Sight Sciences, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included in Park I, Item 1, “Financial Statements,” within this Quarterly Report and our audited consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data,” in our Annual Report. Certain statements included in this discussion and analysis constitute “forward-looking statements” that are subject to considerable risks and uncertainties. Please see the information under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included in Part I, Item 1, “Financial Statements,” within this Quarterly Report and our audited consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data,” in our Annual Report. Certain statements included in this discussion and analysis constitute “forward-looking statements” that are subject to considerable risks and uncertainties. Please see the information under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Previous wording

developing products that are intended to preserve, protect and restore natural physiological functionality to diseased eyes;

Current wording

developing transformative technologies that are intended to preserve, protect and restore natural physiological functionality to diseased eyes;

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 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.

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 revenue consists of sales of the OMNI® Surgical System ("OMNI") and the SION® Surgical Instrument ("SION"), while our Dry Eye revenue consists 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 model not only enables us to differentiate our products and company from competitors, but also expands 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 also sell OMNI in several other countries in Europe 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 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.

Current wording

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. In the fourth quarter of 2024, we instituted a price increase for our TearCare products to reflect the clinical value of our technology as part of our strategy to establish broader coverage with commercial payors and Medicare. This increase materially reduced customer demand for

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 of our product lines. We plan to continue to utilize third party contract manufacturers for our products and any related components.

Current wording

We do not have, and do not currently intend to develop, any internal manufacturing capabilities or infrastructure, and rely on a limited number of third-party manufacturers, many of which are single source suppliers, for the components, accessories and materials that are utilized in the assembly of our products. We believe the manufacturing capacity provided by our suppliers will be adequate 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 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.

Current wording

Our Dry Eye revenue was down for the three months ended March 31, 2025 compared to the same period in 2024 due to lower demand in the Dry Eye segment due to our increase in TearCare pricing which took effect on October 1, 2024, as part of our strategy to achieve reimbursed market access although there is no guarantee as to the timing of reimbursement decisions or the amount of reimbursement. 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 our Dry Eye gross margins will be adversely impacted in 2025 by the tariffs imposed by the U.S. on China, since most of our TearCare SmartLids, are produced and assembled by a Taiwan-based manufacturer in China. However, there was no tariff impact for the three months ended March 31, 2025 due to our usage of inventory purchased prior to the implementation of these tariffs.

Previous wording

further demonstrate our products’ clinical effectiveness and safety to potential customers, patients, payors and regulators including establishing OMNI and SION as standards of care of interventional glaucoma treatment among MIGS-trained surgeons, developing the standalone MIGS market, and pursuing coverage and equitable reimbursement for TearCare;

Current wording

further demonstrate our products’ clinical effectiveness and safety to potential customers, patients, payors and regulators, including (i) establishing OMNI and SION as standards of care of interventional glaucoma treatment among MIGS-trained surgeons, (ii) developing a standalone market segment with a focus on pseudophakic patients whose IOP is not well-controlled on two or more medications and who are at risk of disease progression, and (iii) increasing customer advocacy and pursuing coverage and equitable reimbursement for TearCare;

Previous wording

As a result, we intend to continue to invest in clinical studies, sales and marketing, education initiatives, market access, and product development. However, we are also focused on disciplined expenditures, and seek to grow our operating expenses at a lower rate than revenue. Because of these and other factors, we expect to continue to incur net losses for at least the next several years, and we may seek additional debt and equity financing to fund our operations and planned growth.

Current wording

As a result, we intend to continue to invest in product development, market access, sales and marketing, clinical studies, and education initiatives. Because of these and other factors, we expect to continue to incur net losses for at least the next several years, and we may seek additional debt and equity financing to fund our operations and planned growth.

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 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.

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 initial public offering (“IPO”), and revenue from the sale of our products. As of March 31, 2025, we had cash and cash equivalents of $108.8 million, an accumulated deficit of $360.5 million and an outstanding term loan balance of $40.0 million (excluding debt discount and amortized debt issuance costs).

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, 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."

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, 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."

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® (“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.

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 from the sale of 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 three months ended March 31, 2025 and 2024.

Previous wording

The growth in our revenue is driven by the demand for elective surgery and treatment utilizing our products in the United States and Europe. Such demand is often lower during summer months because of ECP vacations and in winter months because of fewer business or surgery days due to holidays and adverse weather conditions.

Current wording

The growth of our revenue is primarily driven by the demand for elective surgery and treatment utilizing our products in the United States and Europe, product reimbursement rates and coverage criteria, and competition. Such demand is often lower during summer months because of ECP vacations and in winter months because of fewer business or surgery days due to holidays and adverse weather conditions.

Previous wording

Our components and products are produced by third-party suppliers and manufacturers. Our cost of goods sold consists primarily of amounts paid for our products to third-party manufacturers, and our manufacturing overhead costs, which consist primarily of personnel expenses, including salaries, benefits and stock-based compensation, and reserves for excess, obsolete and non-sellable inventory. Cost of goods sold also includes depreciation expenses for production equipment which we provide to our third-party manufacturers and certain direct costs, such as shipping and handling costs.

Current wording

Our components and products are produced by third-party suppliers and manufacturers. Our cost of goods sold consists primarily of amounts paid for our products to third-party manufacturers, and our manufacturing overhead costs, which consist primarily of personnel expenses, including salaries, benefits and stock-based compensation, and reserves for excess, obsolete and non-sellable inventory. Cost of goods sold also includes depreciation expenses for production equipment which we provide to our third-party manufacturers and certain direct costs, such as shipping and handling costs and tariffs on imported products and components.

Previous wording

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and we believe it will continue to be, affected by a variety of factors, including differences in segment gross margins, changes in average selling prices, product sales mix, production and ordering volumes, manufacturing costs, product yields, and headcount. In general, we expect our gross margins to increase over the long term to the extent our production and ordering volumes increase and as we spread the fixed portion of our overhead costs over a larger number of units produced. We intend to use our design, engineering and manufacturing know-how and capabilities to further advance and improve the efficiency of our suppliers’ manufacturing processes, which we believe will reduce costs and increase our gross margins. Our gross margins could fluctuate from quarter to quarter as our product mix varies, we transition to new suppliers, introduce new products, and adopt new manufacturing processes and technologies.

Current wording

We calculate gross margin as gross profit divided by revenue. Our gross margin has been, and we believe it will continue to be, affected by a variety of factors, including differences in segment gross margins, changes in average selling prices, changes in product reimbursement rates, product sales mix, production and ordering volumes, manufacturing costs, product yields, and headcount. In general, we expect our gross margins to increase over the long term to the extent our production and ordering volumes increase and as we spread the fixed portion of our overhead costs over a larger number of units produced. We intend to use our design, engineering and manufacturing know-how and capabilities to further advance and improve the efficiency of our suppliers’ manufacturing processes, which we believe will reduce costs and increase our gross margins. However, we expect our gross margins will be adversely impacted by the tariffs imposed by the U.S. on China for as long as the tariffs are in effect, since most of our OMNI and SION products, as well as our TearCare SmartLids, are produced and assembled by a Taiwan-based manufacturer in China. Our gross margins could fluctuate from quarter to quarter due to a number of factors, including variations in product mix, changes in product reimbursement rates, transitions to new suppliers, introduction of new products by us or our competitors, adoption of new manufacturing processes and technologies, and responses to evolving macroeconomic and geopolitical conditions, including the adoption of new or increased tariffs by the United States and China.

Previous wording

Research and development ("R&D") expenses consist primarily of costs associated with engineering, product development, clinical studies to develop and support our products, including clinical trial design, clinical trial site initiation and study costs, internal and external costs associated with our regulatory compliance and quality assurance functions, medical affairs, cost of products used for clinical trials and other costs associated with products and technologies – either new or enhancements of existing platforms – that are in development. These expenses also include personnel expenses, including salaries, benefits and stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation expenses for equipment and an allocation of information technology ("IT") and facility overhead expenses. Our R&D expenses as a percentage of revenue may vary over time depending on the level and timing of new product development efforts, as well as clinical development, clinical trial and other related activities. We expect our R&D expenses to increase for the next several years as we continue to invest in our active clinical trial programs, develop new products, and improve our existing products.

Current wording

Research and development ("R&D") expenses consist primarily of costs associated with engineering, product development, clinical studies to develop and support our products, including clinical trial design, clinical trial site initiation and study costs, internal and external costs associated with our regulatory compliance and quality assurance functions, medical affairs, cost of products used for clinical trials and other costs associated with products and technologies that are in development. These expenses also include personnel expenses, including salaries, benefits and stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation expenses for equipment and an allocation of information technology ("IT") and facility overhead expenses. Our R&D expenses as a percentage of revenue may vary over time depending on the level and timing of new product development efforts, as well as clinical development, clinical trial and other related activities. We expect our R&D expenses to increase for the next several years as we continue to invest in our active clinical trial programs, develop new products, and improve our existing products.

Previous wording

Investment income primarily consists of interest and amortization on held-to-maturity investments in treasury securities.

Current wording

Investment income primarily consists of interest and amortization on held-to-maturity investments in U.S. treasury securities and money market funds.

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 agreements.

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 the Term Loans.

Previous wording

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

Current wording

The loss on debt extinguishment is associated with the termination and settlement of the Prior Loan Agreement.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Revenue. Our Surgical Glaucoma revenue for the three months ended March 31, 2025 was $17.1 million, a decrease of $1.1 million, or 6.3%, 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 three months ended March 31, 2025. This decrease was primarily driven by a decrease in unit utilization per ordering facility, primarily due to the restrictions on the performance of multiple MIGS procedures in combination with cataract surgery for Medicare patients in the jurisdictions administered by the five MACS that issued the LCDs containing such restrictions, which restrictions became effective in the fourth quarter of 2024. Our Dry Eye revenue decreased 60.9% in the three months ended March 31, 2025 compared to the prior year comparable period primarily due to fewer new customers added in the period, which led to lower SmartHub revenue, and decreased SmartLids purchased after our price increase that went into effect on October 1, 2024. The primary reason that fewer new customers were added and fewer products were sold was due to our focus on the next phase of our commercial strategy for the Dry Eye segment, which involves achieving reimbursed market access for our TearCare products instead of adding customers through a cash-pay models.

Previous 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.

Current wording

Cost of Goods Sold. Cost of goods sold was $2.4 million during the three months ended March 31, 2025, a decrease of $0.4 million from $2.8 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold increased $0.1 million as compared to the prior year comparable period. The increase was primarily driven by product sales mix and higher overhead costs per unit. Our Dry Eye cost of goods sold decreased $0.5 million in the three months ended March 31, 2025 compared to the prior year comparable period, primarily driven by lower revenue resulting from the shift in pricing strategy, partially offset by higher average selling prices.

Previous 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.

Current wording

Gross Profit and Gross Margin. Our total gross profit was $15.1 million in the three months ended March 31, 2025, a decrease of $1.4 million from the prior year comparable period. Our gross margin for the three months ended March 31, 2025 increased to 86.2%, from 85.5% in the prior year comparable period. Gross margin in our Surgical Glaucoma segment was 86.6% for the three months ended March 31, 2025, a decrease from 87.9% for the prior year comparable period, primarily due to product sales mix and higher overhead costs per unit. In our Dry Eye segment, gross margin increased from 42.1% for the three months ended March 31, 2024 to 70.6% for the three months ended March 31, 2025, primarily driven by the price increase for our TearCare SmartLids.

Previous 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.

Current wording

Selling, General, and Administrative Expenses. SG&A expenses were $24.5 million for the three months ended March 31, 2025, a decrease of $2.0 million from the prior year comparable period. The decrease was primarily driven by a $2.9 million decrease in legal expenses, and a $0.6 million decrease in commissions and bonuses, partially offset by a $1.0 million increase in sales training and marketing costs, and a $0.6 million increase in payroll-related expenses.

Previous 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.

Current wording

Investment Income. Investment income was $1.1 million for the three months ended March 31, 2025, a decrease of $0.5 million from the prior year comparable period, due to lower investment balances as well as lower yields on held-to-maturity investments during the current period.

Previous 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.

Current wording

Interest Expense. Interest expense decreased $0.1 million during the three months ended March 31, 2025 compared to the prior year comparable period, due to lower lending rates associated with the Hercules Loan Agreement.

Previous 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.

Current wording

Other Expense, Net. Other expense, net was expense of $0.1 million for the three months ended March 31, 2025, compared to expense of less than $0.1 million for the prior year comparable period.

Previous 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.

Current wording

Net Cash Used in Operating Activities. Net cash used in operating activities for the three months ended March 31, 2025 was $11.6 million, consisting primarily of a net loss of $14.2 million, as well as a net change in our operating assets and liabilities of $2.2 million, partially offset by non-cash charges of $4.8 million. The net change in our operating assets and liabilities was primarily due to a $4.6 million decrease in accrued compensation, and a $0.6 million increase in prepaid expenses and other current assets, partially offset by a $1.3 million decrease in accounts receivable, a $1.1 million increase in accounts payable, and a $0.5 million decrease in our inventory balance. The non-cash charges primarily consisted of $4.2 million related to stock-based compensation expense, $0.2 million of accretion of debt discount and debt issuance costs, $0.1 million of depreciation and amortization, and $0.1 million of noncash operating lease expense.

Previous 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.

Current wording

Net cash used in operating activities for the three months ended March 31, 2024 was $9.8 million, consisting primarily of a net loss of $16.3 million, partially offset by a net change in our operating assets and liabilities of $0.5 million and non-cash charges of $6.0 million. The net change in our operating assets and liabilities was primarily due to a $2.1 million increase in accrued and other current liabilities and a $1.0 million decrease in inventory. Other noncurrent liabilities decreased by $1.4 million, driven by the $2.1 million settlement of the final payment fee under the Prior Loan Agreement. In addition, we had a $1.4 million decrease in accounts receivable, while accrued compensation increased by $0.5 million. The non-cash charges primarily consisted of $4.5 million related to stock-based compensation, $1.0 million noncash loss on the extinguishment of debt, and $0.2 million of noncash operating lease expense.

Previous 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.

Current wording

Net Cash Used in Investing Activities. Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $0.0 million and $0.1 million, respectively. The cash used in the prior year was for purchases of property and equipment.

Previous 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.

Current wording

Net Cash (Used in) Provided by Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2025 was less than $0.1 million, consisting primarily of proceeds from the exercise of stock options. Net cash used in financing activities for the three months ended March 31, 2024 was $0.9 million, consisting primarily of the costs associated with refinancing the indebtedness under the Prior Loan Agreement.

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 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.

Current wording

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, the sale of common stock in our IPO, debt financing arrangements, and revenue from the sale of our products. 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 (the “Initial Loan”) funded under the Hercules Loan Agreement to discharge our indebtedness under our prior secured credit facility (the “Prior Loan Agreement”) with our prior lenders (the “Prior Lenders”). In December 2024, we consummated the drawdown of the $5.0 million Tranche I(b) term loan advance (the "Tranche I(b) Loan") contemplated by the Hercules Loan Agreement.

Previous 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.

Current wording

As of March 31, 2025, we had cash and cash equivalents of $108.8 million, an accumulated deficit of $360.5 million, and $40.0 million outstanding under the Hercules Loan Agreement (excluding debt discountand amortized debt issuance costs). 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

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”).

Current wording

In addition to the Initial Loan and the Tranche 1(b) Loan, the Hercules Loan Agreement provides additional tranches available to us (the “Tranche Loans,” and together with the Initial Loan and the Tranche I(b) Loan, the “Term Loans). Tranche 2 consists of $10.0 million available to draw through September 15, 2025, contingent upon the achievement of certain performance milestones prior to June 30, 2025. We do not currently anticipate achieving these milestones prior to the performance deadline. Tranche 3 consists of $15.0 million available to draw through the interest only period in increments of $5.0 million, subject to the sole approval of Hercules' investment committee.

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 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.

Current wording

The Hercules Loan Agreement provides for a maturity date of July 1, 2028, with an interest only period running for the first 30 months of the agreement term, extendable for an additional six months for a total of 36 months upon the achievement of certain milestones. The Term Loans accrue interest at a floating annual rate equal to the greater of 10.35%, or the Wall Street Journal prime rate plus 2.35%, with the interest rate equal to 10.35% at March 31, 2025. The final payment fee is set at 5.95% of the funded balance, which is recognized as a debt discount and is being accreted into the amortization of debt issuance costs using the effective interest rate method over the term of the loan.

Previous 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.

Current wording

The obligations under the Hercules Loan Agreement are guaranteed by us and our future subsidiaries, subject to exceptions for certain foreign subsidiaries. The obligations under the agreement are secured by substantially all of our assets, including its material intellectual property. Additionally, we are subject to customary affirmative and negative covenants, including covenants that limit or restrict our ability 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. We were in compliance with all covenants as of March 31, 2025.

Previous wording

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

Current wording

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenue and expense during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience, existing and known circumstances, authoritative accounting guidance, and various other factors we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.