Sight Sciences Inc

Previous wording

Our initial product development has focused on the treatment of two of the world’s most prevalent and underserved eye diseases, glaucoma and dry eye disease (“DED”). We have commercialized products in each of our two reportable operating segments, Surgical Glaucoma and Dry Eye. Our Surgical Glaucoma segment consists of sales of the OMNI® Surgical System ("OMNI") and the SION® Surgical Instrument ("SION"), while our Dry Eye segment includes sales of the TearCare® System ("TearCare"), and related components and accessories. Each product is primarily sold through a highly involved direct sales model that offers intensive education, training and customer service. We believe this philosophy and model not only enable us to differentiate our products and company from competitors, but also expand our addressable market by educating ECPs, patients and other stakeholders on our products and evolving treatment paradigms. Outside of the U.S., we have established direct commercial operations in the United Kingdom and Germany. We sell OMNI in several other countries through distributors.

Current wording

Our initial product development has focused on the treatment of two of the world’s most prevalent and underserved eye diseases, glaucoma and dry eye disease (“DED”). We have commercialized products in each of our two reportable operating segments, Surgical Glaucoma and Dry Eye. Our Surgical Glaucoma revenues consist of sales of the OMNI® Surgical System ("OMNI") and the SION® Surgical Instrument ("SION"), while our Dry Eye revenues are comprised of sales of the TearCare® System ("TearCare"), and related components and accessories. Each product is primarily sold through a highly involved direct sales model that offers intensive education, training and customer service. We believe this philosophy and model not only enable us to differentiate our products and company from competitors, but also expand our addressable market by educating ECPs, patients and other stakeholders on our products and evolving treatment paradigms. Outside of the U.S., we have established direct commercial operations in the United Kingdom and Germany. We sell OMNI in several other countries through distributors.

Previous wording

We sell OMNI and SION to facilities where ophthalmic surgeons perform outpatient procedures, such as ambulatory surgery centers ("ASCs") and hospital outpatient departments ("HOPDs"), which are typically reimbursed by Medicare or private payors for procedures using our products. We sell TearCare to ECPs. Currently, there is no meaningful reimbursement coverage by Medicare or private payors for MGD procedures, including TearCare, and patients typically pay out-of-pocket for TearCare, although some payors may agree to provide case-based coverage outside of a formal policy. We are continuing our controlled commercial launch and are focused on our comprehensive, clinical data-driven long-term market development plan that aims to improve awareness and patient access to TearCare. We have dedicated meaningful resources to execute our commercial strategy as we reduce operating expenses and improve cost efficiencies to better align our operating structure for long-term, profitable growth. The overall success of our approach to eyecare to date is evidenced by over 250,000 estimated uses of Surgical Glaucoma products and their predicates in over 2,000 hospitals and ASCs in the U.S. and Europe, and over 60,000 estimated uses of TearCare in over 1,500 eyecare facilities in the U.S. through June 30, 2024.

Current wording

We sell OMNI and SION to facilities where ophthalmic surgeons perform outpatient procedures, such as ambulatory surgery centers ("ASCs") and hospital outpatient departments ("HOPDs"), which are typically reimbursed by Medicare or private payors for procedures using our products. We sell TearCare to ECPs. Currently, there is no meaningful reimbursement coverage by Medicare or private payors for DED procedures, including TearCare, and patients typically pay out-of-pocket for TearCare, although some payors may agree to provide case-based coverage outside of a formal policy. We are continuing our controlled commercial launch and are focused on our comprehensive, clinical data-driven long-term market development plan that aims to improve awareness and patient access to TearCare. We have dedicated meaningful resources to execute our commercial strategy as we reduce operating expenses and improve cost efficiencies to better align our operating structure for long-term, profitable growth. The overall success of our approach to eyecare to date is evidenced by over 275,000 estimated uses of Surgical Glaucoma products and their predicates in over 2,000 hospitals and ASCs in the U.S. and Europe, and over 65,000 estimated uses of TearCare in over 1,500 eyecare facilities in the U.S. through September 30, 2024.

Previous wording

We do not currently operate any manufacturing facilities and instead contract with third parties for our production requirements. We believe our suppliers will be able to meet our current and anticipated manufacturing needs across all our products. We plan to continue to utilize third party contract manufacturers for our products and any related components.

Current wording

We do not currently operate any manufacturing facilities and instead contract with third parties for our production requirements. We believe our suppliers will be able to meet our current and anticipated manufacturing needs across all of our product lines. We plan to continue to utilize third party contract manufacturers for our products and any related components.

Previous wording

Revenue in our Surgical Glaucoma segment for the six-months ended June 30, 2024 and 2023 was $38.5 million and $38.7 million, respectively, with gross margins for the same periods of 88.0% and 87.6%, respectively. Revenue in our Dry Eye segment for the six-months ended June 30, 2024 and 2023 was $2.1 million and $3.6 million, respectively, with gross margins for the same periods of 44.4% and 54.4%, respectively. Given the earlier stage of TearCare’s commercial development, we expect our Dry Eye segment’s gross margins to be lower than our Surgical Glaucoma segment’s gross margins for the near- and medium-term due to the allocation of fixed labor and overhead costs to the segment's cost of goods sold. In addition, we expect lower demand and related gross margin in the Dry Eye segment in the second half of 2024 due to our increase in dry eye pricing effective October 1, 2024, which we believe will have a significant negative impact on cash-pay volumes. We expect TearCare procedure revenues will return to a growth trajectory upon receipt of positive payer coverage determinations that provide for sufficient and equitable reimbursement. We currently anticipate that we and our customers will begin receiving these coverage and payment determinations in 2025. In the first two quarters of 2024, approximately 95% of our revenuewas generated from customers in the U.S.

Current wording

Revenue in our Surgical Glaucoma segment for the nine-months ended September 30, 2024 and 2023 was $57.1 million and $57.2 million, respectively, with gross margins for the same periods of 87.6% and 88.1%, respectively. Revenue in our Dry Eye segment for the nine-months ended September 30, 2024 and 2023 was $3.7 million and $5.1 million, respectively, with gross margins for the same periods of 45.8% and 55.4%, respectively. Given the earlier stage of TearCare’s commercial development, we expect our Dry Eye segment’s gross margins to be lower than our Surgical Glaucoma segment’s gross margins for the near and medium-term due to the allocation of fixed labor and overhead costs to the segment's cost of goods sold. In addition, we expect lower demand and related gross margin in the Dry Eye segment in the fourth quarter of 2024 due to our increase in dry eye pricing which took effect on October 1, 2024, which we believe will have a significant impact on cash-pay volumes. We expect TearCare procedure revenues will return to a growth trajectory upon receipt of positive payor coverage determinations that provide for sufficient and equitable reimbursement. We currently anticipate that we and our customers will begin receiving coverage and payment determinations with respect to the TearCare procedure in 2025, though there is no guarantee that such determinations will be made in accordance with this time frame. In the first three quarters of 2024, approximately 95% of our revenuewas generated from customers in the U.S.

Previous wording

ensure the broadest possible patient access to the treatment alternatives that our products are cleared to offer; enhance and improve upon our existing product technologies;

Current wording

ensure the broadest possible patient access to the treatment alternatives that our products are cleared to offer;

Previous wording

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our IPO, and revenue from the sale of our products. As of June 30, 2024, we had an outstanding term loan balance of $35.0 million (excluding debt discount and amortized debt issuance costs), cash and cash equivalents of $118.2 million and an accumulated deficit of $323.4 million.

Current wording

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our IPO, and revenue from the sale of our products. As of September 30, 2024, we had an outstanding term loan balance of $35.0 million (excluding unamortized debt discount and debt issuance costs), cash and cash equivalents of $118.6 million and an accumulated deficit of $334.5 million.

Previous wording

We believe there are several important factors that have impacted and that will continue to impact our business, financial condition, and results of operations. Except as described in Part II, Item 1A, "Risk Factors," of this Quarterly Report, except as described below, there have been no material changes to such factors from those described in our Annual Report under the heading "Factors Affecting Our Business and Results of Operations."

Current wording

We believe there are several important factors that have impacted and that will continue to impact our business, financial condition, and results of operations. Except as described in Part II, Item 1A, "Risk Factors," of this Quarterly Report, and except as described below, there have been no material changes to such factors from those described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report under the heading "Factors Affecting Our Business and Results of Operations."

Previous wording

The availability of sufficient coverage and reimbursement for procedures involving our OMNI technology is fundamental to our business and prospects, with Medicare providing reimbursement for procedures that account for a majority of our sales revenues. As such, our business and results of operation are in material part dependent upon Medicare reimbursement policies applicable to OMNI procedures. Recent occurrences that could reasonably be expected to materially impact Medicare reimbursement for OMNI procedures include the following:

Current wording

The availability of sufficient coverage and reimbursement for procedures involving our OMNI technology is fundamental to our business and prospects, with Medicare providing reimbursement for procedures that account for a majority of our revenue. As such, our business and results of operation are in material part dependent upon

Previous wording

In May 2024, five of the seven Medicare Administrative Contractors (“MACs”), published proposed local coverage determinations (the “Proposed LCDs”) that, if finalized, will establish new Medicare coverage policies for certain minimally invasive glaucoma surgical procedures ("MIGS procedures") performed in these MACs' jurisdictions. Unlike the LCDs previously published and later withdrawn by these MACs in 2023, the Proposed LCDs do not characterize the OMNI procedure as investigational. If the Proposed LCDs are finalized and go into effect in their current form, Medicare coverage will remain available under the LCDs for MIGS procedures involving the OMNI technology. Each of the Proposed LCDs, if finalized in their current form, would adopt a non-coverage policy when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure, such as canaloplasty or goniotomy, at the same time in the same patient eye. We expect this proposed non-coverage for multiple MIGS procedures, if finalized, may reduce overall MIGS procedure volumes. Given OMNI's comprehensive treatment of the conventional outflow pathway, we believe OMNI provides an effective single MIGS procedure option for cases that were previously treated with a combination of MIGS procedures, but we cannot assure you that the Proposed LCDs, if finalized, will not have an adverse impact on future OMNI sales and therefore adversely affect our business, financial condition and results of operations.

Current wording

Each of the Final LCDs would adopt a non-coverage policy when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure, such as canaloplasty or goniotomy, at the same time in the same patient eye. We expect that this non-coverage policy for multiple MIGS procedures will reduce overall MIGS procedure volumes in the near-term. Our estimate is that approximately 10% of total MIGS codes billed were done in combination with another MIGS code in the six months ended June 30, 2024. Given OMNI's comprehensive treatment of the conventional outflow pathway, we believe OMNI provides an effective single MIGS procedure option for cases that were previously treated with a combination of MIGS procedures, but we cannot assure you that the Final LCDs will not have an adverse impact on future OMNI sales and therefore adversely affect our business, financial condition and results of operations.

Previous wording

We currently derive the majority of our U.S. revenue from the sale of our OMNI and SION products to ASCs and HOPDs and our TearCare products to ECPs. To date, the revenue from our Surgical Glaucoma segment has accounted for over 90% of our total revenue, substantially all of which was generated from sales within the U.S. Our Surgical Glaucoma customers place orders based on their expected procedure volume and reorder as needed, typically on a biweekly, monthly or bimonthly basis. Our TearCare customers typically purchase a TearCare System which consists of one or more TearCare SmartHubs TM (“SmartHubs”), multiple single-use TearCare SmartLids® (“SmartLids”) and other accessories. After utilizing their initial inventory, customers can reorder SmartLids as needed. No single customer accounted for 10% or more of our revenue for the six months ended June 30, 2024 and 2023.

Current wording

We currently derive the majority of our U.S. revenue from the sale of our OMNI and SION products to ASCs and HOPDs and our TearCare products to ECPs. To date, the revenue from our Surgical Glaucoma segment has accounted for over 90% of our total revenue, substantially all of which was generated from sales within the U.S. Our Surgical Glaucoma customers place orders based on their expected procedure volume and reorder as needed, typically on a biweekly, monthly or bimonthly basis. Our TearCare customers typically purchase a TearCare System which consists of one or more TearCare SmartHubs® (“SmartHubs”), multiple single-use TearCare SmartLids® (“SmartLids”) and other accessories. After utilizing their initial inventory, customers can reorder SmartLids as needed. No single customer accounted for 10% or more of our revenue for the nine months ended September 30, 2024 and 2023.

Previous wording

Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the accretion of debt discount and amortization of debt issuance costs associated with our term loan agreement.

Current wording

Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the accretion of debt discount and amortization of debt issuance costs associated with our term loan agreements.

Previous wording

The loss on debt extinguishment is associated with the Company's termination and settlement of the MidCap Term Loan.

Current wording

The loss on debt extinguishment is associated with our termination and settlement of the MidCap Term Loan.

Previous wording

Other expense, net primarily consists of income and expenses that do not originate from the Company's primary business.

Current wording

Other income (expense), net primarily consists of income and expenses that do not originate from our primary business.

Previous wording

Revenue. Revenue for the six months ended June 30, 2024 was $40.6 million, a decrease of $1.7 million, or 3.9%, from the prior year comparable period. The overall decrease in Surgical Glaucoma revenue was primarily attributable to a decrease in the number of OMNI units sold in the six months ended June 30, 2024. This decline in units sold was primarily driven by a decrease in unit utilization per ordering facility and a lower average selling price primarily due to product mix. Our Dry Eye revenue decreased 40.1% in the six months ended June 30, 2024 versus the prior year comparable period primarily due to fewer new customers added in the period, which led to lower SmartHub revenue and fewer SmartLids purchased, partially offset by a higher average selling price for SmartHubs.

Current wording

Revenue. Our Surgical Glaucoma revenue for the three months ended September 30, 2024 was $18.6 million, an increase of $0.2 million, or 1.1%, from the prior year comparable period. The overall increase in Surgical Glaucoma revenue was primarily attributable to an increase in the number of OMNI units sold in the three months ended September 30, 2024. This increase in units sold was primarily driven by an increase in unit utilization per ordering facility. Our Dry Eye revenue decreased 3.7% in the three months ended September 30, 2024 compared to the prior year comparable period primarily due to fewer new customers added in the period, which led to lower SmartHub revenue, partially offset by increased SmartLids purchased prior to our October 1, 2024 price increase. The primary reason that fewer new customers were added was the Company’s focus on the next phase of its commercial strategy for its Dry Eye segment which involves achieving reimbursed market access instead of adding customers pursuing a cash pay model for its TearCare products.

Previous wording

Cost of Goods Sold. Cost of goods sold was $5.8 million during the six months ended June 30, 2024, a decrease of $0.6 million from $6.4 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold decreased $0.2 million as compared to the prior year comparable period. The decrease was primarily driven by product sales mix and a one-time prior year inventory scrap expense. Our Dry Eye cost of goods sold decreased $0.4 million in the six months ended June 30, 2024 compared to the prior year comparable period, primarily driven by lower sales volumes and product mix.

Current wording

Cost of Goods Sold. Cost of goods sold was $3.3 million during the three months ended September 30, 2024, an increase of $0.6 million from $2.7 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold increased $0.5 million as compared to the prior year comparable period. The increase was primarily driven by higher sales volumes and higher overhead costs per unit from lower production volumes. Our Dry Eye cost of goods sold increased $0.1 million in the three months ended September 30, 2024 compared to the comparable period in 2023, primarily driven by higher costs per unit from lower production volumes.

Previous wording

Gross Profit. Our total gross profit was $18.3 million in the three months ended June 30, 2024, a decrease of $1.7 million from the prior year comparable period. Our total gross margin for the three months ended June 30, 2024 increased to 85.8%, up from 85.6% in the prior year comparable period, primarily due to increased mix toward our higher gross margin Surgical Glaucoma segment, partially offset by declines in gross margin of both segments. Gross margin in our Surgical Glaucoma segment was 88.0% for the quarter ended June 30, 2024, a decrease from 88.6% for the prior year comparable period, primarily due to product sales mix. In our Dry Eye segment, gross margin decreased from 54.8% in the second quarter of 2023 to 46.5% in the second quarter of 2024, primarily due to product sales mix and higher overhead costs per unit due to lower volumes.

Current wording

Gross Profit and Gross Margin. Our total gross profit was $16.9 million in the three months ended September 30, 2024, a decrease of $0.4 million from the prior year comparable period. Our gross margin for the three months ended September 30, 2024 decreased to 83.9%, from 86.6% in the prior year comparable period, with lower gross margin in both our Surgical Glaucoma and Dry Eye segments, primarily due to higher overhead costs per unit in the current period as a result of lower production volumes in both segments. Gross margin in our Surgical Glaucoma segment was 86.8% for the quarter ended September 30, 2024, a decrease from 89.1% for the prior year comparable period. In our Dry Eye segment, gross margin decreased from 57.4% in the third quarter of 2023 to 47.7% in the third quarter of 2024.

Previous wording

Selling, General, and Administrative Expenses. SG&A expenses were $26.7 million for the three months ended June 30, 2024, a decrease of $3.4 million from the prior year comparable period. The decrease was primarily driven by a $2.9 million decrease in personnel expenses, including lower commissions during the current period. In addition, the Company saw a $0.7 million decrease in marketing expenses, a $0.7 million decrease in travel and entertainment expenses, and a $0.3 million decrease in facilities expenses. These decreases were partially offset by a $0.8 million increase in accounting and legal expenses, as well as a $0.5 million increase in stock-based compensation expenses.

Current wording

Selling, General, and Administrative Expenses. SG&A expenses were $23.4 million for the three months ended September 30, 2024, a decrease of $3.1 million from the prior year comparable period. The decrease was primarily driven by a $2.3 million decrease in legal expenses, a $0.7 million decrease in marketing expenses, including sales training, and a $0.1 million decrease in facilities expenses.

Previous wording

Investment Income. Investment income was $1.5 million for the three months ended June 30, 2024, a decline of $0.3 million from the prior year comparable period. The decline was due to lower investment balances during the current year.

Current wording

Investment Income. Investment income was $1.5 million for the three months ended September 30, 2024, a decline of $0.4 million from the prior year comparable period. The decline was primarily due to lower investment balances during the current year.

Previous wording

Interest Expense. Interest expense decreased $0.2 million, due to lower lending rates associated with the refinanced debt agreement during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Interest Expense. Interest expense decreased $0.3 million during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to lower lending rates associated with the Hercules Loan Agreement.

Previous wording

Other Expense, Net. Other expense, net was expense of $0.1 million and $0.0 million for the six months ended June 30, 2024 and 2023.

Current wording

Other Income (Expense), Net. Other income (expense), net was income of less than $0.1 million for the three months ended September 30, 2024, compared to expense of less than $0.1 million for the three months ended September 30, 2023.

Previous wording

Comparison of the Six Months Ended June 30, 2024 and 2023 (dollars in thousands)

Current wording

Comparison of the Nine Months Ended September 30, 2024 and 2023 (dollars in thousands)

Previous wording

Revenue. Our Surgical Glaucoma revenue for the three months ended June 30, 2024 was $20.2 million, a decrease of $1.2 million, or 5.4%, from the prior year comparable period. The overall decrease in Surgical Glaucoma revenue was primarily attributable to a decrease in the number of OMNI units sold and a lower average selling price primarily due to product mix in the three months ended June 30, 2024. This decline in units sold was primarily driven by a decrease in unit utilization per ordering facility. Our Dry Eye revenue decreased 45.7% in the three months ended June 30, 2024 compared to the prior year comparable period primarily due to fewer new customers added in the period, which led to lower SmartHub revenue and fewer SmartLids purchased. The primary driver of fewer new customers added and lower units sold was due to the Company’s focus on the next phase of its commercial strategy for its Dry Eye segment which involves achieving market access.

Current wording

Revenue. Our Surgical Glaucoma revenue for the nine months ended September 30, 2024 was $57.1 million, a decrease of less than $0.1 million, or less than 0.1%, from the prior year comparable period. The overall decrease in Surgical Glaucoma revenue was primarily attributable to a decrease in the number of OMNI units sold during the nine months ended September 30, 2024. This decline in units sold was primarily driven by a decrease in unit utilization per ordering facility and a lower average selling price primarily due to product mix. Our Dry Eye revenue decreased $1.5 million, or 28.9%, in the nine months ended September 30, 2024 versus the prior year comparable period primarily due to fewer new customers added in the period, which led to lower SmartHub revenue and fewer SmartLids purchased, partially offset by a higher average selling price for SmartHubs. The primary reason that fewer new customers were added was the Company’s focus on the next phase of its commercial strategy for its Dry Eye segment which involves achieving reimbursed market access instead of adding customers pursuing a cash pay model for its TearCare products.

Previous wording

Cost of Goods Sold. Cost of goods sold was $3.0 million during the three months ended June 30, 2024, a decrease of $0.4 million from $3.4 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold decreased less than $0.1 million as compared to the prior year comparable period. The decrease was primarily driven by lower sales volumes and product sales mix. Our Dry Eye cost of goods sold decreased $0.3 million in the three months ended June 30, 2024 compared to the comparable period in 2023, primarily driven by lower sales volumes and product mix.

Current wording

Cost of Goods Sold. Cost of goods sold was $9.1 million during the nine months ended September 30, 2024, a decrease of less than $0.1 million from $9.1 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold increased $0.3 million as compared to the prior year comparable period. The increase was primarily driven by product sales mix and higher per unit cost, partially offset by higher prior year scrap charges. Our Dry Eye cost of goods sold decreased $0.3 million in the nine months ended September 30, 2024 compared to the prior year comparable period, primarily driven by lower sales volumes and product mix.

Previous wording

Gross Profit. Our total gross profit was $34.8 million in the six months ended June 30, 2024, a decrease of $1.1 million from the prior year comparable period. Our total gross margin for the six months ended June 30, 2024 increased to 85.7%, up from 84.8% in the prior year comparable period. Gross margin in our Surgical Glaucoma segment was 88.0% for the six months ended June 30, 2024, an increase from 87.6% for the prior year comparable period, primarily due to a one-time prior year inventory scrap expense. In our Dry Eye segment, gross margin decreased from 54.4% in the six months ended June 30, 2023 to 44.4% in the six months ended June 30, 2024, primarily due to product sales mix and higher overhead costs per unit due to lower volumes.

Current wording

Gross Profit and Gross Margin. Our gross profit was $51.7 million in the nine months ended September 30, 2024, a decrease of $1.5 million from the prior year comparable period. Our total gross margin for the nine months ended September 30, 2024 decreased to 85.1%, from 85.4% in the prior year comparable period. Gross margin in our Surgical Glaucoma segment was 87.6% for the nine months ended September 30, 2024, a decrease from 88.1% for the prior year comparable period, primarily due to product sales mix and higher cost per unit, partially offset by higher prior year comparable period scrap charges. In our Dry Eye segment, gross margin decreased from 55.4% in the nine months ended September 30, 2023 to 45.8% in the nine months ended September 30, 2024, primarily due to higher overhead costs per unit due to lower volumes.

Previous wording

Research and Development Expenses. R&D expenses during the six months ended June 30, 2024 decreased $0.9 million, or 9.5%, to $9.0 million. The decrease was primarily driven by a $0.7 million decrease in clinical studies and general research and development expenses, as well as $0.6 million decrease in payroll expenses. These were partially offset by a $0.3 million increase in legal and stock-based compensation expenses.

Current wording

Research and Development Expenses. R&D expenses during the nine months ended September 30, 2024 decreased $0.4 million, or 3.1%, to $13.7 million. The decrease was primarily driven by a $0.8 million decrease in clinical studies and general research and development expenses, as well as $0.5 million decrease in payroll expenses. These were partially offset by a $0.4 million increase in professional and outside services, as well as a $0.2 million increase in legal expenses and stock-based compensation expenses.

Previous wording

Selling, General, and Administrative Expenses. SG&A expenses were $53.2 million for the six months ended June 30, 2024, a decrease of $5.5 million from the prior year comparable period. The decrease was primarily driven by a $5.9 million decrease in personnel expenses, including lower commissions during the current period. In addition, the Company saw a $2.2 million decrease in marketing expenses, including sales training and demos, a $1.1 million decrease in travel and entertainment expenses, and a $0.6 million decrease in facilities expenses. These decreases were partially offset by a $3.4 million increase in accounting and legal expenses, as well as a $1.4 million increase in stock-based compensation expenses.

Current wording

Selling, General, and Administrative Expenses. SG&A expenses were $76.6 million for the nine months ended September 30, 2024, a decrease of $8.6 million from the prior year comparable period. The decrease was primarily driven by a $5.8 million decrease in personnel expenses, including lower commissions during the current period. In addition, there was a $2.9 million decrease in marketing expenses, including sales training and demos, a $1.2 million decrease in travel and entertainment expenses, and a $0.7 million decrease in facilities expenses. These decreases were partially offset by a $1.8 million increase in stock-based compensation expenses, as well as a $1.1 million increase in accounting and legal expenses.

Previous wording

Investment Income. Investment income was $3.2 million for the six months ended June 30, 2024, a decline of $0.4 million from the prior year comparable period. The decline was due to lower investment balances during the current year.

Current wording

Investment Income. Investment income was $4.6 million for the nine months ended September 30, 2024, a decline of $0.9 million from the prior year comparable period. The decline was primarily due to lower investment balances during the current year.

Previous wording

Interest Expense. Interest expense decreased $0.3 million, due to lower lending rates associated with the refinanced debt agreement during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Interest Expense. Interest expense decreased $0.6 million, due to lower lending rates associated with the Hercules Loan Agreement during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

Loss on Debt Extinguishment. Loss on debt extinguishment was $2.0 million for the six months ended June 30, 2024 as compared to $0.0 million in the six months ended June 30, 2023. The increase in the current year is driven by the Company's loss on the termination and settlement of the MidCap Term Loan.

Current wording

Loss on Debt Extinguishment. Loss on debt extinguishment was $2.0 million for the nine months ended September 30, 2024 compared to $0.0 million in the nine months ended September 30, 2023. The increase in the current year is driven by our loss on the termination and settlement of the MidCap Term Loan.

Previous wording

Other Expense, Net. Other expense, net was expense of less than $0.1 million for both the three months ended June 30, 2024 and 2023.

Current wording

Other Expense, Net. Other expense, net was expense of less than $0.1 million for both the nine months ended September 30, 2024 and 2023.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 was $19.3 million, consisting primarily of a net loss of $28.6 million, as well as a net change in our operating assets and liabilities of $1.4 million, partially offset by non-cash charges of $10.7 million. The net change in our operating assets and liabilities was primarily due to a $5.7 million increase in accounts receivable and a $1.3 million decrease in other noncurrent liabilities. Accrued and other current liabilities increased $1.9 million, while both inventory and prepaid expenses and other current assets increased by $1.2 million. In addition, accrued compensation increased by $0.9 million and accounts payable increased by $0.6 million. The non-cash charges primarily consisted of $8.8 million related to stock-based compensation expense, $1.0 million of noncash loss on the extinguishment of debt, $0.4 million of depreciation and amortization and $0.3 million of noncash operating lease expense.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $18.9 million, consisting of a net loss of $39.7 million, partially offset by non-cash charges of $15.6 million as well as a net change in our operating assets and liabilities of $5.2 million. The net change in our operating assets and liabilities was primarily due to a $1.4 million decrease in accounts receivable, a $1.9 million decrease in our inventory balance, and a $3.4 million increase in accrued compensation. These were partially offset by a $1.5 million decrease in other noncurrent liabilities. The non-cash charges primarily consisted of $13.1 million related to stock-based compensation expense, $1.0 million of noncash loss on debt extinguishment, $0.5 million of depreciation and amortization, $0.5 million of noncash operating lease expense, and $0.5 million of accretion of debt discount and debt issuance costs.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2023 was $30.9 million, consisting primarily of a net loss of $31.8 million and a net change in our operating assets and liabilities of $7.7 million, partially offset by non-cash charges of $8.7 million. The net change in our operating assets and liabilities was primarily due to a $3.0 million increase in accounts receivable and a $2.0 million increase in inventory to support the continued growth of our operations. We had a $0.2 million increase in accounts payable, while accrued compensation and accrued and other current liabilities decreased by an aggregate of $4.5 million, primarily driven by the timing of payments on invoices and bonuses. The non-cash charges primarily consisted of $7.3 million related to stock-based compensation, $0.5 million of noncash operating lease expense, $0.3 million of depreciation, and $0.3 million of accretion of debt discount and amortization of debt issuance costs.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2023 was $40.7 million, consisting primarily of a net loss of $44.9 million and a net change in our operating assets and liabilities of $9.3 million, partially offset by non-cash charges of $13.5 million. The net change in our operating assets and liabilities was primarily due to a $2.2 million increase in accounts receivable and a $3.3 million increase in inventory to support the continued growth of our operations and increase stocking levels. We had a $0.9 million increase in accounts payable, while accrued compensation and accrued and other current liabilities decreased by an aggregate of $4.9 million, primarily driven by the timing of payments on invoices and bonuses. The non-cash charges primarily consisted of $11.1 million related to stock-based compensation, $0.7 million of noncash operating lease expense, $0.5 million of depreciation, and $0.5 million of accretion of debt discount and debt issuance costs.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $0.2 million and $0.2 million, respectively, in both cases for purchases of property and equipment.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $0.2 million and $0.5 million, respectively, in both cases for purchases of property and equipment.

Previous wording

Net cash used in financing activities for the six months ended June 30, 2024 was $0.5 million, consisting primarily of the costs associated with the refinancing of the outstanding term loan agreement. Net cash provided by financing activities for the six months ended June 30, 2023 of $0.6 million, which primarily relates to the exercise of common stock options and proceeds from employee stock plan purchases, partially offset by taxes paid on the net share settlement of restricted stock units.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $0.4 million, consisting primarily of the costs associated with our term loan agreement with Hercules Capital, Inc. ("Hercules"). Net cash provided by financing activities for the nine months ended September 30, 2023 of $0.7 million, which primarily relates to the exercise of common stock options and proceeds from employee stock plan purchases, partially offset by taxes paid on the net share settlement of restricted stock units.

Previous wording

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our IPO, and revenue from the sale of our products. Since our inception, we have raised an aggregate of approximately $402.4 million in net proceeds from sales of our redeemable convertible preferred stock and common stock and borrowed $32.9 million of net proceeds under our term loans. In January 2024, we entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with Hercules Capital, Inc (“Hercules”) and certain of its affiliates (collectively with Hercules, the “Lenders”), which provides for a senior secured term loan facility in the aggregate principal amount of up to $65.0 million. We used the proceeds from an initial $35.0 million tranche funded under the Hercules Loan Agreement to discharge our indebtedness under our prior secured credit facility with MidCap Financial Services and certain of its affiliates (the “Prior Lenders”). While our indebtedness to Lenders remains outstanding, we are required to use commercially reasonable efforts to grant to Lenders the option to invest up to $3.0 million in our next round of equity financing, if any, broadly marketed to multiple investors on the same terms, conditions and pricing offered to investors in such subsequent equity financing.

Current wording

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our IPO, and revenue from the sale of our products. Since our inception, we have raised an aggregate of approximately $402.4 million in net proceeds from sales of our redeemable convertible preferred stock and common stock and borrowed $32.9 million of net proceeds under our term loans. In January 2024, we entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with Hercules and certain of its affiliates (collectively with Hercules, the “Lenders”), which provides for a senior secured term loan facility in the aggregate principal amount of up to $65.0 million. We used the proceeds from an initial $35.0 million tranche (the "Initial Loan") funded under the Hercules Loan Agreement to discharge our indebtedness under our prior secured credit facility with MidCap Financial Services and certain of its affiliates (the “Prior Lenders”). While our indebtedness to Lenders remains outstanding, we are required to use commercially reasonable efforts to grant the Lenders the option to invest up to $3.0 million in our next round of equity financing, if any, broadly marketed to multiple investors on the same terms, conditions and pricing offered to investors in such subsequent equity financing.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $118.2 million, an accumulated deficit of $323.4 million and $35.0 million outstanding under our term loan agreement (before debt discount) with Hercules. Based on our current planned operations, we expect our cash and cash equivalents and additional borrowings available under the Hercules Loan Agreement will enable us to fund our operations for at least the next 12 months and the foreseeable future.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $118.6 million, an accumulated deficit of $334.5 million and $35.0 million outstanding under the Hercules Term Loan Agreement (before debt discount). Based on our current planned operations, we expect our cash and cash equivalents and additional borrowings available under the Hercules Loan Agreement will enable us to fund our operations for at least the next 12 months and the foreseeable future.

Previous wording

The Hercules Loan Agreement provides for a senior secured term loan facility in the aggregate principal amount of up to $65.0 million. An initial tranche of $35.0 million (the “Initial Loan”) was funded under the Hercules Loan Agreement on January 22, 2024 (the “Closing Date”). In addition to the Initial Loan, the Hercules Loan Agreement provides for additional tranches as follows: $5.0 million available in a single draw through December 15, 2024, $10.0 million available to draw upon the achievement of certain performance milestones through September 15, 2025, and $15.0 million available for us to draw on through the interest only period in increments of $5.0 million, subject to the sole approval of Hercules' investment committee (the “Tranche Loans,” and together with the Initial Loan, the “Term Loans”).

Current wording

December 15, 2024, $10.0 million available to draw upon the achievement of certain performance milestones through September 15, 2025, and $15.0 million available for us to draw on through the interest-only period in increments of $5.0 million, subject to the sole approval of Hercules' investment committee (such tranche loans, together with the Initial Loan, the “Term Loans”).

Previous wording

The Hercules Loan Agreement includes a maturity date of July 1, 2028, with an interest only period running for 30 months, extendable for an additional 6 months for a total of 36 months upon the achievement of certain milestones. The Term Loans accurate interest at a floating annual rate of the greater of 10.35% or the Wall Street Journal prime rate plus 2.35%, with the initial interest rate under the Term Loans equal to 10.85%. The final payment fee is set at 5.95% of the funded balance. In conjunction with the funding of the Initial Loan, we issued warrants to the Lenders to purchase up to an aggregate of 135,686 shares of our common stock at an exercise price of $5.159 per share. Each warrant is exercisable for a period of seven years from the date of issuance and is tradeable in accordance with the provisions of Rule 144 of the Securities Act.

Current wording

The Hercules Loan Agreement includes a maturity date of July 1, 2028, with an interest only period running for 30 months, extendable for an additional six months for a total of 36 months upon the achievement of certain milestones. The Term Loans accurate interest at a floating annual rate of the greater of 10.35% or the Wall Street Journal prime rate plus 2.35%, with an interest rate under the Term Loans equal to 10.35% as of September 30, 2024. The final payment fee is set at 5.95% of the funded balance. In conjunction with the funding of the Initial Loan, we issued warrants to the Lenders to purchase up to an aggregate of 135,686 shares of our common stock at an exercise price of $5.159 per share. Each warrant is exercisable for a period of seven years from the date of issuance and is tradeable in accordance with the provisions of Rule 144 of the Securities Act.

Previous wording

Our obligations under the Hercules Loan Agreement are guaranteed by us and our future subsidiaries, subject to exceptions for certain foreign subsidiaries. Our obligations under the agreement are secured by substantially all of our assets, including our material intellectual property. Additionally, we are subject to customary affirmative and negative covenants, including covenants that limit or restrict the ability of us to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. We are also subject to certain minimum cash and revenue covenants under the Hercules Loan Agreement.

Current wording

Our obligations under the Hercules Loan Agreement are guaranteed by us and our future subsidiaries, subject to exceptions for certain foreign subsidiaries and secured by substantially all of our assets, including our material intellectual property. Additionally, we are subject to customary affirmative and negative covenants, including covenants that limit or restrict the ability of us to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. We are also subject to certain minimum cash and revenue covenants under the Hercules Loan Agreement.

Previous wording

An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that the assumptions and estimates associated with stock-based compensation expense have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider this to be a critical accounting estimate.

Current wording

An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.