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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-08 · 87 added, 198 removed, 100 unchanged (74% of the section changed)

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Since our founding in 1996, we have been producing critical reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics.

Our more than 2,500 active customers span the entire continuum of the life sciences market, including leading pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostics franchises, and academic and government research institutions.

Our approximately 3,000 customers span the entire continuum of the life sciences market, including leading pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostics franchises, and academic and government research institutions.

Our Company is built around our knowledge, methods, and know-how in our proprietary manufacturing processes, which are highly adaptable and configurable.

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Lab Essentials and Clinical Solutions.

Our products cross all stages of development, from early research through commercialization.

We offer three primary product types:

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and (iii) molecular biology reagents for sample manipulation, resuspension, and purification.

Our liquid cell culture media and supplements and molecular biology reagents are available in both of our two product categories;

Our liquid cell culture media and supplements and molecular biology reagents are available in both of our two primary product categories;

pre-poured media plates are available in our Lab Essentials category only.

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We typically recognize revenue when products are shipped.

We generated revenue of $9.6 million during the three months ended September 30, 2024, which represents an increase of $1.4 million compared to revenue of $8.2 million during the three months ended September 30, 2023.

For the three months ended September 30, 2024 and 2023, only 5.4% and 4.2%, respectively, of our revenue was generated from customers located outside of the United States.

We generated revenue of $28.5 million during the nine months ended September 30, 2024, which represents a decrease of $0.3 million compared to revenue of $28.8 million during the nine months ended September 30, 2023.

For the nine months ended September 30, 2024 and 2023, only 4.7% and 4.1%, respectively, of our revenue was generated from customers located outside of the United States.

We generated revenue of $9.8 million during the three months ended March 31, 2025, which represents an increase of $0.5 million compared to revenue of $9.3 million during the three months ended March 31, 2024.

For the three months ended March 31, 2025 and 2024, only 5.3% and 4.5%, respectively, of our revenue was generated from customers located outside of the United States.

Our sales outside of the United States are denominated in U.S.

We had an operating loss of $7.4 million during the three months ended September 30, 2024, compared to an operating loss of $8.8 million during the three months ended September 30, 2023.

We had an operating loss of $20.5 million during the nine months ended September 30, 2024, compared to an operating loss of $24.7 million during the nine months ended September 30, 2023.

We had an operating loss of $5.0 million during the three months ended March 31, 2025, compared to an operating loss of $8.0 million during the three months ended March 31, 2024.

While our expenses may fluctuate over the short term, we expect our expenses will continue to increase in future periods, but at a slower rate, in connection with our ongoing activities as we:

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General inflation in the U.S.

has risen to levels not experienced in recent decades.

While the rate of inflation has moderated in 2024, general inflation, including rising prices for our raw materials and other inputs, as well as rising salaries and other expenses, negatively impact our business by increasing our cost of sales and operating expenses.

In addition, during 2023 and early 2024, the U.S.

Federal Reserve has raised interest rates in response to concerns about inflation, and although the U.S.

Federal Reserve lowered interest rates in September of 2024, the direction and timing of future interest rate changes remains uncertain.

rose in recent years to levels not experienced in recent decades.

While the rate of inflation moderated in 2024, general inflation, including rising prices for our raw materials and other inputs, as well as rising salaries and other expenses, can negatively impact our business by increasing our

cost of sales and operating expenses.

In addition, during early 2024, the U.S.

Federal Reserve raised interest rates in response to concerns about inflation, and although the U.S.

Federal Reserve lowered interest rates in late 2024, the direction and timing of future interest rate changes remains uncertain.

Inflation, together with increased interest rates, may cause our customers to reduce, delay, or cancel orders for our goods and services, thereby causing a decrease in or change in timing of sales of our products and services.

We cannot predict the impact of future inflation and interest rate changes on the results of our operations.

Furthermore, changes to tariff and related international trade policy in early 2025 create uncertainty about the broader economy and our business.

For further information regarding the impact of these economic factors on the Company, please see the risk factors identified in Part I, Item 1A, Risk Factors, of our 2024 Annual Report on Form 10-K.

Results of Operations

Comparison of the Three Months Ended September 30, 2024, and Three Months Ended September 30, 2023

The following tables set forth our results of operations for the three months ended September 30, 2024 and 2023 (dollars in thousands):

For the Three Months Ended September 30,

Cost of sales

Operating expenses:

Research and development

Sales and marketing

General and administrative

Amortization of intangible assets

Total operating expenses

Loss from operations

Other expenses, net

Interest expense, net

Loss on extinguishment of debt

Other income, net

Total other expenses, net

Loss before income taxes

(Benefit from) provision for income taxes

Our revenue disaggregated by product category for the three months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Three Months Ended September 30,

Lab Essentials

Clinical Solutions

Total revenue

Total revenue was $9.6 million and $8.2 million for the three months ended September 30, 2024 and 2023, respectively.

Lab Essentials revenue was $7 .2 million for the three months ended September 30, 2024, a decrease of $0.1 million, or 1.6%, compared to $7.3 million for the three months ended September 30, 2023.

The decrease in Lab Essentials revenue was attributable to lower average revenue per customer, partially offset by an increased number of customers.

Clinical Solutions revenue was $2 .0 million for the three months ended September 30, 2024, an increase of $1 .4 million, or 229 .0 %, compared to $0.6 million for the three months ended September 30, 2023.

The increase in Clinical Solutions revenue was primarily attributable to an increased number of customers and, to a lesser extent, higher average revenue per customer.

Our revenue disaggregated by geographic region, for the three months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Three Months Ended September 30,

United States

International

Total revenue

Revenue from U.S.

sales was $9 .1 million and $7 .8 million for the three months ended September 30, 2024 and 2023, respectively.

Revenue from U.S.

sales as a percentage of our total revenue was consistent period over period, representing 94.6% and 95 .8 % of our total revenue during the three months ended September 30, 2024 and 2023, respectively.

Revenue from international sales was $0 .5 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively.

Revenue from international sales as a percentage of our total revenue was also consistent period over period, representing 5 .4 % and 4.2% of our total revenue during the three months ended September 30, 2024 and 2023, respectively.

Our gross profit for the three months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Three Months Ended September 30,

Cost of sales

Gross profit %

Gross profit percentage was 0 .9 % and 18.0% for the three months ended September 30, 2024 and 2023, respectively.

The decrease in gross profit percentage was primarily driven by $2.8 million of non-recurring and non-cash charges related to the disposal of expired inventory and write down of excess inventory created in the second half of 2022 when we increased production to meet high demand.

Excluding the $2.8 million of non-recurring and non-cash charges, the gross profit percentage for the three months ended September 30, 2024, would have been 29.8%, or an increase of more than 10% primarily driven by higher Clinical Solutions revenue coupled with reduced headcount.

Operating expenses

Our operating expenses for the three months ended September 30, 2024 and 2023, were as follows (dollars in thousands):

For the Three Months Ended September 30,

Research and development

Sales and marketing

General and administrative

Amortization of intangible assets

Total operating expenses

Research and development expenses were $0 .6 million and $1 .4 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by reduced headcount and supplies expense.

Sales and marketing expenses were $1 .6 million and $2.4 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by reduced headcount.

General and administrative expenses were $5.0 million and $6.1 million for the three months ended September 30, 2024 and 2023, respectively.

Excluding the one-time, non-recurring charge of $0.4 million related to the write-off of ATM Facility costs during the three months ended September 30, 2023, general and administrative expenses decreased $0.8 million compared to the three months ended September 30, 2023.

The decrease was driven by reduced spending, primarily in professional fees and insurance.

Amortization of intangible assets was consistent at $0.3 million for each of the three months ended September 30, 2024 and 2023.

Other expenses, net

Our other expenses, net for the three months ended September 30, 2024 and 2023, were as follows (dollars in thousands):

For the Three Months Ended September 30,

Interest expense, net

Loss on extinguishment of debt

Other income, net

Total other expenses, net

Total other expenses, net was $0.1 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease in total other expenses, net was primarily due to the $0.8 million loss on extinguishment of debt incurred during the three months ended September 30, 2023.

Additionally, interest expense was lower due to a lower debt balance outstanding despite higher interest rates, partially offset by higher interest income earned on short-term liquid investments.

(Benefit from) provision for income taxes

Our (benefit from) and provision for income taxes for the three months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Three Months Ended September 30,

(Benefit from) provision for income taxes

Effective tax rate

Our benefit from income taxes was not significant for the three months ended September 30, 2024, and our provision for income taxes was not significant for the three months ended September 30, 2023.

The effective tax rates for the three months ended September 30, 2024 and 2023 were 0.1% and (0.1)%, respectively.

The effective tax rates differ from the federal statutory rate primarily due to operating losses not expected to produce an income tax benefit.

Comparison of the Nine Months Ended September 30, 2024, and Nine Months Ended September 30, 2023

The following tables set forth our results of operations for the nine months ended September 30, 2024 and 2023 (dollars in thousands):

For the Nine Months Ended September 30,

Comparison of the Three Months Ended March 31, 2025, and Three Months Ended March 31, 2024

The following tables set forth our results of operations for the three months ended March 31, 2025 and 2024 (dollars in thousands):

For the Three Months Ended March 31,

Cost of sales

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Amortization of intangible assets

Long-lived assets impairment

Total operating expenses

Loss from operations

Other expenses, net

Other income (expenses), net

Interest expense, net

Loss on extinguishment of debt

Other income, net

Total other expenses, net

Other adjustment to loan exit fee

Total other income (expenses), net

Loss before income taxes

(Benefit from) provision for income taxes

Our revenue disaggregated by product category for the nine months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Nine Months Ended September 30,

Provision for (benefit from) income taxes

Our revenue disaggregated by product category for the three months ended March 31, 2025 and 2024, was as follows (dollars in thousands):

For the Three Months Ended March 31,

Lab Essentials

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Total revenue

Total revenue was $28.5 million and $28.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Lab Essentials revenue was $22 .1 million in each of the nine months ended September 30, 2024 and 2023.

Lab Essentials revenue was consistent as the decline in average revenue per customer was offset by a similar increase in number of customers.

Clinical Solutions revenue was $5 .2 million for the nine months ended September 30, 2024, a decrease of $0 .6 million, or 10 .4 %, compared to $5.9 million for the nine months ended September 30, 2023.

Total revenue was $9.8 million and $9.3 million for the three months ended March 31, 2025 and 2024, respectively.

Lab Essentials revenue was $8.1 million for the three months ended March 31, 2025, an increase of $0.9 million, or 11.7%, compared to $7.3 million for the three months ended March 31, 2024.

The increase in Lab Essentials revenue was attributable to an increased number of customers, partially offset by slightly lower average revenue per customer.

Clinical Solutions revenue was $1.2 million for the three months ended March 31, 2025, a decrease of $0 .6 million, or 32 .4 %, compared to $1.7 million for the three months ended March 31, 2024.

The decrease in Clinical Solutions revenue was attributable to lower average revenue per customer, partially offset by an increased number of customers.

Excluding revenue of $2.7 million from a single large order, Clinical Solutions revenue was up 66% for the nine months ended September 30, 2024.

Our revenue disaggregated by geographic region, for the nine months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Nine Months Ended September 30,

Our revenue disaggregated by geographic region, for the three months ended March 31, 2025 and 2024, was as follows (dollars in thousands):

For the Three Months Ended March 31,

United States

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Revenue from U.S.

sales was $27 .2 million and $27.6 million for the nine months ended September 30, 2024 and 2023, respectively.

sales was $9.3 million and $8.9 million for the three months ended March 31, 2025 and 2024, respectively.

Revenue from U.S.

sales as a percentage of our total revenue was consistent period over period, representing 95.3% and 95 .9 % of our total revenue during the nine months ended September 30, 2024 and 2023, respectively.

Revenue from international sales was $1 .3 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Revenue from international sales as a percentage of our total revenue was also consistent period over period, representing 4 .7 % and 4 .1 % of our total revenue during the nine months ended September 30, 2024 and 2023, respectively.

Our gross profit for the nine months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Nine Months Ended September 30,

sales as a percentage of our total revenue was consistent period over period, representing 94.7% and 95.5% of our total revenue during the three months ended March 31, 2025 and 2024, respectively.

Revenue from international sales was $0.5 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively.

Revenue from international sales as a percentage of our total revenue was also consistent period over period, representing 5.3% and 4.5% of our total revenue during the three months ended March 31, 2025 and 2024, respectively.

Our gross profit for the three months ended March 31, 2025 and 2024, was as follows (dollars in thousands):

For the Three Months Ended March 31,

Cost of sales

Gross profit %

Gross profit percentage was 17 .9 % and 31.1% for the nine months ended September 30, 2024 and 2023, respectively.

Excluding the $2.8 million of non-recurring and non-cash charges, gross profit for the nine months ended September 30, 2024, would have been 27.6%.

The decrease in gross profit was also driven by increased overhead costs, largely depreciation expense following the completion of our new manufacturing facility in the prior year, which were partially offset by reduced headcount.

Gross profit percentage was 30.7% and 23.8% for the three months ended March 31, 2025 and 2024, respectively.

The increase in gross profit was primarily driven by higher revenue coupled with lower overhead costs.

Operating expenses

Our operating expenses for the nine months ended September 30, 2024 and 2023, were as follows (dollars in thousands):

For the Nine Months Ended September 30,

Our operating expenses for the three months ended March 31, 2025 and 2024, were as follows (dollars in thousands):

For the Three Months Ended March 31,

Research and development

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Amortization of intangible assets

Long-lived assets impairment

Total operating expenses

Research and development expenses were $2 .2 million and $4.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by reduced headcount and supplies expense.

Sales and marketing expenses were $4 .8 million and $6.9 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease was primarily driven by reduced headcount.

General and administrative expenses were $17.8 million and $19.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Excluding the one-time, non-recurring charges related to the reduction in workforce of $1.3 million for the nine months ended September 30, 2024 and the non-recurring charges related to the reduction in workforce of $0.7 million and the $0.4 million write off related to ATM Facility costs during the nine months ended September 30, 2023, general and administrative expenses decreased $1.8 million compared to the nine months ended September 30, 2023.

The decrease was driven by reduced headcount and spending, primarily on professional fees and insurance, partially offset by increased stock-based compensation expense related to the stock option repricing as well as facility costs.

Research and development expenses were $0.6 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively.

The decrease was primarily driven by lower salaries and wages resulting from the reduction in workforce that was completed early during the three months ended March 31, 2024.

Sales and marketing expenses were $1.6 million and $1.7 million for the three months ended March 31, 2025 and 2024, respectively.

The decrease was primarily driven by lower salaries and wages resulting from the reduction in workforce that occurred during the three months ended March 31, 2024.

However, the decrease in salaries and wages was largely offset by increased marketing costs during the three months ended March 31, 2025.

General and administrative expenses were $5.5 million and $7.4 million for the three months ended March 31, 2025 and 2024, respectively.

Excluding the one-time, non-recurring charges related to the reduction in workforce of $1.3 million for the three months ended March 31, 2024, general and administrative expenses decreased $0.6 million.

The decrease was primarily driven by lower stock-based compensation expense due to repricing that occurred during the three months ended March 31, 2024.

See “Notes to Financial Statements—Note 13.

Stock-Based Compensation” for a more detailed discussion of the stock option repricing.

Amortization of intangible assets was consistent at $0.9 million for each of the nine months ended September 30, 2024 and 2023.

We incurred a $2.2 million impairment charge related to long-lived assets for the nine months ended September 30, 2023, with no comparable charges for the nine months ended September 30, 2024.

Refer to “Notes to Financial Statements—Note 6—Property, Plant, and Equipment, Net,” in our 2023 Annual Report on Form 10-K for details regarding the impairment.

Other expenses, net

Our other expenses, net for the nine months ended September 30, 2024 and 2023, were as follows (dollars in thousands):

For the Nine Months Ended September 30,

Amortization of intangible assets was consistent at $0.3 million for each of the three months ended March 31, 2025 and 2024.

Other income (expenses), net

Our other income (expenses), net for the three months ended March 31, 2025 and 2024, were as follows (dollars in thousands):

For the Three Months Ended March 31,

Interest expense, net

Loss on extinguishment of debt

Other income, net

Total other expenses, net

Total other expenses, net was $0.6 million and $1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in total other expenses, net was primarily due to the $0.8 million loss on extinguishment of debt incurred during the nine months ended September 30, 2023 coupled with lower interest capitalized.

Additionally, interest expense was lower due to a lower debt balance outstanding despite higher interest rates, partially offset by higher interest income earned on short-term liquid investments.

Capitalized interest costs were zero and $0.9 million for the nine months ended September 30, 2024 and 2023, respectively.

(Benefit from) provision for income taxes

Our (benefit from) and provision for income taxes for the nine months ended September 30, 2024 and 2023, was as follows (dollars in thousands):

For the Nine Months Ended September 30,

(Benefit from) provision for income taxes

Other adjustment to loan exit fee

Total other income (expenses), net

Total other income, net was $0.3 million for the three months ended March 31, 2025, compared to total other expenses, net of $0.1 million for the three months ended March 31, 2024.

The increase in total other income, net was primarily attributable to a $0.5 million adjustment recognized on the exit fee concurrent with the refinancing of our credit agreement during the three months ended March 31, 2025.

Provision for (benefit from) income taxes

Our provision for and (benefit from) income taxes for the three months ended March 31, 2025 and 2024, was as follows (dollars in thousands):

For the Three Months Ended March 31,

Provision for (benefit from) income taxes

Effective tax rate

Our benefit from income taxes was not significant for the nine months ended September 30, 2024, and our provision for income taxes was not significant for the nine months ended September 30, 2023.

The effective tax rates for the nine months ended September 30, 2024 and 2023 were 0.2% and (0.0)%, respectively.

Our income taxes were not significant for either the three months ended March 31, 2025 or 2024.

The effective tax rates for the three months ended March 31, 2025 and 2024 were (0.5%) and 0.4%, respectively.

The effective tax rates differ from the federal statutory rate primarily due to operating losses not expected to produce an income tax benefit.

Liquidity and Capital Resources

The primary sources of financing for our operations are our (i) initial public offering, which we completed in June 2021 (IPO) and resulted in net proceeds to us of $99.1 million, (ii) registered direct offering and concurrent private placement completed in September 2023 (collectively, the September 2023 Offerings), which resulted in aggregate gross proceeds of $22.9 million before deducting offering expenses of $0.4 million and the prepayment of $10.0 million owed under the Term Loan as discussed below, and (iii) private placement completed in July 2024 (the July 2024 Offering), which resulted in aggregate gross proceeds of $15.4 million before deducting offering expenses payable by the Company.

To facilitate our expected growth, we have used our sources of liquidity to make investments to expand our operations and increase capacity, and may continue to do so in the future.

In particular, we have completed the build out of our new manufacturing facility and have made improvements to our warehouse and distribution facilities, all located in Hollister, California.

The primary sources of financing for our operations are our (i) registered direct offering and concurrent private placement completed in September 2023 (collectively, the September 2023 Offerings), which resulted in aggregate gross proceeds of $22.9 million before deducting offering expenses of $0.4 million and the prepayment of $10.0 million owed under the Term Loan as discussed below, and (ii) private placement completed in July 2024 (the July 2024 Offering), which resulted in aggregate gross proceeds of $15.4 million before deducting offering expenses of $0.2 million.

Our principal liquidity requirements are to fund our operations and capital expenditures.

During the three and nine months ended September 30, 2024, we incurred net losses of $7.6 million and $21.0 million, respectively.

In addition, as of September 30, 2024, we had an accumulated deficit of $112.8 million and $12.1 million in borrowings outstanding under our Term Loan (defined below).

As of September 30, 2024, we had $36.2 million of working capital, which included $31.7 million in cash and cash equivalents and short-term investments.

As of September 30, 2024, we had an outstanding principal amount of $12.1 million under a senior secured term loan (the Term Loan) pursuant to Amendment No.

5 to our Credit Agreement with MidCap Financial Trust (MidCap).

On March 8, 2024, we entered into limited waivers and amendments (collectively Amendment No.

5, or, as amended, the Amended Credit Agreement ) which

includes a waiver from MidCap of the revenue covenant violations for each of the periods ending November 30, 2023 and January 31, 2024.

Amendment No.

5 also reduced the revenue covenants for future periods up to and including for the twelve months ending December 31, 2024, from $42.0 million to $34.0 million.

Amendment No.

5 also removed those requirements for the periods ending January 31, 2025 through December 31, 2025, instead requiring that for each applicable twelve-month period ending after December 31, 2024, our minimum net revenue requirement will be determined by MidCap in its reasonable discretion in consultation with the our senior management and based on financial statements and projections delivered to MidCap in accordance with the financial reporting requirements in the Amended Credit Agreement, so long as the minimum net revenue requirements for those periods shall not be less than the greater of (x) the applicable minimum net revenue requirement for the twelve-month period ending on the last day of the immediately preceding month and (y) $34.0 million.

In addition, Amendment No.

5 also removed the advance rate for finished goods inventory in the determination of the borrowing base for the Revolver and increased the minimum cash requirement from $9.0 million to $10.0 million.

Under the terms of the Amended Credit Agreement, cash and cash equivalents as well as short-term investments in U.S.

Treasuries are included in the determination of the minimum cash covenant.

Finally, Amendment No.

5 conditions the next borrowing under the Revolver on the Company achieving net revenue for the preceding twelve-month period of at least $38.0 million down from $45.0 million.

S ee “Notes to Financial Statements—Note 10—Long-term Debt, Net,” for a more detailed discussion of the material terms of our Amended Credit Agreement.

We were in compliance with our financial covenants under the terms of the Amended Credit Agreement as of September 30, 2024.

As a result of recent business improvements, benefits from the Amended Credit Agreement, and actions taken by management in the current fiscal year to reduce operating costs, and raise additional capital, management believes that there is no longer substantial doubt about our ability to continue as a going concern for the twelve-month period following the date on which the accompanying unaudited financial statements are being issued.

However, debt service requirements in the future require that we continue to execute our plans both in terms of operations and financial results.

Additionally, unforeseen events or changes in assumptions may occur and result in material differences between our future financial results or forecasts and the current financial forecast, and those differences could result in management concluding in the future, as it has in the past, that there is substantial doubt about our ability to continue as a going concern based upon the new information.

We also have an ATM Facility under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $50.0 million.

We will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the ATM Facility.

The aggregate market value of shares eligible for sale under the ATM Facility will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction.

See “Notes to Financial Statements—Note 11—Stockholder’s Equity,” for a more detailed discussion of the material terms of our ATM Facility.

As of September 30, 2024, our material cash requirements from known contractual obligations and commitments relate primarily to operating leases for our office, manufacturing, warehouse, and distribution facilities.

See “Notes to Financial Statements—Note 7—Leases,” for a discussion of our lease obligations reflected on our balance sheet.

As of March 31, 2025, we had $32.7 million in net working capital, which included $26.3 million in cash and cash equivalents and short-term investments.

Our material cash requirements from known contractual obligations and commitments relate primarily to operating leases for our office, manufacturing, warehouse, and distribution facilities at March 31, 2025.

See “Notes to Financial Statements—Note 9.

Leases,” for a discussion of our lease obligations reflected on our balance sheet.

In addition to our existing cash and cash equivalents and short-term investments, our principal source of liquidity is our credit facility.

On March 3, 2025, we entered into the Second Amended and Restated Credit Agreement with MidCap Financial (Midcap) Trust which provides for loan commitments in an aggregate amount of up to $28.245 million consisting of a $23.245 million senior secured term loan (Term Loan) and a $5.0 million working capital facility (Revolver).

The Amended Term Loan consists of the $12.135 million balance outstanding under the previous term loan, plus an additional $1.110 million related to the exit fee that would otherwise have been due upon closing of the Second and Amended Restated Term Loan Credit Agreement, as well as an additional tranche of $10.0 million that may become available for use in an acquisition, with MidCap’s consent.

The Second Amended and Restated Credit Agreement includes minimum net revenue requirements that are measured on a trailing twelve-month basis and a minimum cash requirement which is constant throughout the term of the agreement.

For example, our minimum net revenue requirement for the twelve months ending December 31, 2025, is $39.0 million.

The minimum cash requirement is $8.0 million, which includes cash and cash equivalents as well as short-term investments in U.S.

See “Notes to Financial Statements—Note 12.

Long-term Debt,” for a more detailed discussion of the material terms of our Second Amended and Restated Credit Agreement.

The following table sets forth, for the periods indicated, net cash flows used in operating activities, used in investing activities, and used in financing activities (in thousands):

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by investing activities

Net cash used in financing activities

Net decrease in cash and cash equivalents

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Net cash used in operating activities consists primarily of net loss adjusted for certain non-cash items (including depreciation and amortization, bad debt expense, deferred taxes, loss on disposal of property, plant, and equipment, inventory reserve, amortization of debt issuance costs, and stock-based compensation expense), and the effect of changes in working capital and other activities.

Net cash used in operating activities was $11.5 million for the nine months ended September 30, 2024, which primarily consisted of net loss of $21.0 million plus net adjustments for non-cash charges of $12.4 million, offset by net changes in operating assets and liabilities of $2.9 million.

The primary non-cash adjustments to net loss included $4.9 million of depreciation and amortization, a $4.2 million provision for inventory, $2.9 million of stock-based compensation, and $0.3 million of amortization of debt financing costs.

The main drivers of the changes in operating assets and liabilities were a $0.9 million increase in prepaid and other current assets, a $0.7 million decrease in accrued liabilities, a $0.7 million increase in accounts receivable, a $0.4 million decrease in accounts payable, and a $0.3 million increase in inventories, partially offset by a $0.3 million decrease other non-current assets.

Net cash used in operating activities was $15.9 million for the nine months ended September 30, 2023, which primarily consisted of net loss of $26.1 million plus net adjustments for non-cash charges of $10.8 million, offset by net changes in operating assets and liabilities of $0.6 million.

The primary non-cash adjustments to net loss included $4.0 million of depreciation and amortization, $3.1 million of stock-based compensation, a $2.2 million impairment charge related to long-lived assets, $0.8 million loss on extinguishment of debt, and $0.4 million in amortization of debt financing costs.

The main drivers of the changes in operating assets and liabilities were a $0.9 million decrease in accounts payable, a $0.7 million increase in accounts receivable, a $0.7 million increase in prepaid expenses and other current assets, partially offset by a $0.8 million increase in accrued liabilities, a $0.6 million decrease in inventories, and a $0.3 million decrease other non-current assets.

Net cash used in operating activities was $4.1 million for the three months ended March 31, 2025, which primarily consisted of net loss of $4.6 million plus net adjustments for non-cash charges of $2.3 million, offset by net changes in operating assets and liabilities of $1.8 million.

The primary non-cash adjustments to net loss included $1.6 million of depreciation and amortization, $0.9 million of stock-based compensation, and $0.4 million provision for inventory, partially offset an adjustment to the loan exit fee of $0.5 million, and amortization of the discount on short-term investments of $0.2 million.

The main drivers of the changes in operating assets and liabilities were a $1.3 million increase in accounts receivable, a $1.0 million decrease in accrued liabilities, and a $0.2 million increase in inventories, partially offset by a $0.7 million increase in accounts payable.

Net cash used in operating activities was $6.6 million for the three months ended March 31, 2024, which primarily consisted of net loss of $8.1 million plus net adjustments for non-cash charges of $3.0 million, offset by net changes in operating assets and liabilities of $1.5 million.

The primary non-cash adjustments to net loss included $1.6 million of depreciation and amortization and $1.3 million of stock-based compensation.

The main drivers of the changes in operating assets and liabilities were a $1.7 million decrease in accrued liabilities, and a $0.6 million increase in accounts receivable, partially offset by a $0.5 million decrease in inventories, a $0.2 million decrease in prepaid expenses and other current assets, a $0.1 million increase in accounts payable, and a $0.1 million decrease other non-current assets.

Investing Activities

Net cash used in investing activities was $25.9 million for the nine months ended September 30, 2024, which consisted of purchases of short-term investments of $25.4 million and purchases of property, plant, and equipment of $0.6 million, partially offset by proceeds from the sale of certain long-lived assets of $0.1 million.

Net cash used in investing activities was $7.6 million for the nine months ended September 30, 2023, which consisted of purchases of property, plant, and equipment.

Net cash provided by investing activities was $3.8 million for the three months ended March 31, 2025, which consisted of maturities of short-term investments of $6.0 million, partially offset by purchases of short-term investments of $2.0 million and purchases of property, plant, and equipment of $0.2 million.

Net cash provided by investing activities was not significant for the three months ended March 31, 2024, as proceeds from the sale of certain long-lived assets of $0.1 million were partially offset by purchases of property, plant, and equipment of $0.1 million.

Financing Activities

Net cash used in financing activities was $10.5 million for the nine months ended September 30, 2024, which was primarily attributable to net proceeds from the July 2024 Offering of $15.2 million, proceeds from financed insurance premiums of $0.4 million and proceeds of $0.1 million from the issuance of common stock under our employee stock purchase plan, partially offset by the repayment of financed insurance premiums of $0.6 million.

Net cash provided by financing activities was $13.4 million for the nine months ended September 30, 2023, which was primarily attributable to proceeds from the September 2023 Offerings of $22.9 million and proceeds from financed insurance premiums of $1.0 million, partially offset by repayment of long-term debt of $10.0 million, repayment of financed insurance premiums of $0.3 million and payment of offering costs of $0.4 million related to the ATM Facility.

We also received proceeds of $0.1 million from the exercise of stock options and $0.1 million from issuance of common stock under our employee stock purchase plan.

Net cash used in financing activities was $0.1 million for the three months ended March 31, 2025, which was primarily attributable to payment of exit fee costs of $1.1 million and repayment of financed insurance premiums of $0.1 million, largely offset by proceeds from long-term debt of $1.1 million.

Net cash used in financing activities was $0.3 million for the three months ended March 31, 2024, which was primarily attributable to repayments of financed insurance premiums.

Critical Accounting Policies and Estimates

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We have elected to avail ourselves of this exemption from adopting new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult.

We may take advantage of these reporting

exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

Under the JOBS Act, we will remain an emerging growth company until the earliest to occur of:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis