance obligation pursuant to the Terumo Agreement (Note 4).

Cash and Cash Equivalents

Cash and cash equivalents are held in banks or in custodial accounts with banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash.

Marketable Securities

The Company accounts for its marketable securities with remaining maturities of less than one year, or where its intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. These investments represent debt investments in corporate or government securities that are designated as available-for-sale and are carried at fair value, with unrealized gains and losses reported in stockholders’ equity as accumulated other comprehensive income (loss). The disclosed fair value related to the Company’s investments is based on market prices from a variety of industry standard data providers and generally represent quoted prices for similar assets in active markets or have been derived from observable market data.

Strategic Investments

Management has made investments in affiliated companies and assesses whether the Company exerts significant influence over its strategic investments. The Company considers the nature and magnitude of its investment, any voting and protective rights it holds, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationships. To date, the Company has concluded that it does not have the ability to exercise significant influence over its strategic investments.

The Company’s strategic investments consist of equity investments in common stock of Motus GI Holdings, Inc. (“Motus GI”), a publicly-held company and related party, and preferred shares of Vivasure Medical Limited (“Vivasure”), a privately-held company and related party. The Company classifies strategic investments on its balance sheet as current assets if the assets are available for use for current operations, and the Company does not have a specific plan to hold the investments for a certain duration of time. The shares held of Motus GI represent equity securities with a readily determinable fair value and are required to be measured at fair value at each reporting period using readily determinable pricing available on a securities exchange, in accordance with the provisions of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. Therefore, the Company categorized the investments as current assets. The investments in Vivasure do not have readily determinable fair values and are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Additionally, as the investments in Vivasure are not readily marketable, the Company categorized the investments as non-current assets. As of September 30, 2023 and December 31, 2022, the carrying value of the investments in Vivasure was $2.5 million.

Fair Value of Financial Instruments

The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s

judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, prepaid expense, accounts payable and accrued expenses approximate fair value because of the short-term maturity of these financial instruments. In addition, the Company records its investment in Motus GI, marketable securities, and warrant liabilities at fair value. In addition, at September 30, 2023, the Company believed the carrying value of debt approximates fair value as the interest rates were reflective of the rate the Company could obtain on debt with similar terms and conditions. See Note 6 for additional information regarding fair value measurements.

The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable represent amounts due from customers. The allowance for doubtful accounts is recorded for estimated losses by evaluating various factors, including relative creditworthiness of each customer, historical collections experience and aging of the receivable. As of September 30, 2023 and December 31, 2022, an allowance for doubtful accounts was not deemed necessary.

Inventory

Inventory is stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) and net realizable value. Net realizable value represents the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company analyzes its inventory levels and writes down inventory that has become obsolete or has a cost basis in excess of its expected net realizable value or inventory quantities in excess of expected requirements. Excess requirements are determined based on comparison of existing inventories to forecasted sales, with consideration given to inventory shelf life. Expired inventory is disposed of, and the related costs are recognized in cost of goods sold. As of September 30, 2023 and December 31, 2022, an impairment charge as a result of obsolete inventory was not deemed necessary.

Research and Development Prepayments, Accruals and Related Expenses

The Company incurs costs of research and development activities conducted by its third-party service providers, which include the conduct of preclinical and clinical studies. The Company is required to estimate its prepaid and accrued research and development costs at each reporting date. These estimates are made as of the reporting date of the work completed over the life of the individual study in accordance with agreements established with our service providers. The Company determines the estimates of research and development activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers, as to the progress or stage of completion of trials or services, as of the end of the reporting period, pursuant to contracts with the third parties and the agreed upon fee to be paid for such services. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related

goods are accepted by the Company or the services are performed. Accruals are recorded for the amounts of services provided that have not yet been invoiced.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized over the lesser of their useful life or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred.


Asset category		Depreciable life
Manufacturing equipment		10 years
Office equipment		3 – 7 years
Research and development equipment		7 years

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the terms of the arrangement. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right-of-use (“ROU”) assets and operating lease liabilities at the lease commencement date, and thereafter if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. The Company’s policy is to not record leases with a lease term of 12 months or less on its balance sheets.

The ROU asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the statements of operations.

Payments due under each lease agreement include fixed and variable payments. Variable payments relate to the Company’s share of the lessor’s operating costs associated with the underlying asset and are recognized when the event on which those payments are assessed occurs. Variable payments have been excluded from the lease liability and associated right-of-use asset.

The interest rate implicit in lease agreements is typically not readily determinable, and as such, the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Debt Discount and Debt Issuance Costs

Debt discounts and debt issuance costs incurred in connection with the issuance of debt are capitalized and reflected as a reduction to the related debt liability. The costs are amortized to interest expense over the term of the debt using the effective-interest method.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired,

the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. The Company has not identified any such impairment losses to date.

Warrants

The Company evaluates its warrants to determine if the contracts qualify as liabilities in accordance with ASC 480-10, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging (“ASC 815”). If the warrant is determined to meet the criteria to be liability classified, the warrant liability is marked-to-market each balance sheet date and recorded as a liability, with the change in fair value recorded in the Company’s condensed consolidated statements of operations and comprehensive loss as gain (loss) on fair value adjustment of warrant liability within other income or expense.

In bundled transactions, the proceeds received from any debt instruments and liability classified warrants are allocated to the warrant at fair value first, and the residual value is then allocated to the debt instrument. Upon conversion or exercise of a warrant that is subject to liability treatment, the instrument is marked to fair value at the conversion or exercise date and the fair value is reclassified to equity. Equity classified warrants are recorded within additional paid-in capital at the time of issuance at fair value as of the issuance date and are not subject to subsequent remeasurement.

Revenue Recognition

The Company recognizes revenue under the core principle according to ASC 606, Revenue from Contracts with Customers (“ASC 606”), to depict the transfer of control to the Company’s customers in an amount reflecting the consideration the Company expects to be entitled to. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when a performance obligation is satisfied.

The Company’s revenues are currently comprised of product revenue from the sale of FreeHold’s intracorporeal organ retractors, and partnership revenues from the Terumo Agreement related to the development and commercialization of Virtue SAB.

Product Revenues

Product revenues related to sales of FreeHold’s intracorporeal organ retractors are recognized at a point-in-time upon the shipment of the product to the customer, and there are no significant estimates or judgments related to estimating the transaction price. The product revenues consist of a single performance obligation, and the payment terms are typically 30 days. Product revenues are recognized solely in the United States.

Partnership Revenues

To date, the Company’s partnership revenues have related to the Terumo Agreement as further described in Note 4. In future periods, partnership revenues may also include revenues related to the Medtronic Agreement as discussed in Note 5.

The Company assessed whether the Terumo Agreement fell within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) based on whether the arrangement involved joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. The Company determined that the Terumo Agreement did not fall within the scope of ASC 808. The Company then analyzed the arrangement pursuant to the provisions of ASC 606 and determined that the arrangement represents a contract with a customer and is therefore within the scope of ASC 606.

The promised goods or services in the Terumo Agreement include (i) license rights to the Company’s intellectual property, and (ii) research and development services. The Company also has optional additional items in the Terumo Agreement which are considered marketing offers and are accounted for as separate contracts with the customer if such

option is elected by the customer, unless the option provides a material right which would not be provided without entering into the contract. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources or (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct in the Terumo Agreement, the Company considered factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

The Company estimates the transaction price for the Terumo Agreement performance obligations based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration includes both fixed consideration and variable consideration. At the inception of the Terumo Agreement, as well as at each reporting period, the Company evaluates the amount of potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method better predicts the amount expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price.

The Terumo Agreement contains development and regulatory milestone payments. At contract inception and at each reporting period, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect partnership revenues and earnings in the period of adjustment.

The Terumo Agreement also includes sales-based royalties and the license is deemed to be the predominant item to which the royalties relate. Accordingly, the Company will recognize royalty revenue when the related sales occur. To date, the Company has not recognized any royalty revenue under the arrangement.

The Company has determined that intellectual property licensed to Terumo and the research and development services to be provided through the premarket approval by the U.S. Food and Drug Administration (the “FDA”) for the in-stent restenosis (“ISR”) indication represent a combined performance obligation that is satisfied over time, and that the appropriate method of measuring progress for purposes of recognizing revenues relates to a proportional performance model that measures the proportional performance based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the performance obligation. The Company evaluates the measure of progress at each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company receives payments from Terumo based on billing schedules established in the contract. Such billings for milestone related events have 10-day terms from the date the milestone is achieved, royalty payments are 20-day terms after the close of each quarter, any optional services are 20 days after receipt of an invoice and any sales of the SirolimusEFR are within 30 days after receipt of the shipping invoices. Upfront payments are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional.

Stock-Based Compensation

The Company applies ASC 718-10, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expenses for all stock-based payment awards made to employees and directors including employee stock options under the Company’s stock plans based on estimated fair values (see Note 11). Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as an expense in the financial statements over the respective vesting period on a straight-line basis.

Under the requirements of ASU 2018-07, the Company accounts for stock-based compensation to nonemployees under the fair value method, which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date) and recognized in the Company’s condensed consolidated statements of operations and comprehensive loss over the requisite service period. The Company accounts for forfeitures of stock-based awards as they occur.

Net Loss Per Share

Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration of potential dilutive shares of common stock. Since the Company was in a loss position for the periods presented, basic net loss is the same as diluted net loss since the effects of potentially dilutive securities are antidilutive. Potentially dilutive securities include all outstanding warrants, stock options, Earnout Consideration (Note 3) and unvested restricted stock awards and restricted stock units. Shares of Company Common Stock outstanding but subject to forfeiture and cancellation by the Company (e.g., the Forfeitable Shares (as defined in Note 3)) are excluded from the weighted-average number of shares until the period in which such shares are no longer subject to forfeiture. In periods in which there is net income, the Company would apply the two-class method to compute net income per share. Under this method, earnings are allocated to common stock and participating securities based on their respective rights to receive dividends, as if all undistributed earnings for the period were distributed. The two-class method does not apply in periods in which a net loss is reported.

Income Taxes

The Company accounts for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded if it is more-likely-than-not that some portion or all the deferred tax assets will not be realized in future periods. At September 30, 2023 and December 31, 2022, the Company recorded a full valuation allowance on its deferred tax assets.

The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more likely than not to be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense.

Deferred Offering and Merger Costs

Offering and merger costs, consisting of legal, accounting, printer and filing fees were deferred to be offset against proceeds received when the Business Combination was completed. As of December 31, 2022, there were $4.0 million of deferred transaction costs included in deposits and other assets on the accompanying condensed consolidated balance sheet. Upon the close of the Business Combination, these deferred costs were recorded against net proceeds in additional paid-in capital. For further discussion on the Business Combination, see Note 3.

Defined Contribution Plan

The Company has a defined retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan allows eligible employees to defer a portion of their annual compensation on a pre-tax basis. Effective January 1, 2023,

the Company participates in a matching safe harbor 401(k) Plan with a Company contribution of up to 3.5% of each eligible participating employee’s compensation. Safe harbor contributions vest immediately for each participant. During the three and nine months ended September 30, 2023, the Company made $98,000 and $279,000, respectively, in contributions under this safe harbor 401(k) Plan.

Comprehensive Loss

Comprehensive loss is comprised of net loss and changes in unrealized gains and losses on the Company’s available-for-sale investments.

Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined it operates in one segment.

New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During 2018 and 2019, the FASB also issued subsequent amendments to the initial guidance (collectively, “Topic 326”). Topic 326 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted ASU 2016-13 as of January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements.

Summary of Significant Accounting Policies - Other (Details)		3 Months Ended	9 Months Ended	12 Months Ended
	Jan. 01, 2023	Sep. 30, 2023 USD ($)	Sep. 30, 2023 USD ($) segment	Dec. 31, 2022 USD ($)
Summary of Significant Accounting Policies
Strategic investments		$ 2,495,000	$ 2,495,000	$ 2,495,000
Allowance for doubtful accounts receivable		0	0	0
Inventory impairment charge			0	0
Impairment of long-lived assets			0
Deferred offering deposit				4,000,000.0
Defined contribution plan, percentage	3.50%
Contribution		98,000	$ 279,000
Number of operating segments \| segment			1
Terumo Agreement
Summary of Significant Accounting Policies
Term of billing from date of milestone achievement			10 days
Term of royalty payments from close of each quarter			20 days
Term of optional services from receipt of invoice			20 days
Term of SirolimusERF from receipt of shipping invoice			30 days
Strategic Investments Less Current Portion
Summary of Significant Accounting Policies
Strategic investments		$ 2,500,000	$ 2,500,000	$ 2,500,000

Business Combination and Recapitalization - Schedule of reconciliation of business combination elements to changes in equity (Details) - HSAC2 - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Business Combination and Recapitalization
Cash - HSAC2's trust (net of redemption)	$ 51,915
Cash - Backstop Agreement	18,085
Gross proceeds	70,000
Deferred financing, offering and merger costs	(15,698)
Effect of Business Combination, net of redemptions and transaction costs	54,302
Proceeds from reverse recapitalization	$ 56,800
Legacy Orchestra
Business Combination and Recapitalization
Transaction costs		$ 2,500

Warrants

9 Months Ended

Sep. 30, 2023

Warrants

Warrants

10. Warrants

The Company evaluates its outstanding warrants to determine if the instruments qualify for equity or liability classification.

Private Warrants

Prior to the Merger, HSAC2 had outstanding 1,500,000 Private Warrants, which were issued in connection with the HSAC2 IPO to the Sponsor. Each Private Warrant entitles the holder thereof to purchase one share of Company Common Stock at a price of $11.50 per share, subject to adjustment as provided therein. The Private Warrants became exercisable 30 days after the completion of the Business Combination and will expire five years after the completion of the Business Combination. Each Private Warrant is non-redeemable and may be exercised on a cashless basis. Since these warrants are indexed to the Company’s publicly traded common stock, they are classified within equity.

As described in Note 3, the Sponsor and HSAC2’s other initial shareholders prior to the HSAC2 IPO agreed to subject (i) the 4,000,000 Insider Shares and (ii) the 450,000 Private Shares to a lock-up for up to 12 months following the Closing and the Sponsor forfeited 50% of its 1,500,000 Private Warrants, comprising 750,000 Private Warrants, for no consideration, immediately prior to the Closing. Pursuant to the terms of the Merger Agreement, immediately following the Sponsor Forfeiture and prior to the Closing, HSAC2 issued 750,000 Officer and Director Warrants to eleven specified employees and directors of Legacy Orchestra. The Officer and Director Warrants have substantially similar terms to the forfeited Private Warrants, except that 50% of the Officer and Director Warrants will become exercisable 24 months after the Closing and the remaining 50% will become exercisable 36 months after the Closing.

Assumed Legacy Orchestra Warrants

Prior to the close of the Business Combination, the majority of Legacy Orchestra’s warrants (the “Legacy Orchestra Warrants”) were required to be accounted for as liabilities as certain features within the warrant agreements contained features that were not considered “fixed for fixed” pursuant to ASC 815, and therefore, the fair value of the warrant liability was marked-to-market at each balance sheet date, with the change in fair value recorded in the Company’s condensed consolidated statements of operations and comprehensive loss within other income (expense). Upon the close of the Business Combination, all liability classified Legacy Orchestra Warrants became equity classified on that date, as the warrant agreements became “fixed for fixed.” As a result, the warrant liability was fair valued and adjusted from $2.1 million as of December 31, 2022 to $2.4 million as of January 26, 2023, and then subsequently reclassified into stockholders’ equity. In addition, Legacy Orchestra also had outstanding other equity classified warrants recorded within additional paid-in capital at the time of issuance at fair value that were not subject to subsequent remeasurement.

The Company calculates the fair value of the outstanding warrant liability at each reporting date by estimating the equity value of the Company, and then utilizing option pricing models to allocate the total equity value to the shares and warrants outstanding. The inputs used in the valuation models for the Company’s warrant liability are as follows:


	Period from
	January 1, 2023
	to January 26, 2023		September 30, 2022
Expected volatility	44 – 49	%	42 – 45	%
Risk-free interest rate	3.60 – 4.80	%	3.30 – 4.10	%
Remaining term in years	0.35 – 5.00		0.67 – 5.13
Exercise price of common warrants	$1.08 – $30.11		$1.08 – $30.11
Exercise price of Legacy preferred warrants	—		—
Common stock price	$10.63		$9.18
Legacy preferred stock price	—		—
Expected dividend yield	0	%	0	%

The Company’s warrant liability related to Legacy Orchestra warrant activity rollforward is as follows, with the warrants having been converted to reflect the effect of the Merger:


	Preferred	Common
(in thousands, except share data)	Warrants	Warrants	Amount
Balance December 31, 2022	—	1,327,074	$	2,089
Warrants exercised prior to the business combination	—	(1,163)		(10)
Change in fair value of warrants as of January 26, 2023	—	—		294
Warrants reclassified to equity	—	(1,325,911)		(2,373)
Balance March 31, 2023	—	—		—
Balance June 30, 2023	—	—		—
Balance September 30, 2023	—	—	$	—


	Preferred	Common
(in thousands, except share data)	Warrants	Warrants	Amount
Balance December 31, 2021	206,997	1,189,162	$	635
Exercise of warrants	—	(68,587)		(156)
Change in the fair value of warrants	—	—		145
Balance March 31, 2022	206,997	1,120,575		624
Exercise of warrants	—	(4,650)		(15)
Forfeiture of warrants	—	(4,650)		(38)
Issuance of warrants related to Legacy Orchestra preferred stock financing	—	159,965		620
Amendments of existing warrants	(206,997)	206,997		810
Other	—	(150,000)		(335)
Change in the fair value of warrants	—	—		243
Balance June 30, 2022	—	1,328,237		1,909
Balance September 30, 2022	—	1,328,237	$	1,909

Private Warrants and Assumed Legacy Orchestra Warrants

The following table summarizes outstanding warrants to purchase shares of Company Common Stock as of September 30, 2023 and December 31, 2022:


	Number of Shares
	September 30,	December 31,	Exercise
	2023	2022	Price	Term
Liability-classified Warrants
Legacy Orchestra Warrants	—	1,327,074	$0.50 – $14.00	0.10 – 4.50

Equity-classified Warrants
Legacy Orchestra Warrants	509,258	250,000	$0.50 – $14.00	0.10 – 8.75
Private Warrants Held by Sponsor	750,000	1,500,000	$11.50	4.32 – 4.57
Private Warrants Held by Employees (Note 11)	675,000	—	$11.50	4.32
	1,934,258	1,750,000
Total Outstanding	1,934,258	3,077,074

Balance Sheet Components - Schedule of accrued expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Balance Sheet Components
Accrued compensation	$ 2,571	$ 2,480
Clinical trial accruals	956	1,003
Other accrued expenses	774	1,893
Total accrued expenses	$ 4,301	$ 5,376

Medtronic Agreement (Details) - USD ($)	3 Months Ended		9 Months Ended
Medtronic Agreement (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Medtronic agreement
Research and development	$ 8,558,000	$ 5,899,000	$ 25,311,000	$ 14,402,000
Medtronic Agreement
Medtronic agreement
Reimbursable research and development expense	854,000		3,100,000
Proceeds from issuance of Series D-2 Preferred Stock			40,000,000
Research and development	530,000		530,000
Revenue recognized to date	$ 0		0
Minimum \| Medtronic Agreement
Medtronic agreement
Expected to receive product price			500
Maximum \| Medtronic Agreement
Medtronic agreement
Expected to receive product price			1,600
Accounts Payable and Accrued Expenses \| Medtronic Agreement
Medtronic agreement
Reimbursable research and development expense			$ 1,400,000

Net Loss Per Share - Schedule of calculation of diluted net loss per share (Details) - shares			9 Months Ended
	Apr. 12, 2023	Jan. 26, 2023	Sep. 30, 2023	Sep. 30, 2022
Anti-dilutive Securities
Earnout first milestone	4,000,000
Earnout first milestone Round off	3,999,987
Forfeitable shares	500,000
Antidilutive securities			13,170,211	3,074,661
Maximum
Anti-dilutive Securities
Shares consideration		8,000,000
Earnout first milestone	4,000,000
Stock options
Anti-dilutive Securities
Antidilutive securities			4,579,065	1,578,316
Warrant liability.
Anti-dilutive Securities
Antidilutive securities			1,934,258	1,328,237
Unvested Restricted Stock Awards
Anti-dilutive Securities
Antidilutive securities			1,740,221	168,108
Conversion Option
Anti-dilutive Securities
Antidilutive securities			416,667
Forfeitable Shares
Anti-dilutive Securities
Antidilutive securities			500,000
Earnout Consideration
Anti-dilutive Securities
Antidilutive securities			4,000,000

Marketable Securities and Strategic Investments (Tables)

9 Months Ended

Sep. 30, 2023

Marketable Securities and Strategic Investments

Schedule of marketable securities


	September 30, 2023
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost Basis		Gains		Losses		Value
Corporate debt securities	$	25,625	$	—	$	(24)	$	25,601
Government debt securities		63,862		1		(54)		63,809
Total	$	89,487	$	1	$	(78)	$	89,410


	December 31, 2022
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost Basis		Gains		Losses		Value
Corporate debt securities	$	52,242	$	7	$	—	$	52,249
Government debt securities		11,681		—		(15)		11,666
Total	$	63,923	$	7	$	(15)	$	63,915

Condensed Consolidated Statements of Stockholders Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Previously Reported Convertible Preferred Stock	Previously Reported Common Stock	Previously Reported Additional Paid-In Capital	Previously Reported Accumulated Other Comprehensive (Loss)	Previously Reported Accumulated Deficit	Previously Reported	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive (Loss)	Accumulated Deficit	Total
Retroactive application of reverse capitalization (Note 3)	$ (51,452)	$ 1	$ 51,451			$ 51,452
Retroactive application of reverse capitalization (Note 3) (in shares)	(12,075,976)	6,636,983
Balance at Dec. 31, 2021	$ 51,452		94,894		$ (166,126)	(71,232)	$ 1	$ 146,345		$ (166,126)	$ (19,780)
Balance (in shares) at Dec. 31, 2021	12,075,976	2,185,297					8,822,280
Stock-based compensation								70			70
Exercise of stock options								25			25
Exercise of stock options (in shares)							5,696
Exercise of warrants								230			230
Exercise of warrants (in shares)							68,588
Proceeds from private placement								25,262			25,262
Proceeds from private placement (in shares)							1,240,169
Net loss										(5,729)	(5,729)
Balance at Mar. 31, 2022							$ 1	171,932		(171,855)	78
Balance (in Shares) at Mar. 31, 2022							10,136,733
Balance at Dec. 31, 2021	$ 51,452		94,894		(166,126)	(71,232)	$ 1	146,345		(166,126)	(19,780)
Balance (in shares) at Dec. 31, 2021	12,075,976	2,185,297					8,822,280
Net loss											(23,858)
Balance at Sep. 30, 2022							$ 2	251,410		(189,984)	61,428
Balance (in Shares) at Sep. 30, 2022							20,187,850
Balance at Mar. 31, 2022							$ 1	171,932		(171,855)	78
Balance (in shares) at Mar. 31, 2022							10,136,733
Stock-based compensation								219			219
Exercise of stock options								92			92
Exercise of stock options (in shares)							21,442
Exercise of warrants								(151)			(151)
Exercise of warrants (in shares)							4,650
Proceeds from private placement							$ 1	76,392			76,393
Proceeds from private placement (in shares)							10,015,015
Shares issued pursuant to consulting agreement								38			38
Shares issued pursuant to consulting agreement (in shares)							9,300
Issuance of warrants pursuant to debt financing								178			178
Other								506			506
Net loss										(7,847)	(7,847)
Balance at Jun. 30, 2022							$ 2	249,206		(179,702)	69,506
Balance (in Shares) at Jun. 30, 2022							20,187,140
Stock-based compensation								2,223			2,223
Exercise of stock options								4			4
Exercise of stock options (in shares)							710
Proceeds from private placement								(23)			(23)
Net loss										(10,282)	(10,282)
Balance at Sep. 30, 2022							$ 2	251,410		(189,984)	61,428
Balance (in Shares) at Sep. 30, 2022							20,187,850
Retroactive application of reverse capitalization (Note 3)	$ (165,923)	$ 2	165,921			165,923
Retroactive application of reverse capitalization (Note 3) (in shares)	(35,694,179)	17,665,636
Balance at Dec. 31, 2022	$ 165,923		86,353	$ (8)	(199,734)	(113,389)	$ 2	252,274	$ (8)	(199,734)	52,534
Balance (in shares) at Dec. 31, 2022	35,694,179	2,522,214					20,187,850
Effect of Merger and recapitalization (refer to Note 3)							$ 1	54,301			54,302
Effect of Merger and recapitalization (refer to Note 3) (in shares)							11,422,741
Reclassification of Legacy Orchestra common stock warrants to stockholders' equity								2,373			2,373
Unrealized loss on marketable securities									(27)		(27)
Stock-based compensation								1,489			1,489
Exercise of stock options								10			10
Exercise of stock options (in shares)							2,325
Exercise of warrants								11			11
Exercise of warrants (in shares)							128,231
Net loss										(10,940)	(10,940)
Balance at Mar. 31, 2023							$ 3	310,458	(35)	(210,674)	99,752
Balance (in Shares) at Mar. 31, 2023							31,741,147
Balance at Dec. 31, 2022	$ 165,923		$ 86,353	$ (8)	$ (199,734)	$ (113,389)	$ 2	252,274	(8)	(199,734)	52,534
Balance (in shares) at Dec. 31, 2022	35,694,179	2,522,214					20,187,850
Unrealized loss on marketable securities											(69)
Net loss											(36,302)
Balance at Sep. 30, 2023							$ 4	315,765	(77)	(236,036)	79,656
Balance (in Shares) at Sep. 30, 2023							35,743,972
Balance at Mar. 31, 2023							$ 3	310,458	(35)	(210,674)	99,752
Balance (in shares) at Mar. 31, 2023							31,741,147
Issuance of shares in settlement of earnout							$ 1				1
Issuance of shares in settlement of earnout (in shares)							3,999,987
Unrealized loss on marketable securities									(61)		(61)
Stock-based compensation								1,707			1,707
Exercise of stock options								64			64
Exercise of stock options (in shares)							15,500
Exercise of warrants								22			22
Exercise of warrants (in shares)							32,279
Forfeiture of restricted stock awards (in shares)							(45,906)
Net loss										(12,046)	(12,046)
Balance at Jun. 30, 2023							$ 4	312,251	(96)	(222,720)	89,439
Balance (in Shares) at Jun. 30, 2023							35,743,007
Unrealized loss on marketable securities									19		19
Stock-based compensation								3,510			3,510
Exercise of stock options								4			4
Exercise of stock options (in shares)							965
Net loss										(13,316)	(13,316)
Balance at Sep. 30, 2023							$ 4	$ 315,765	$ (77)	$ (236,036)	$ 79,656
Balance (in Shares) at Sep. 30, 2023							35,743,972

Marketable Securities and Strategic Investments (Details) € in Millions	3 Months Ended				9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 12, 2023 shares	Dec. 31, 2022 USD ($)	May 31, 2022 EUR (€)
Marketable Securities and Strategic Investments
Recognized gains (loss)	$ 0	$ 0			$ (102,000)	$ 0
Investments fair value	362,000				362,000			$ 86,000
Strategic Investment Motus GI
Marketable Securities and Strategic Investments
Recognized gains (loss)	293,000	(327,000)			276,000	(707,000)
Number of shares exchanged for royalty certificates \| shares							701,522
Investments fair value	362,000				362,000			$ 86,000
Impairment charge	$ 0	$ 0			$ 0	$ 0
Strategic Investment Vivasure
Marketable Securities and Strategic Investments
Investments gain			$ 1,900,000
Impairment charge				$ 5,800,000
Haemonetics Corporation \| Strategic Investment Vivasure
Marketable Securities and Strategic Investments
Investments fair value \| €									€ 30

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
CURRENT ASSETS:
Cash and cash equivalents	$ 19,078	$ 19,784
Marketable securities	89,410	63,915
Strategic investments, current portion	362	86
Accounts receivable, net	86	96
Inventory	137	276
Prepaid expenses and other current assets	1,116	533
Total current assets	110,189	84,690
Property and equipment, net	1,355	1,489
Right-of-use assets	1,714	2,187
Strategic investments, less current portion	2,495	2,495
Deposits and other assets	604	4,711
TOTAL ASSETS	116,357	95,572
CURRENT LIABILITIES:
Accounts payable	3,150	3,968
Accrued expenses and other liabilities	4,301	5,376
Operating lease liability, current portion	747	697
Warrant liability		2,089
Deferred revenue, current portion	3,676	6,436
Loan payable, current portion	9,599
Total current liabilities	21,473	18,566
Deferred revenue, less current portion	13,845	13,103
Loan payable, less current portion		9,490
Operating lease liability, less current portion	1,117	1,683
Other long-term liabilities	266	196
TOTAL LIABILITIES	36,701	43,038
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value per share; 10,000,000 shares authorized; none issued or outstanding at September 30, 2023 and December 31, 2022.
Common stock, $0.0001 par value per share; 340,000,000 shares authorized; 35,743,972 and 20,187,850 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.	4	2
Additional paid-in capital	315,765	252,274
Accumulated other comprehensive loss	(77)	(8)
Accumulated deficit	(236,036)	(199,734)
TOTAL STOCKHOLDERS' EQUITY	79,656	52,534
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 116,357	$ 95,572

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2023

Net Loss Per Share

Schedule of calculation of diluted net loss per share


	Nine Months Ended
	September 30,
	2023	2022
Stock options	4,579,065	1,578,316
Company common stock warrants	1,934,258	1,328,237
Unvested restricted stock awards	1,740,221	168,108
Conversion option	416,667	—
Forfeitable shares	500,000	—
Earnout consideration	4,000,000	—
Total	13,170,211	3,074,661

Common and Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2023	Dec. 31, 2022
Common Stock
Common stock, shares authorized		340,000,000	340,000,000
Common stock, par value (in Dollars per share)		$ 0.0001	$ 0.0001
Preferred Stock
Preference shares, shares authorized		10,000,000	10,000,000
Preference shares, par value (in Dollars per share)		$ 0.0001	$ 0.0001
Preference shares, shares outstanding		0	0
Proceeds from private placement financing	$ 109,830
Maximum
Common Stock
Common stock, shares authorized		340,000,000
Legacy Orchestra
Preferred Stock
Preference shares, shares outstanding		35,694,179

Warrants - Private Warrants and Assumed Legacy Orchestra Warrants (Details) - $ / shares	Sep. 30, 2023	Jan. 26, 2023	Dec. 31, 2022
Warrants
Warrants	1,934,258		3,077,074
Exercise Price	$ 11.50
Legacy Orchestra Warrants
Warrants
Warrants			1,327,074
Legacy Orchestra Warrants \| Minimum
Warrants
Exercise Price	$ 0.50
Term	1 month 6 days
Legacy Orchestra Warrants \| Maximum
Warrants
Exercise Price	$ 14.00
Term	4 years 6 months
Equity-classified Warrants
Warrants
Warrants	1,934,258		1,750,000
Legacy Orchestra Warrants
Warrants
Warrants	509,258		250,000
Legacy Orchestra Warrants \| Minimum
Warrants
Exercise Price	$ 0.50
Term	1 month 6 days
Legacy Orchestra Warrants \| Maximum
Warrants
Exercise Price	$ 14.00
Term	8 years 9 months
Private Warrants Held by Sponsor
Warrants
Warrants	750,000	1,500,000	1,500,000
Exercise Price	$ 11.50
Term	5 years
Private Warrants Held by Sponsor \| Minimum
Warrants
Term	4 years 3 months 25 days
Private Warrants Held by Sponsor \| Maximum
Warrants
Term	4 years 6 months 25 days
Private Warrants Held by Employees
Warrants
Warrants	675,000
Exercise Price	$ 11.50
Term	4 years 3 months 25 days

Leases - Other (Details)				1 Months Ended	3 Months Ended		9 Months Ended
Leases - Other (Details)	May 31, 2022 USD ($)	Jan. 31, 2020 USD ($)	Nov. 30, 2019 USD ($) ft²	Jan. 31, 2019 USD ($) ft²	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)
Leases
Lease space \| ft²			5,200	8,052
Rent lease expense					$ 209,000	$ 198,000	$ 626,000	$ 552,000
Cash paid for operating lease liabilities							$ 669,000	$ 579,000
Minimum
Leases
Monthly rent expense	$ 7,000	$ 12,000	$ 28,000	$ 9,000
Maximum
Leases
Monthly rent expense	$ 23,000	$ 17,000	$ 30,000	$ 19,000

Financial Instruments and Fair Value Measurements - Schedules of liabilities for which fair value is determined by Level 3 (Details) - Warrant liability. - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023
Roll-forward of liabilities determined by Level 3 inputs
Balance - beginning			$ 2,089
Warrants exercised prior to the Business Combination			(10)
Change in fair value of warrants			294
Warrants reclassified to equity			(2,373)
Balance - ending

Business Combination and Recapitalization

9 Months Ended

Sep. 30, 2023

Business Combination and Recapitalization

Business Combination and Recapitalization

3. Business Combination and Recapitalization

On January 26, 2023, Legacy Orchestra and HSAC2 consummated the Business Combination, with Legacy Orchestra surviving as a wholly owned subsidiary of HSAC2. As part of the Business Combination, HSAC2 changed its name to Orchestra BioMed Holdings, Inc. Upon the closing of the Business Combination (the “Closing”), the Company’s certificate of incorporation provided for, among other things, a total number of authorized shares of capital stock of 350,000,000 shares, of which 340,000,000 shares were designated common stock, $0.0001 par value per share, and of which 10,000,000 shares were designated preferred stock, $0.0001 par value per share.

The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, HSAC2 is treated as the “acquired” company and Legacy Orchestra is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Orchestra issuing stock for the net assets of HSAC2, accompanied by a recapitalization. The net assets of HSAC2 are stated at historical cost, with no goodwill or intangible assets recorded.

In connection with the Business Combination, HSAC2 Holdings, LLC (the “Sponsor”) agreed that 25% or 1,000,000 shares of its shares of Company Common Stock will be forfeited to the Company (the “Forfeitable Shares”) on the first business day following the fifth anniversary of the Closing unless, as to 500,000 shares, the volume-weighted average price of the Company Common Stock is greater than or equal to $15.00 per share over any 20 trading days within any 30-trading day period (the “Initial Milestone Event”), and as to the remaining 500,000 shares, the volume-weighted average price of the Company Common Stock is greater than or equal to $20.00 per share over any 20 trading days within any 30-trading day period (the “Final Milestone Event”). Further, the Sponsor and HSAC2’s other initial shareholders prior to HSAC2’s initial public offering (the “HSAC2 IPO”) agreed to subject (i) the 4,000,000 shares of Company Common Stock issued to HSAC2’s initial shareholders prior to the HSAC2 IPO (the “Insider Shares”) and (ii) the 450,000 shares of Company Common Stock purchased in a private placement simultaneously with the HSAC2 IPO (the “Private Shares”) to a lock-up for up to 12 months following the Closing, and the Sponsor forfeited 50% of its 1,500,000 warrants in HSAC2 purchased upon consummation of the HSAC2 IPO (the “Private Warrants”), comprising 750,000 Private Warrants, for no consideration, immediately prior to the Closing (the “Sponsor Forfeiture”). Pursuant to

the terms of the Merger Agreement, immediately following the Sponsor Forfeiture and prior to the Closing, HSAC2 issued 750,000 warrants to purchase Company Common Stock to eleven specified employees and directors of Legacy Orchestra (the “Officer and Director Warrants”). The Officer and Director Warrants have substantially similar terms to the forfeited Private Warrants, except that 50% of the Officer and Director Warrants will become exercisable 24 months after the Closing and the remaining 50% will become exercisable 36 months after the Closing. On April 12, 2023, the Initial Milestone Event was achieved, and, as a result, 500,000 of the Forfeitable Shares are no longer subject to forfeiture.

In connection with the Business Combination, existing Legacy Orchestra stockholders also had the opportunity to elect to participate in an earnout (the “Earnout”) pursuant to which each such electing stockholder (an “Earnout Participant”) may receive a portion of additional contingent consideration of up to 8,000,000 shares of Company Common Stock in the aggregate (“Earnout Consideration”). Each Earnout Participant agreed to extend their applicable lock-up period from 6 months to 12 months after the Closing, pursuant to an Earnout Election Agreement and such Earnout Participants will collectively be entitled to receive: (i) 4,000,000 shares of the Earnout Consideration, in the aggregate, in the event that, from the time beginning immediately after the Closing until the fifth anniversary of the Closing Date (the “Earnout Period”), the Initial Milestone Event occurs; and (ii) an additional 4,000,000 shares of the Earnout Consideration, in the aggregate, in the event that, during the Earnout Period, the Final Milestone Event occurs. Approximately, 91% of Legacy Orchestra stockholders elected to participate in the Earnout. On April 12, 2023, the Initial Milestone Event was achieved, and each Earnout Participant was issued their Pro Rata Portion (as such term is defined in the Merger Agreement) of 4,000,000 shares of Company Common Stock, resulting in a total of 3,999,987 shares of Company Common Stock being issued (less than 4,000,000 due to rounding).

Simultaneously with the execution of the Merger Agreement, HSAC2 and Legacy Orchestra entered into separate forward purchase agreements (each, as amended, a “Forward Purchase Agreement” and, together, the “Forward Purchase Agreements”) with certain funds managed by RTW Investments, LP (the “RTW Funds”) and Covidien Group S.à.r.l., an affiliate of Medtronic plc (“Medtronic” and the RTW Funds, each a “Purchasing Party”), pursuant to which each of the Purchasing Parties agreed to purchase $10 million of ordinary shares of HSAC2 (“HSAC2 Ordinary Shares”) immediately prior to the Domestication (as defined below), less the dollar amount of HSAC2 Ordinary Shares holding redemption rights that the Purchasing Party acquired and held until immediately prior to the Domestication (such HSAC2 Ordinary Shares either purchased from HSAC2 or acquired and held until immediately prior to the Domestication, the “Forward Purchase Shares”). The RTW Funds completed their purchases of HSAC2 Ordinary Shares under their Forward Purchase Agreement on or before July 22, 2022. Medtronic completed approximately $9.9 million of purchases of HSAC2 Ordinary Shares under its Forward Purchase Agreement on or before January 20, 2023. Medtronic subsequently completed $0.1 million in purchases of HSAC2 Ordinary Shares and/or Company Common Stock on or before January 30, 2023.

Simultaneously with the execution of the Merger Agreement and Forward Purchase Agreements, HSAC2, Legacy Orchestra and the RTW Funds entered into a Backstop Agreement (the “Backstop Agreement”), pursuant to which the RTW Funds, jointly and severally, agreed to purchase such number of HSAC2 Ordinary Shares at a price of $10.00 per share to the extent that the amount of cash remaining in HSAC2’s working capital and trust account as of immediately prior to the closing of the Merger was less than $60 million (which calculation excludes amounts received pursuant to Medtronic’s Forward Purchase Agreement or are otherwise held in HSAC2’s trust account established pursuant to the HSAC2 IPO (the “HSAC2 Trust Account”) in respect of Medtronic’s Forward Purchase Shares, but is inclusive of amounts received pursuant to the RTW Funds’ Forward Purchase Agreement and otherwise held in the HSAC2 Trust Account in respect of the RTW Funds’ Forward Purchase Shares). Pursuant to the Backstop Agreement, the RTW Funds purchased 1,808,512 HSAC2 Ordinary Shares on January 25, 2023, immediately prior to the Domestication.

Immediately prior to the closing of the Business Combination, each issued and outstanding share of Legacy Orchestra preferred stock (the “Legacy Orchestra Preferred Stock”) was canceled and converted into shares of Legacy Orchestra common stock (the “Legacy Orchestra Common Stock”) based on predetermined ratios (see Note 9).

Upon the consummation of the Business Combination, each issued and outstanding share of Legacy Orchestra Common Stock was canceled and converted into the right to receive shares of Company Common Stock based upon the Exchange Ratio. The shares and corresponding capital amounts and loss per share related to Legacy Orchestra Common Stock prior to the Business Combination have been retroactively restated to reflect the Exchange Ratio.

Outstanding stock options, whether vested or unvested, to purchase shares of Legacy Orchestra Common Stock (“Legacy Orchestra Options”) granted under the Orchestra BioMed, Inc. 2018 Stock Incentive Plan (“2018 Plan”) (see Note 11) converted into stock options to purchase shares of Company Common Stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the Business Combination, after giving effect to the Exchange Ratio (the “Exchanged Options”).

The following table details the number of shares of Company Common Stock issued immediately following the consummation of the Business Combination:


		Number of
		Shares
Common stock of HSAC2, outstanding prior to the Business Combination		6,762,117
Less: Redemption of HSAC2 shares		(1,597,888)
Common stock held by former HSAC2 shareholders		5,164,229
HSAC2 sponsor shares		4,450,000
Shares issued related to Backstop Agreement		1,808,512
Total shares outstanding prior to issuance of merger consideration to Legacy Orchestra stockholders		11,422,741
Shares issued to Legacy Orchestra stockholders – Company Common Stock⁽¹⁾		20,191,338
Total shares of Company Common Stock immediately after Business Combination⁽²⁾		31,614,079

(1)

The number of shares of common stock issued to Legacy Orchestra equity holders was determined based on (i) 2,522,214 shares of Legacy Orchestra Common Stock outstanding immediately prior to the closing of the Business Combination converted based on the Exchange Ratio and (ii) 35,694,179 shares of Legacy Orchestra Preferred Stock outstanding immediately prior to the Closing, which pursuant to their terms converted into Legacy Orchestra Common Stock immediately prior to the Closing and then converted into Company Common Stock based on the Exchange Ratio. All fractional shares were rounded down.

(2)

Excludes 8,000,000 shares of Company Common Stock issued or to be issued based on satisfaction of the Initial Milestone Event and the Final Milestone Event. On April 12, 2023, the Initial Milestone Event was achieved, and each Earnout Participant was issued their Pro Rata Portion (as such term is defined in the Merger Agreement) of 4,000,000 shares of Company Common Stock, resulting in a total of 3,999,987 shares of Company Common Stock being issued (less than 4,000,000 due to rounding).

The following table reconciles the elements of the Business Combination to the Company’s condensed consolidated statement of changes in stockholders’ equity (deficit) (in thousands):


	Amount
Cash – HSAC2’s trust (net of redemption)	$	51,915
Cash – Backstop Agreement		18,085
Gross proceeds		70,000
Less: HSAC2 and Legacy Orchestra transaction costs paid		(15,698)
Effect of Business Combination, net of redemptions and transaction costs	$	54,302

The $54.3 million above differs from the $56.8 million effect of the Business Combination on the condensed consolidated statements of cash flows, due to $2.5 million of transaction costs paid by Legacy Orchestra in 2022.

Marketable Securities and Strategic Investments - Schedule of marketable securities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Marketable Securities
Amortized Cost Basis	$ 89,487	$ 63,923
Unrealized Gains	1	7
Unrealized Losses	(78)	(15)
Fair Value	89,410	63,915
Corporate debt securities
Marketable Securities
Amortized Cost Basis	25,625	52,242
Unrealized Gains		7
Unrealized Losses	(24)
Fair Value	25,601	52,249
Government debt securities
Marketable Securities
Amortized Cost Basis	63,862	11,681
Unrealized Gains	1
Unrealized Losses	(54)	(15)
Fair Value	$ 63,809	$ 11,666

Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements

6. Financial Instruments and Fair Value Measurements

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:


	September 30, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market fund (included in cash and cash equivalents)	$	13,618	$	—	$	—	$	13,618
Investment in Motus GI (see Note 7)		362		—		—		362
Marketable securities (Corporate and Government debt securities)		—		89,410		—		89,410
Total assets	$	13,980	$	89,410	$	—	$	103,390


	December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market fund (included in cash and cash equivalents)	$	8,708	$	—	$	—	$	8,708
Investment in Motus GI (see Note 7)		86		—		—		86
Marketable securities (Corporate and Government debt securities)		—		63,915		—		63,915
Total assets	$	8,794	$	63,915	$	—	$	72,709
Liabilities:
Warrant liability (see Note 10)	$	—	$	—	$	2,089	$	2,089
Total liabilities	$	—	$	—	$	2,089	$	2,089

The Level 2 assets consist of government and corporate debt securities which are valued using market observable inputs, including the current interest rate and other characteristics for similar types of investments, whose fair value may not represent actual transactions of identical securities. There were no transfers between Levels 1, 2 or 3 for the periods presented.

Prior to the closing of the Business Combination, the Company’s warrant liability was measured at fair value on a recurring basis using unobservable inputs and were classified as Level 3 inputs, and any change in fair value was recognized as change in fair value of warrant liability in the Company’s condensed consolidated statements of operations and comprehensive loss. As of the Closing Date, all Legacy Orchestra liability classified warrants were reclassified to equity. Refer to Note 10 for the valuation technique and assumptions used in estimating the fair value of the warrants and discussion on the change in classification.

The following table presents a roll-forward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs (in thousands):


	Warrant
	Liability
Balance—December 31, 2022	$	2,089
Warrants exercised prior to the Business Combination		(10)
Change in fair value of warrants		294
Warrants reclassified to equity		(2,373)
Balance—March 31, 2023		—
Balance—June 30, 2023		—
Balance—September 30, 2023	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Warrants (Tables)

9 Months Ended

Sep. 30, 2023

Warrants

Schedule of fair value of the outstanding warrant liability


	Period from
	January 1, 2023
	to January 26, 2023		September 30, 2022
Expected volatility	44 – 49	%	42 – 45	%
Risk-free interest rate	3.60 – 4.80	%	3.30 – 4.10	%
Remaining term in years	0.35 – 5.00		0.67 – 5.13
Exercise price of common warrants	$1.08 – $30.11		$1.08 – $30.11
Exercise price of Legacy preferred warrants	—		—
Common stock price	$10.63		$9.18
Legacy preferred stock price	—		—
Expected dividend yield	0	%	0	%

Schedule of warrant activity rollforward

The Company’s warrant liability related to Legacy Orchestra warrant activity rollforward is as follows, with the warrants having been converted to reflect the effect of the Merger:


	Preferred	Common
(in thousands, except share data)	Warrants	Warrants	Amount
Balance December 31, 2022	—	1,327,074	$	2,089
Warrants exercised prior to the business combination	—	(1,163)		(10)
Change in fair value of warrants as of January 26, 2023	—	—		294
Warrants reclassified to equity	—	(1,325,911)		(2,373)
Balance March 31, 2023	—	—		—
Balance June 30, 2023	—	—		—
Balance September 30, 2023	—	—	$	—


	Preferred	Common
(in thousands, except share data)	Warrants	Warrants	Amount
Balance December 31, 2021	206,997	1,189,162	$	635
Exercise of warrants	—	(68,587)		(156)
Change in the fair value of warrants	—	—		145
Balance March 31, 2022	206,997	1,120,575		624
Exercise of warrants	—	(4,650)		(15)
Forfeiture of warrants	—	(4,650)		(38)
Issuance of warrants related to Legacy Orchestra preferred stock financing	—	159,965		620
Amendments of existing warrants	(206,997)	206,997		810
Other	—	(150,000)		(335)
Change in the fair value of warrants	—	—		243
Balance June 30, 2022	—	1,328,237		1,909
Balance September 30, 2022	—	1,328,237	$	1,909

Schedule of purchase shares of Company Common Stock

The following table summarizes outstanding warrants to purchase shares of Company Common Stock as of September 30, 2023 and December 31, 2022:


	Number of Shares
	September 30,	December 31,	Exercise
	2023	2022	Price	Term
Liability-classified Warrants
Legacy Orchestra Warrants	—	1,327,074	$0.50 – $14.00	0.10 – 4.50

Equity-classified Warrants
Legacy Orchestra Warrants	509,258	250,000	$0.50 – $14.00	0.10 – 8.75
Private Warrants Held by Sponsor	750,000	1,500,000	$11.50	4.32 – 4.57
Private Warrants Held by Employees (Note 11)	675,000	—	$11.50	4.32
	1,934,258	1,750,000
Total Outstanding	1,934,258	3,077,074

Terumo Agreement - Deferred revenue (Details) - Collaborative Arrangement - Terumo - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Changes in the Company's deferred revenue balance
Deferred Revenue - Beginning balance	$ 19,539	$ 22,401
Revenue recognized	2,018	1,931
Deferred Revenue - Ending balance	$ 17,521	$ 20,470

Leases

9 Months Ended

Sep. 30, 2023

Leases

Leases

12. Leases

Office Lease

In January 2019, Legacy Orchestra entered into an additional addendum to the lease agreement for office space in New Hope, PA originally entered into in December 2009 (as amended, the “New Hope Lease”). The New Hope Lease covers 8,052 square feet and will expire in September 2024. Monthly fees will be between $9,000 and $19,000 for the period from commencement through expiration.

In November 2019, Legacy Orchestra entered into a new lease agreement for approximately 5,200 square feet of office space in New York, NY. The lease will expire in March 2028. Monthly fees will be between $28,000 and $30,000 for the period from commencement through expiration.

In January 2020, Legacy Orchestra entered into an agreement for the use of portions of the office space of Motus GI, a related party, in Fort Lauderdale, Florida. The agreement will expire in September 2024. The monthly fee commenced on the month following the date of agreement. Monthly fees will be between $12,000 and $17,000 for the period from commencement through expiration.

In May 2022, Legacy Orchestra amended the agreement with Motus GI for a larger portion of the office space and extended the expiration date to November 2024. Monthly fees will be between $7,000 and $23,000 for the period from commencement of the amendment to expiration. The amount paid is estimated to be proportionate to the percentage of space used by the Company applied to the monthly rent obligated to be paid by Motus GI to their landlord.

Operating cash flow supplemental information for the nine months ended September 30, 2023:

Cash paid for amounts included in the present value of operating lease liabilities was $669,000 during the nine months ended September 30, 2023 compared to $579,000 during the nine months ended September 30, 2022.


As of September 30, 2023:
Weighted average remaining lease term – operating leases, in years	3.60
Weighted average discount rate – operating leases	6.25	%

Operating Leases

Rent/lease expense for office and lab space was approximately $209,000 and $198,000, respectively, for the three months ended September 30, 2023 and 2022. Rent/lease expense for office and lab space was approximately $626,000 and $552,000 for the nine months ended September 30, 2023 and 2022, respectively. The table below shows the future minimum rental payments, exclusive of taxes, insurance, and other costs, under the leases as of September 30, 2023:


	Operating
	Leases
Year ending December 31:	(in thousands)
2023 (remaining three months)	$	208
2024		727
2025		352
2026		352
2027		352
Thereafter		88
Total future minimum lease payments	$	2,079
Imputed interest		(215)
Total liability	$	1,864

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Compensation

Schedule of cost related to stock-based compensation

Total stock-based compensation related to option issuances was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	391	$	101	$	1,206	$	192
Selling, general and administrative		610		2,092		1,979		2,199
Total stock-based compensation	$	1,001	$	2,193	$	3,185	$	2,391

Total stock-based compensation related to restricted stock awards and restricted stock units was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	643	$	—	$	643	$	—
Selling, general and administrative		1,595		30		2,142		121
Total stock-based compensation	$	2,238	$	30	$	2,785	$	121

Total stock-based compensation related to warrants was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Research and development	$	120	$	—	$	328	$	—
Selling, general and administrative		150		—		408		—
Total stock-based compensation	$	270	$	—	$	736	$	—

Schedule of stock option activity


		Weighted	Weighted	Aggregate
	Shares	Average	Average	Intrinsic
	Underlying	Exercise	Remaining	Value
	Options	Price	Term (years)	(in thousands)
Outstanding at January 1, 2023	7,868,448	3.51	8.35		—
Retroactive application of Reverse Recapitalization (Note 3)	(4,209,620)	4.05	—		—
Outstanding at January 1, 2023, effect of Merger	3,658,828	7.56	8.35		—
Granted	1,080,875	8.19	—		—
Exercised	(18,790)	4.17	—		—
Forfeited/canceled	(141,848)	9.22	—		—
Outstanding September 30, 2023	4,579,065	7.72	8.03	$	7,495
Exercisable at September 30, 2023	2,432,159	6.90	6.97	$	5,794

Schedule of restricted stock activity



		Restricted Stock
		Awards/Units
		Outstanding
Outstanding January 1, 2023		158,589
Granted		1,695,222
Vested		(67,689)
Forfeited/canceled		(45,901)
Outstanding September 30, 2023		1,740,221

Schedule of estimated grant-date fair value calculated using Black-Scholes option pricing model


	Nine Months Ended September 30,
	2023			2022
Expected term (in years)		6.09			6.00
Expected volatility		46	%		49	%
Risk-free interest rate		3.86	%		2.96	%
Expected dividend yield		0	%		0	%
Fair value of common stock	$	8.19		$	8.58

Financial Instruments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Financial Instruments and Fair Value Measurements

Schedule of financial assets and liabilities measured at fair value


	September 30, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market fund (included in cash and cash equivalents)	$	13,618	$	—	$	—	$	13,618
Investment in Motus GI (see Note 7)		362		—		—		362
Marketable securities (Corporate and Government debt securities)		—		89,410		—		89,410
Total assets	$	13,980	$	89,410	$	—	$	103,390


	December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market fund (included in cash and cash equivalents)	$	8,708	$	—	$	—	$	8,708
Investment in Motus GI (see Note 7)		86		—		—		86
Marketable securities (Corporate and Government debt securities)		—		63,915		—		63,915
Total assets	$	8,794	$	63,915	$	—	$	72,709
Liabilities:
Warrant liability (see Note 10)	$	—	$	—	$	2,089	$	2,089
Total liabilities	$	—	$	—	$	2,089	$	2,089

Schedule of liabilities for which fair value is determined by Level 3

The following table presents a roll-forward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs (in thousands):


	Warrant
	Liability
Balance—December 31, 2022	$	2,089
Warrants exercised prior to the Business Combination		(10)
Change in fair value of warrants		294
Warrants reclassified to equity		(2,373)
Balance—March 31, 2023		—
Balance—June 30, 2023		—
Balance—September 30, 2023	$	—

Debt Financing (Tables)

9 Months Ended

Sep. 30, 2023

Debt Financing

Schedule of amount of principal payments


	Principal
	Payments
Period ending September 30:	(in thousands)
2023 (remaining three months)	$	—
2024		2,500
2025		5,000
2026		2,500
Total	$	10,000

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets (Unaudited)
Preference shares, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Preference shares, shares authorized	10,000,000	10,000,000
Preference shares, shares issued	0	0
Preference shares, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	340,000,000	340,000,000
Common stock, shares issued	35,743,972	20,187,850
Common stock, shares outstanding	35,743,972	20,187,850

Business Combination and Recapitalization (Tables)

9 Months Ended

Sep. 30, 2023

Business Combination and Recapitalization

Schedule of common stock following the consummation of business combination

The following table details the number of shares of Company Common Stock issued immediately following the consummation of the Business Combination:


		Number of
		Shares
Common stock of HSAC2, outstanding prior to the Business Combination		6,762,117
Less: Redemption of HSAC2 shares		(1,597,888)
Common stock held by former HSAC2 shareholders		5,164,229
HSAC2 sponsor shares		4,450,000
Shares issued related to Backstop Agreement		1,808,512
Total shares outstanding prior to issuance of merger consideration to Legacy Orchestra stockholders		11,422,741
Shares issued to Legacy Orchestra stockholders – Company Common Stock⁽¹⁾		20,191,338
Total shares of Company Common Stock immediately after Business Combination⁽²⁾		31,614,079

(1)

(2)

Schedule of reconciliation of business combination to statement of changes in stockholders equity

The following table reconciles the elements of the Business Combination to the Company’s condensed consolidated statement of changes in stockholders’ equity (deficit) (in thousands):


	Amount
Cash – HSAC2’s trust (net of redemption)	$	51,915
Cash – Backstop Agreement		18,085
Gross proceeds		70,000
Less: HSAC2 and Legacy Orchestra transaction costs paid		(15,698)
Effect of Business Combination, net of redemptions and transaction costs	$	54,302

Leases - Schedule of future minimum rental payments, exclusive of taxes, insurance and other costs, under the leases (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Operating Lease Maturity
2023 (remaining three months)	$ 208
2024	727
2025	352
2026	352
2027	352
Thereafter	88
Total future minimum lease payments	2,079
Imputed interest	(215)
Total liability	$ 1,864

Organization and Basis of Presentation (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Organization and Basis of Presentation
Accumulated deficit	$ (236,036)	$ (199,734)
Business Combination
Organization and Basis of Presentation
Accumulated deficit	$ 236,000

- Definition

Amount of accumulated undistributed earnings (deficit).

+ References + Details

Net Loss Per Share

9 Months Ended

Sep. 30, 2023

Net Loss Per Share

Net Loss Per Share

15. Net Loss Per Share

Basic net loss per share of Company Common Stock is computed by dividing net loss by the weighted-average number of shares of Company Common Stock. Shares of Company Common Stock outstanding but subject to forfeiture and cancellation by the Company (e.g., the Forfeitable Shares – see Note 3) are excluded from the weighted-average number of shares until the period in which such shares are no longer subject to forfeiture.

As discussed in Note 3, in connection with the Business Combination, existing Legacy Orchestra stockholders had the opportunity to elect to participate in the Earnout pursuant to which each such Earnout Participant may receive a portion of additional contingent consideration of up to 8,000,000 shares of Earnout Consideration. On April 12, 2023, the Initial Milestone Event was achieved, and each Earnout Participant was issued their Pro Rata Portion (as such term is defined in the Merger Agreement) of 4,000,000 shares of Company Common Stock, resulting in a total of 3,999,987 shares of Company Common Stock being issued (less than 4,000,000 due to rounding). Additionally, 500,000 of the Forfeitable Shares are no longer subject to forfeiture as a result of the Initial Milestone Event.

Diluted net loss per share of Company Common Stock includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, Legacy Orchestra Warrants and Private Warrants, and Forfeitable Shares and Earnout Consideration, which would result in the issuance of incremental shares of Company Common Stock, unless their effect would be anti-dilutive.

The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share for the three and nine months ended September 30, 2023 and September 30, 2022, as their effect is anti-dilutive:


	Nine Months Ended
	September 30,
	2023	2022
Stock options	4,579,065	1,578,316
Company common stock warrants	1,934,258	1,328,237
Unvested restricted stock awards	1,740,221	168,108
Conversion option	416,667	—
Forfeitable shares	500,000	—
Earnout consideration	4,000,000	—
Total	13,170,211	3,074,661

Terumo Agreement - Remaining performance obligation (Details) $ in Millions	Sep. 30, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01
Terumo Agreement
Revenue remaining performance obligation amount	$ 13.8
Remaining performance obligation recognition period	24 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01
Terumo Agreement
Revenue remaining performance obligation amount	$ 3.7
Remaining performance obligation recognition period	12 months

Terumo Agreement (Tables)

9 Months Ended

Sep. 30, 2023

Terumo Agreement.

Schedule of deferred revenue


Deferred Revenue – December 31, 2022 (in thousands)	$	19,539
Revenue recognized		(2,018)
Deferred Revenue – September 30, 2023	$	17,521


Deferred Revenue – December 31, 2021	$	22,401
Revenue recognized		(1,931)
Deferred Revenue – September 30, 2022	$	20,470

Debt Financing - Other (Details)	1 Months Ended	3 Months Ended		9 Months Ended
Debt Financing - Other (Details)	Jun. 30, 2022 USD ($) tranche $ / shares shares	Sep. 30, 2023 USD ($) shares	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) shares	Sep. 30, 2022 USD ($)	Dec. 31, 2022 shares
Debt Financing
Outstanding principal amount of the loans converted into common stock					$ 178,000
Warrants outstanding (in shares) \| shares		1,934,258		1,934,258		3,077,074
Loss on extinguishment					(682,000)
Interest expense		$ 469,000	$ 387,000	$ 1,400,000	$ 880,000
Fund I and II warrants
Debt Financing
Opportunities Fund I and II warrants	$ 100,000
Estimated fair value of the warrants	178,000
Other financing cost	405,000
2022 Loan and Security Agreement
Debt Financing
Term loan	$ 20,000,000
Number of tranches \| tranche	2
Outstanding principal amount of the loans converted into common stock	$ 5,000,000
Conversion price \| $ / shares	$ 12.00
Conversion option not exercisable term	6 months
Interest rate		15.00%		15.00%
Repayment terms of the loan	4 years
Repayment of interest only term	2 years
Repayment of principal	$ 417,000
Repayment of principal and interest	$ 417,000
Percentage of initial commitment amount	4.25%
Initial commitment amount	$ 20,000,000
2022 Loan and Security Agreement \| Prime rate
Debt Financing
Interest rate variable (as a percent)	6.45%
Tranche One
Debt Financing
Term loan	$ 10,000,000
Tranche Two
Debt Financing
Term loan	10,000,000
Tranche Three
Debt Financing
Term loan	30,000,000
2019 Loan and Security Agreement
Debt Financing
Estimated fair value of the warrants	$ 544,000
Warrants outstanding (in shares) \| shares	0
Loss on extinguishment	$ 682,000
Percentage of amount drawn	2.00%
Share price \| $ / shares	$ 1.33
Warrants Issued	$ 150,000
Percentage of original aggregate principal amount	8.25%
2019 Loan and Security Agreement \| Maximum
Debt Financing
Interest rate stated (as a percent)	6.25%
2019 Loan and Security Agreement \| Prime rate \| Maximum
Debt Financing
Interest rate variable (as a percent)	1.00%

Common and Preferred Stock

9 Months Ended

Sep. 30, 2023

Common and Preferred Stock

Common and Preferred Stock

9. Common and Preferred Stock

Common Stock

The Company is authorized to issue up to 340,000,000 shares of Company Common Stock, par value $0.0001 per share.

As discussed in Note 3, the Company has retroactively adjusted the shares issued and outstanding prior to January 26, 2023 to give effect to the Exchange Ratio to determine the number of shares of Company Common Stock into which they were converted.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share. The board of directors of the Company (the “Board”) has the authority to issue preferred stock and to determine the rights, privileges, preferences, restrictions, and voting rights of those shares. As of September 30, 2023, no shares of preferred stock were outstanding.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 13
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

Debt Financing

9 Months Ended

Sep. 30, 2023

Debt Financing

Debt Financing

14. Debt Financing

In June 2022, Legacy Orchestra entered into a Loan and Security Agreement with Avenue Venture Opportunities Fund I and II (the “2022 Loan and Security Agreement”). The terms of the 2022 Loan and Security Agreement include a term loan of up to $20 million available in two tranches with the first tranche of $10 million that was drawn at closing in June of 2022, and a second tranche of $10 million available at closing of the Legacy Orchestra Series D-2 Preferred Stock financing was not drawn. Additionally, the Company may have access to a third tranche of $30 million subject to certain financing milestones. The term loan matures on June 1, 2026. In addition, the lender has the right, at its discretion, but not the obligation, to convert any portion of the outstanding principal amount of the loans up to $5 million into shares of Company Common Stock at a price per share equal to $12.00 (the “Conversion Option”), subject to adjustment; provided, however, the Conversion Option shall not be exercised by lender during the six (6) month period after completion of the Business Combination.

Pursuant to the terms of the 2022 Loan and Security Agreement, Legacy Orchestra issued Avenue Venture Opportunities Fund I and II warrants that will be exercisable for 100,000 shares of Company Common Stock, and the estimated fair value of the warrants of $178,000 was recorded as debt discount on the date of issuance and is being

amortized to interest expense over the term of the 2022 Loan and Security Agreement. In addition, other financing costs totaling $405,000 were also recorded as debt discount and is being amortized to interest expense over the term of the facility.

The term loan accrues interest at a floating per annum rate equal to the Wall Street Journal prime rate plus 6.45%. The rate in effect at September 30, 2023 was 15.0%. The repayment terms of the loan include monthly payments over a 4-year period, consisting of an initial 2-year interest-only period, followed by 24 monthly principal payments of $417,000 plus interest. In addition, there is a final payment equal to 4.25% of the initial commitment amount of $20 million, which will be accrued over the term of the loan using the effective-interest method.

Concurrent with the closing of the 2022 Loan and Security Agreement, Legacy Orchestra terminated and repaid an existing 2019 Loan and Security Agreement with Silicon Valley Bank (the “2019 Loan and Security Agreement”), which resulted in a loss on extinguishment of $682,000. Pursuant to the terms of the 2019 Loan and Security Agreement, Legacy Orchestra issued Silicon Valley Bank a warrant that, to the extent Legacy Orchestra made draws on the 2019 Loan and Security Agreement, was exercisable for a number of shares of Legacy Orchestra Common Stock equal to 2% of the amount drawn divided by the exercise price of $1.33 per share of Legacy Orchestra Common Stock. As a result of the draw in December of 2020, Legacy Orchestra issued 150,000 Legacy Orchestra Common Stock warrants to Silicon Valley Bank, and the estimated fair value of the warrants of $544,000 was recorded as debt discount on the date of issuance and was being amortized to interest expense over the term of the credit facility. These warrants have been exercised and are no longer outstanding.

The term loan accrued interest at a floating per annum rate equal to the greater of (i) the Wall Street Journal prime rate plus 1.00% or (ii) 6.25%. In addition, there was a final payment equal to 8.25% of the original aggregate principal amount which accrued over the term of the loan using the effective-interest method.

Total interest expense recorded on these facilities during the three months ended September 30, 2023 and September 30, 2022 was approximately $469,000 and $387,000, respectively. Total interest expense recorded on these facilities during the nine months ended September 30, 2023 and September 30, 2022 was approximately $1.4 million and $880,000, respectively.

The following table shows the amount of principal payments due pursuant to the term loan under the 2022 Loan and Security Agreement by year:


	Principal
	Payments
Period ending September 30:	(in thousands)
2023 (remaining three months)	$	—
2024		2,500
2025		5,000
2026		2,500
Total	$	10,000

The term loan under the 2022 Loan and Security Agreement is secured by all of the Company’s assets, excluding intellectual property and certain other assets. The loan contains customary affirmative and restrictive covenants, including the Company’s ability to enter into fundamental transactions, incur additional indebtedness, grant liens, pay any dividend or make any distributions to its holders, make investments, merge or consolidate with any other person or engage in transactions with the Company’s affiliates, but does not include any financial covenants. On October 6, 2023, the 2022 Loan and Security Agreement was repaid in full and terminated. Refer to Note 16, Subsequent Events.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Stock-Based Compensation - Weighted Average Assumptions (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2023 USD ($) shares	Sep. 30, 2023 USD ($) employee shares	Jan. 26, 2023 USD ($) Y $ / shares	Dec. 31, 2022 USD ($) shares	Sep. 30, 2022 Y $ / shares
Stock-Based Compensation
Warrant liability, Fair value \| $			$ 2,400,000	$ 2,100,000
Warrants outstanding (in shares)	1,934,258	1,934,258		3,077,074
Remaining Term (in Years) \| Minimum
Stock-Based Compensation
Warrants, measurement input \| Y			0.35		0.67
Remaining Term (in Years) \| Maximum
Stock-Based Compensation
Warrants, measurement input \| Y			5.00		5.13
Expected volatility \| Minimum
Stock-Based Compensation
Warrants, measurement input			0.44		0.42
Expected volatility \| Maximum
Stock-Based Compensation
Warrants, measurement input			0.49		0.45
Risk-free interest rate \| Minimum
Stock-Based Compensation
Warrants, measurement input			0.0360		0.0330
Risk-free interest rate \| Maximum
Stock-Based Compensation
Warrants, measurement input			0.0480		0.0410
Expected dividend yield
Stock-Based Compensation
Warrants, measurement input			0		0
Fair value of common stock
Stock-Based Compensation
Warrants, measurement input \| $ / shares			10.63		9.18
Legacy Orchestra Warrants \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Number of warrants to be issued	750,000	750,000
Number of warrants forfeited	75,000	75,000
Warrants outstanding (in shares)	675,000	675,000
Number of employees and directors, warrants issued \| employee		11
Legacy Orchestra Warrants \| Restricted Stock \| Exercisable 24 months after the Closing \| 2023 Plan
Stock-Based Compensation
Warrants exercisable (as a percent)		50.00%
Warrants exercisable term		24 months
Legacy Orchestra Warrants \| Restricted Stock \| Exercisable 36 months after the Closing \| 2023 Plan
Stock-Based Compensation
Warrants exercisable (as a percent)		50.00%
Warrants exercisable term		36 months
Legacy Orchestra Warrants \| Remaining Term (in Years) \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Warrants, measurement input	5.00	5.00
Legacy Orchestra Warrants \| Expected volatility \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Warrants, measurement input	50	50
Legacy Orchestra Warrants \| Risk-free interest rate \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Warrants, measurement input	3.54	3.54
Legacy Orchestra Warrants \| Expected dividend yield \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Warrants, measurement input	0	0
Legacy Orchestra Warrants \| Fair value of common stock \| Restricted Stock \| 2023 Plan
Stock-Based Compensation
Warrant liability, Fair value \| $	$ 10.63	$ 10.63

Terumo Agreement - Other narratives (Details) - Collaborative Arrangement - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Terumo Agreement
Estimated total costs increase (decrease) percentage				10.00%
Terumo
Terumo Agreement
Cost incurred	$ 3,400,000	$ 4,000,000.0	$ 11,700,000	$ 10,600,000
Estimated total costs increase (decrease) percentage			7.00%
Increase (decrease) in revenue from change in estimate	$ 558,000	$ 10,000	$ 882,000	$ 956,000
Collaborative Arrangement, Change in Estimate, Increase (Decrease) in Earnings Per Share , Basic	$ 0.02	$ 0	$ 0.03	$ 0.03
Collaborative Arrangement, Change in Estimate, Increase (Decrease) in Earnings Per Share	$ 0.02	$ 0	$ 0.07	$ 0.07

Terumo Agreement

9 Months Ended

Sep. 30, 2023

Terumo Agreement.

Terumo Agreement

4. Terumo Agreement

In June 2019, Legacy Orchestra entered into the Terumo Agreement, pursuant to which Terumo secured global commercialization rights for Virtue SAB in coronary and peripheral vascular indications (the “Terumo Indications”). Under the Terumo Agreement, Legacy Orchestra received an upfront payment of $30 million and an equity commitment of up to $5 million of which $2.5 million was invested in June 2019 as part of the Legacy Orchestra Series B-1 financing and $2.5 million was invested in June 2022 as part of the Legacy Orchestra Series D-2 financing. The Company was initially eligible to receive up to $65 million in additional payments based on the achievement of certain development and regulatory milestones and is also eligible to earn royalties on future sales by Terumo based on royalty rates ranging from 10 – 15%. Of these milestone payments, $35 million relate to achieving certain milestones by specified target achievement dates. As of the issuance date of these financial statements, the target achievement date for two $5 million milestone payments has already passed. In addition, due to delays in the Company’s Virtue SAB program resulting from the COVID-19 pandemic, supply chain issues and unexpected changes to regulatory requirements, including increased testing and other activities related to chemistry, manufacturing, and control, increased nonclinical and good laboratory practice

preclinical data requirements, including biocompatibility, as well as a requirement to repeat good laboratory practice preclinical studies already performed based on changes to source of component materials and a change in manufacturing site, the Company is unlikely to be able to complete the remaining time-based milestones by the specified target achievement dates to earn the remaining $25 million in time-based milestone payments pursuant to the Terumo Agreement.

As previously disclosed, the Company and Terumo have been negotiating for mutually agreeable adjustments to its current agreement with the purpose of restructuring milestone payments as well as making other potential material modifications to that agreement including additional financial commitments by Terumo to Orchestra and the Virtue SAB program. The Company has delayed initiation of its Virtue ISR-US pivotal study, for which it secured conditional IDE approval from the FDA on August 8, 2023, until such time as the Company restructures its partnership agreement with Terumo in a manner that provides the Company with a satisfactory amount of additional capital, whether from milestone payments or other financial arrangements. Initiation of the Virtue ISR-US pivotal study is currently targeted for 2024 pending ongoing negotiations with Terumo. If negotiations are not completed to the Company’s satisfaction or to the satisfaction of Terumo, clinical study, product development, and commercialization plans for Virtue SAB may continue to be adversely impacted.

Pursuant to the terms of the Terumo Agreement, Legacy Orchestra licensed intellectual property rights to Terumo and the Company is primarily responsible for completing the development of the product in the United States through premarket approval by the FDA for the ISR indication. These research and development services to be provided by the Company include (i) manufacturing, testing and packaging the drug required for the clinical trials, (ii) supplying Terumo with information related to the design and manufacture of the delivery device and the technology transfer needed for Terumo to ultimately commence manufacture of the delivery device, and (iii) carrying out regulatory activities related to clinical trials in the United States for the ISR indication.

The Company has concluded that the license granted to Terumo is not distinct from the research and development services that will be provided to Terumo through the completion of the development of ISR indication, as Terumo cannot obtain the benefit of the license without the related research and development services. Accordingly, the Company will recognize revenues for this combined performance obligation over the estimated period of research and development services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total estimated costs of the research and development services.

In 2019, Legacy Orchestra received a total of $32.5 million from Terumo related to the stock purchase and the revenue generating elements of the Terumo Agreement. The Company recorded the estimated fair value of the shares of $2.5 million in stockholders’ equity, as the value paid by Terumo is consistent with the value paid by other third-party stockholders in Legacy Orchestra’s offering of its Series B-1 Preferred Stock. The Company allocated the remaining $30 million to the transaction price of the Terumo Agreement. The Company considers the future potential development and regulatory milestones to be variable consideration, which are fully constrained from the transaction price as of September 30, 2023 and December 31, 2022, as the achievement of such milestone payments are uncertain and highly susceptible to factors outside of the Company’s control. The Company plans to re-evaluate the transaction price at each reporting period and as uncertain events are resolved or other changes in circumstances occur. In addition, the arrangement also includes sales-based royalties on product sales by Terumo subsequent to commercialization ranging from 10 - 15%, none of which have been recognized to date.

The Company recorded the $30 million upfront payment received from Terumo in 2019 within deferred revenue. The following table presents the changes in the Company’s deferred revenue balance from the Terumo Agreement during the nine months ended September 30, 2023 and 2022:


Deferred Revenue – December 31, 2022 (in thousands)	$	19,539
Revenue recognized		(2,018)
Deferred Revenue – September 30, 2023	$	17,521


Deferred Revenue – December 31, 2021	$	22,401
Revenue recognized		(1,931)
Deferred Revenue – September 30, 2022	$	20,470

The Company’s balance of deferred revenue contains the transaction price from the Terumo Agreement allocated to the combined license and research and development performance obligation, which was partially unsatisfied as of September 30, 2023. The Company expects to recognize approximately $3.7 million of its deferred revenue during the next twelve months and recognize the remaining approximately $13.8 million through the remainder of the performance period, which is currently estimated to be completed in 2028 and may be impacted by the actual clinical and regulatory timelines of the program.

As of each quarterly reporting date, the Company evaluates its estimates of the total costs expected to be incurred through the completion of the combined performance obligation and updates its estimates as necessary. For the three months ended September 30, 2023 and 2022, the expenses incurred related to the Terumo Agreement were approximately $3.4 million and $4.0 million, respectively. For the nine months ended September 30, 2023 and 2022, the expenses incurred related to the Terumo Agreement were approximately $11.7 million and $10.6 million, respectively. The estimated total costs associated with the Terumo Agreement through completion increased by approximately 7% as of September 30, 2023, as compared to the estimates as of December 31, 2022, and increased by approximately 10% as of September 30, 2022, as compared to the estimates as of December 31, 2021. While the Company believes it has estimated total costs associated with the Terumo Agreement through completion, these estimates encompass a broad range of expenses over a multi-year period and, as such, are subject to periodic changes as new information becomes available. The impact of the changes in estimates resulted in a reduction of partnership revenues of $558,000 and $10,000 for the three months ended September 30, 2023 and 2022, respectively, as compared to the amounts that would have been recorded based on the previous estimates. The impact of the changes in estimates resulted in a reduction of partnership revenues of $882,000 and $956,000 for the nine months ended September 30, 2023 and 2022, respectively, as compared to the amounts that would have been recorded based on the previous estimates. The impact of these changes in estimates on the net loss per share, basic and diluted, for the three months ended September 30, 2023 was an increase of $0.02 and no impact for the three months ended September 30, 2022. The impact of these changes in estimates on the net loss per share, basic and diluted, for the nine months ended September 30, 2023 and 2022 was an increase of $0.03 and $0.07, respectively.

The Company will also manufacture, or have manufactured, SirolimusEFR and has exclusive rights to sell it on a per unit basis to Terumo for use in the Virtue SAB product. The Company has determined that this promise does not contain a material right as the pricing is based on standalone selling prices. Through September 30, 2023, there have been no additional amounts recognized as revenue under the Terumo Agreement other than the recognition of a portion of the upfront payment described above.

Business Combination and Recapitalization - Other (Details) $ / shares in Units, $ in Millions	Apr. 12, 2023 shares	Jan. 30, 2023 USD ($)	Jan. 26, 2023 USD ($) D employee $ / shares shares	Jan. 25, 2023 shares	Jan. 20, 2023 USD ($)	Jul. 04, 2022 USD ($) $ / shares	Sep. 30, 2023 $ / shares shares	Dec. 31, 2022 $ / shares shares
Business Combination and Recapitalization
Common stock, shares authorized							340,000,000	340,000,000
Common stock, par value (in Dollars per share) \| $ / shares							$ 0.0001	$ 0.0001
Preference shares, shares authorized							10,000,000	10,000,000
Preference shares, par value (in Dollars per share) \| $ / shares							$ 0.0001	$ 0.0001
Warrants outstanding (in shares)							1,934,258	3,077,074
Maximum
Business Combination and Recapitalization
Common stock, shares authorized							340,000,000
HSAC 2 Holdings, LLC
Business Combination and Recapitalization
Sponsor share forfeiture (as percent)			25.00%
Number of shares forfeiture by sponsor			1,000,000
Insider shares subject to lock up period			4,000,000
Private shares subject to lock up period			450,000
Share lock up period			12 months
Number of warrants issued			750,000
Number of employees and directors, warrants issued \| employee			11
Number of shares issuable as earnout consideration	500,000
HSAC 2 Holdings, LLC \| Private warrants
Business Combination and Recapitalization
Sponsor warrant forfeiture (as percent)			50.00%
Warrants outstanding (in shares)			1,500,000
Number of warrants forfeiture by sponsor			750,000
Consideration for forfeiture of warrants \| $			$ 0.0
HSAC 2 Holdings, LLC \| Initial milestone event
Business Combination and Recapitalization
Number of shares forfeiture by sponsor			500,000
Sponsor share forfeiture, stock price trigger \| $ / shares			$ 15.00
Sponsor share forfeiture, threshold trading days \| D			20
Sponsor share forfeiture, threshold consecutive trading days \| D			30
HSAC 2 Holdings, LLC \| Final milestone event
Business Combination and Recapitalization
Number of shares forfeiture by sponsor			500,000
Sponsor share forfeiture, stock price trigger \| $ / shares			$ 20.00
Sponsor share forfeiture, threshold trading days \| D			20
Sponsor share forfeiture, threshold consecutive trading days \| D			30
HSAC 2 Holdings, LLC \| Exercisable 24 months after the Closing
Business Combination and Recapitalization
Warrants exercisable term			24 months
HSAC 2 Holdings, LLC \| Exercisable 36 months after the Closing
Business Combination and Recapitalization
Warrants exercisable (as a percent)			50.00%
Warrants exercisable term			36 months
HSAC2
Business Combination and Recapitalization
Insider shares subject to lock up period			4,000,000
Private shares subject to lock up period			450,000
Share lock up period			12 months
Number of warrants issued			750,000
Number of employees and directors, warrants issued \| employee			11
Percent of shareholders elected to participate in earnout			91.00%
HSAC2 \| RTW Funds and Covidien Group \| Forward purchase agreement
Business Combination and Recapitalization
Aggregate amount of shares to be issued \| $						$ 10.0
HSAC2 \| Medtronic \| Forward purchase agreement
Business Combination and Recapitalization
Value of shares issued \| $		$ 0.1			$ 9.9
HSAC2 \| RTW Funds \| Backstop agreement
Business Combination and Recapitalization
Share issue price (in dollars per share) \| $ / shares						$ 10.00
Threshold remaining working capital and trust account for share issue \| $						$ 60.0
Shares issued (in shares)				1,808,512
HSAC2 \| Minimum
Business Combination and Recapitalization
Share lock up period			6 months
HSAC2 \| Maximum
Business Combination and Recapitalization
Share lock up period			12 months
Number of shares issuable as earnout consideration			8,000,000
HSAC2 \| Initial milestone event
Business Combination and Recapitalization
Number of shares issuable as earnout consideration	4,000,000		4,000,000
Number of shares issuable as earnout consideration due to rounding	3,999,987
HSAC2 \| Initial milestone event \| Maximum
Business Combination and Recapitalization
Number of shares issuable as earnout consideration	4,000,000
HSAC2 \| Final milestone event
Business Combination and Recapitalization
Number of shares issuable as earnout consideration			4,000,000
HSAC2 \| Exercisable 24 months after the Closing
Business Combination and Recapitalization
Warrants exercisable (as a percent)			50.00%
Warrants exercisable term			24 months
HSAC2 \| Exercisable 36 months after the Closing
Business Combination and Recapitalization
Warrants exercisable (as a percent)			50.00%
Warrants exercisable term			36 months
HSAC2
Business Combination and Recapitalization
Shares authorized (in shares)			350,000,000
Common stock, shares authorized			340,000,000
Common stock, par value (in Dollars per share) \| $ / shares			$ 0.0001
Preference shares, shares authorized			10,000,000
Preference shares, par value (in Dollars per share) \| $ / shares			$ 0.0001
Goodwill \| $			$ 0.0
Intangible assets \| $			$ 0.0

Warrants - Valuation models for Warrants (Details) $ in Millions	Jan. 26, 2023 USD ($) Y $ / shares	Dec. 31, 2022 USD ($)	Sep. 30, 2022 Y $ / shares
Warrants
Warrant liability, Fair value \| $	$ 2.4	$ 2.1
Expected volatility \| Minimum
Warrants
Warrants, measurement input	0.44		0.42
Expected volatility \| Maximum
Warrants
Warrants, measurement input	0.49		0.45
Risk-free interest rate \| Minimum
Warrants
Warrants, measurement input	0.0360		0.0330
Risk-free interest rate \| Maximum
Warrants
Warrants, measurement input	0.0480		0.0410
Remaining Term (in Years) \| Minimum
Warrants
Warrants, measurement input \| Y	0.35		0.67
Remaining Term (in Years) \| Maximum
Warrants
Warrants, measurement input \| Y	5.00		5.13
Stock price
Warrants
Warrants, measurement input	10.63		9.18
Expected dividend yield
Warrants
Warrants, measurement input	0		0
Commons Warrants \| Exercise price \| Minimum
Warrants
Warrants, measurement input	1.08		1.08
Commons Warrants \| Exercise price \| Maximum
Warrants
Warrants, measurement input	30.11		30.11

Document And Entity Information - shares	9 Months Ended
Document And Entity Information - shares	Sep. 30, 2023	Nov. 10, 2023
Document And Entity Information Abstract
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Fiscal Year Focus	2023
Document Transition Report	false
Entity File Number	001-39421
Entity Registrant Name	Orchestra BioMed Holdings, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	92-2038755
Entity Address, Address Line One	150 Union Square Drive
Entity Address, City or Town	New Hope
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18938
City Area Code	215
Local Phone Number	862-5797
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	OBIO
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		35,743,972
Entity Central Index Key	0001814114
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Amendment Flag	false

Related Party Transactions (Details) - USD ($)		1 Months Ended
Related Party Transactions (Details) - USD ($)	Sep. 12, 2023	Apr. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Vivasure
Related Party Transaction
Unsecured convertible redeemable notes		$ 208,000	$ 213,000	$ 183,000
Motus GI Investments
Related Party Transaction
Shares acquired in termination of royalty certificates.	701,522

Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2023

Balance Sheet Components

Schedule of property and equipment balances, net


	September 30,		December 31,
(in thousands)	2023		2022
Equipment	$	1,783	$	1,712
Office furniture		367		364
Leasehold improvements		198		191
Property and equipment, gross		2,348		2,267
Less accumulated depreciation and amortization		(993)		(778)
Total Property and equipment, net	$	1,355	$	1,489

Schedule of accrued expenses


	September 30,		December 31,
(in thousands)	2023		2022
Accrued compensation	$	2,571	$	2,480
Clinical trial accruals		956		1,003
Other accrued expenses		774		1,893
Total accrued expenses	$	4,301	$	5,376

Business Combination and Recapitalization - Common stock outstanding (Details) - shares	Apr. 12, 2023	Jan. 26, 2023	Sep. 30, 2023	Dec. 31, 2022
Business Combination and Recapitalization
Common stock of HSAC2, outstanding prior to the Business Combination
Common stock, shares outstanding			35,743,972	20,187,850
Preference shares, shares outstanding			0	0
Legacy Orchestra
Business Combination and Recapitalization
Common stock of HSAC2, outstanding prior to the Business Combination		6,762,117
Less: Redemption of HSAC2 shares		(1,597,888)
Common stock held by former HSAC2 shareholders		5,164,229
HSAC2 sponsor shares		4,450,000
Exercise of warrants (in shares)		1,808,512
Total shares outstanding prior to issuance of merger consideration to Legacy Orchestra stockholders		11,422,741
Shares issued to Legacy Orchestra stockholders - Company Common Stock		20,191,338
Total shares of Company Common Stock immediately after Business Combination		31,614,079
Common stock, shares outstanding		31,614,079	2,522,214
Preference shares, shares outstanding			35,694,179
Number of shares issuable as earnout consideration	4,000,000	8,000,000
Number of shares issuable as earnout consideration due to rounding	3,999,987

Related Party Transactions

9 Months Ended

Sep. 30, 2023

Related Party Transactions

Related Party Transactions

13. Related Party Transactions

In addition to transactions and balances related to cash and stock-based compensation to officers and directors, the Company had the following transactions and balances with related parties during the year ended 2022 and the nine months ended September 30, 2023:

Vivasure Investments

In December 2020 and 2021, and April 2022, Legacy Orchestra invested in Vivasure, a related party, $183,000, $213,000, and $208,000, respectively, in the form of unsecured convertible redeemable notes. The unsecured convertible redeemable notes converted into Series D preferred stock of Vivasure in May of 2022 (Note 7).

Motus GI Investments

On September 12, 2023, Motus GI, a related party, and the Company entered into an agreement to terminate the rights of previously held royalty certificates in exchange for 701,522 additional shares of Motus GI common stock (Note 7).

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

Subsequent Events (Details) - USD ($)	Oct. 06, 2023	Sep. 30, 2023
Subsequent Events Items
Exercise Price		$ 11.50
Subsequent events. \| 2022 Loan and Security Agreement
Subsequent Events Items
Amount of principal repaid	$ 10,000,000
Number of warrants issued	27,707
Exercise Price	$ 7.67
Cash payment with respect to certain fees	$ 212,500
Net interest, prepayment fees and legal fees	$ 849,000

Debt Financing - Schedule of amount of principal payments (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Debt Maturity
2024	$ 2,500
2025	5,000
2026	2,500
Total	$ 10,000

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Reverse Recapitalization

Emerging Growth Company and Smaller Reporting Company Status

Use of Estimates

Cash and Cash Equivalents

Marketable Securities

Strategic Investments

Fair Value of Financial Instruments

judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

Accounts Receivable and Allowance for Doubtful Accounts

Inventory

Research and Development Prepayments, Accruals and Related Expenses

goods are accepted by the Company or the services are performed. Accruals are recorded for the amounts of services provided that have not yet been invoiced.

Property and Equipment


Asset category		Depreciable life
Manufacturing equipment		10 years
Office equipment		3 – 7 years
Research and development equipment		7 years

Leases

Debt Discount and Debt Issuance Costs

Impairment of Long-Lived Assets

Stock-Based Compensation

Net Loss Per Share

Income Taxes

Deferred Offering and Merger Costs

Defined Contribution Plan

Comprehensive Loss

Comprehensive loss is comprised of net loss and changes in unrealized gains and losses on the Company’s available-for-sale investments.

Segment Reporting

New Accounting Standards

Terumo Agreement - Other (Details) - Collaborative Arrangement - Terumo - USD ($)	1 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2019	Jun. 30, 2022
Terumo Agreement
Upfront payment received	$ 30,000,000	$ 30,000,000
Equity commitment	5,000,000
Amount invested for financing	2,500,000
Amount receivable on Milestones	35,000,000
Arrangement, Milestone Payment Amount, Target Achievement Dates Passed	2
Target milestone payment date already passed	$ 5,000,000
Remaining time-based milestones by the specified target achievement			$ 25,000,000
Stock purchase and the revenue generating elements		32,500,000
Estimated fair value of the shares		2,500,000
Transaction price		$ 30,000,000
Minimum
Terumo Agreement
Royalty receivable percentage	10.00%
Sales-based royalties percentage		10.00%
Maximum
Terumo Agreement
Additional payments on the achievement milestone	$ 65,000,000
Royalty receivable percentage	15.00%
Sales-based royalties percentage		15.00%

Balance Sheet Components - Other (Details) - USD ($)	3 Months Ended		9 Months Ended
Balance Sheet Components - Other (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Balance Sheet Components
Depreciation and amortization expense	$ 71,000	$ 54,000	$ 215,000	$ 152,000

Stock-Based Compensation - Schedule of restricted stock activity (Details)	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Restricted Stock
Restricted Stock Outstanding
Restricted stock, Beginning	158,589
Restricted stock, Granted	1,695,222
Restricted stock, Vested	(67,689)
Restricted stock, Forfeited/canceled	(45,901)
Restricted stock, Ending	1,740,221
Service-Based Restricted Stock Awards
Restricted Stock Outstanding
Restricted stock, Granted	1,695,222
Weighted-average grant date fair value \| $ / shares	$ 7.42
Performance-Based Restricted Stock Awards
Restricted Stock Outstanding
Restricted stock, Granted	0

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue:
Total revenue	$ 419	$ 1,163	$ 2,498	$ 2,430
Expenses:
Cost of product revenues	41	56	139	158
Research and development	8,558	5,899	25,311	14,402
Selling, general and administrative	6,344	5,275	16,073	10,699
Total expenses	14,943	11,230	41,523	25,259
Loss from operations	(14,524)	(10,067)	(39,025)	(22,829)
Other income (expense):
Interest income (expense), net	915	63	2,741	(419)
Gain (loss) on fair value adjustment of warrant liability		36	(294)	(1,124)
Loss on debt extinguishment				(682)
Gain (loss) on fair value of strategic investments	293	(314)	276	1,196
Total other income (expense)	1,208	(215)	2,723	(1,029)
Net loss	$ (13,316)	$ (10,282)	$ (36,302)	$ (23,858)
Net loss per share
Basic (in Dollars per share)	$ (0.38)	$ (0.51)	$ (1.11)	$ (1.80)
Diluted (in Dollars per share)	$ (0.38)	$ (0.51)	$ (1.11)	$ (1.80)
Weighted-average shares used in computing net loss per share, basic (in Shares)	35,243,598	20,187,773	32,586,431	13,236,450
Weighted-average shares used in computing net loss per share, diluted (in Shares)	35,243,598	20,187,773	32,586,431	13,236,450
Comprehensive loss
Net loss	$ (13,316)	$ (10,282)	$ (36,302)	$ (23,858)
Unrealized loss on marketable securities	19		(69)
Comprehensive loss	(13,297)	(10,282)	(36,371)	(23,858)
Partnership revenue
Revenue:
Total revenue	271	986	2,018	1,931
Product revenue
Revenue:
Total revenue	$ 148	$ 177	$ 480	$ 499

Leases - Schedule of recognized as an asset and operating lease liabilities (Details)	Sep. 30, 2023
Leases
Weighted average remaining lease term - operating leases, in years	3 years 7 months 6 days
Weighted average discount rate - operating leases	6.25%