# 908 Devices Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [908 Devices Inc.](/companies/mass.md) (CIK 1555279)
- Form: 10-Q
- Filed: 2023-08-08
- Accepted by EDGAR: Aug 8, 2023, 13:15 ET
- Period: 2023-06-30
- Accession: 0001558370-23-013779
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1555279/000155837023013779/mass-20230630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1555279/000155837023013779/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $12.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $21.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $6.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $11.4m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $5.8m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-06-30 | $10.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $5.5m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-01-01 to 2023-06-30 | $10.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $11.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-06-30 | $23.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$10.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$24.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $551.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | −$71.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | −$122.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$9.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$21.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.29 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.68 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.29 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.68 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 32,199,156 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 32,083,122 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$18.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $1.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $133.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $181.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $210.8m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $20.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $36.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $174.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 69,120 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 15, 2023 (“2022 Form 10-K”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Item 1.A. Risk Factors” section of our 2022 Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.*

### Overview

We have developed an innovative suite of purpose-built handheld and desktop devices for point-of-need chemical and biochemical analysis. Leveraging our proprietary mass spectrometry, or Mass Spec, microfluidics, and analytics and machine learning technologies, we make devices that are significantly smaller and more accessible than conventional laboratory instruments. Our devices are used at the point-of-need to interrogate unknown and invisible materials and provide quick, actionable answers to directly address some of the most critical problems in life sciences research, bioprocessing, pharma/biopharma, forensics and adjacent markets.

We create simplified measurement devices that our customers can use as accurate tools where and when their work needs to be done, rather than overly complex and centralized analytical instrumentation. We believe the insights and answers our devices provide will accelerate workflows, reduce costs, and offer transformational opportunities for our end users.

Front-line workers rely upon our handheld devices to combat the opioid crisis and detect counterfeit pharmaceuticals and illicit materials in the air or on surfaces at levels 1,000 times below their lethal dose. Our desktop devices are accelerating development and production of biotherapeutics by identifying and quantifying extracellular species in bioprocessing critical to cell health and productivity. They sit alongside bioreactors and fermenters producing drug candidates, functional proteins, cell and gene therapies, and synthetic biology derived products. We believe the insights and answers our devices provide accelerate workflows, reduce costs, and offer transformational opportunities for our end users. The term “products” as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” refers to the MX908, Rebel, ZipChip Interface, Maven and related sampling devices.

On August 3, 2022, we entered into a share purchase and transfer agreement and completed our acquisition of 100% of the registered share capital of Trace, for a total purchase price consideration of $17.3 million, comprised of (i) a $14.4 million initial cash payment, (ii) up to $2.0 million contingent cash consideration upon achievement of certain milestones over a twenty-four-month period and (iii) $0.9 million contingent pension liability holdback to be released upon discharging or transferring of such liability from Trace. Trace is a leading provider of online analysis systems for biotech applications in research, development and production. Trace’s products are used for monitoring and control of complex processes in industrial pharmaceutical productions under continuous measurement conditions. We expect to integrate acquired sampling technology within future product offerings.

Since our inception, we have incurred significant operating losses. Our ability to generate revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $21.6 million and $19.4 million for the six months ended June 30, 2023 and 2022, respectively, and incurred net losses of $21.9 million and $17.5 million for those same periods. As of June 30, 2023, we had an accumulated deficit of $156.1 million. We expect to continue to incur net losses as we focus on growing commercial sales of our products in both the United States and international markets, including growing our sales teams, scaling our manufacturing operations, continuing research and development efforts to develop new products and further enhance our existing products. Further, we expect to incur additional costs associated with operating as a public company. As a result, we may need additional funding for expenses related to our operating activities, including selling, general and administrative expenses and research and development expenses.

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings, debt financings and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations.

We believe that our existing cash and cash equivalents and revenue from product and service will enable us to fund our operating expenses, capital expenditure requirements and debt service payments for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “*Liquidity and Capital Resources.”*

### Global Economic Conditions

We are continuing to closely monitor macroeconomic impacts, including, but not limited to, continued inflationary and interest rate pressures, challenging capital markets and financing alternatives and developments affecting financial institutions on our business, results of operations and financial results.

We are closely monitoring continued economic uncertainty in the United States and abroad, including volatility in the global markets and the rise and fluctuations in inflation and interest rates. These developments and the potential worsening of other macro-economic conditions present risks for us, and our suppliers and customers. For example, general inflation in the United States, EMEA and other geographies has risen to levels not experienced in recent decades, which has led to rising prices for our raw materials and other inputs, as well as rising salaries and travel expenses, which could continue to negatively impact our business by increasing our cost of sales and operating expenses. General inflation could also negatively impact our business if it leads to spending pressure and decreased available capital for our customers to deploy to purchase our products and services.

In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Inflation, together with increased interest rates, may cause our customers to reduce or delay orders for our goods and services thereby causing a decrease in or change in timing of sales of our products and services. The impact of future inflation and interest rate fluctuations on the results of our operations cannot be accurately predicted.

There also continues to be a challenging environment for the public capital markets and other financing alternatives to raise cash, which, together with inflationary and interest rates pressures, may be contributing to more cautious spending by our customers. Certain of our pharmaceutical and biotechnology customers, including bioprocessing customers, may evaluate their inventory levels, cash on hand and path to profitability, and institute cost controls and take other actions to reduce or delay purchases of our products and services. We cannot accurately predict the extent of the full impact on the budgets and capital expenditures of our customers, or the timing of the normalization of customer purchasing patterns.

We are also monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including SVB, being closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver on March 10, 2023, Signature Bank being closed by its New York State Department of

Financial Services on March 12, 2023, and other financial institutions. We are also monitoring the impacts that these events may have on our customers and vendors. Despite the steps taken to date by U.S. agencies to protect depositors, and the subsequent acquisition of SVB by First-Citizens Bank & Trust Company, the follow-on effects of the events surrounding the SVB and Signature Bank failures and pressure on other banks are unknown, and could include failures of other financial institutions to which we may encounter direct or indirect exposure. The extent of such impacts is uncertain, and there may be additional risks that we have not yet identified. We continue to monitor the situation on U.S. financial institutions and potential impact on our business.

While conditions related to the COVID-19 pandemic generally have improved further in the first half of 2023 compared to fiscal 2022, and our business operations are no longer significantly impacted, we will continue to monitor supply chain risks and other potential lingering impacts. On April 10, 2023, the U.S. announced that the public health emergency related to COVID-19 ended. The Company does not anticipate significant impact from the expiration of the public health emergency.

While it is difficult to predict all of the impacts these global economic events and developments affecting financial institutions, and rising inflation and interest rates will have on our business and to predict the effects of these factors on our customers’ spending in the near term, we believe the long-term opportunity that we see for our products and services remain unchanged.

For further discussion of the possible impacts of these global factors and other risks on our business, see Part I, Item 1A, “Risk Factors,” of our 2022 Form 10-K.

### Factors Affecting Our Performance

We believe that our financial performance has been and in the foreseeable future will continue to be primarily driven by the following factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address to sustain our growth and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties.

### Device sales

Our financial performance has largely been driven by, and in the future will continue to be impacted by, the rate of sales of our handheld and desktop devices. Management focuses on device sales as an indicator of current business success and a leading indicator of likely future recurring revenue from consumables and services. We expect our device sales to continue to grow as we increase penetration in our existing markets and expand into, or offer new features and solutions that appeal to, new markets.

We plan to grow our device sales in the coming years through multiple strategies including expanding our sales efforts domestically and globally and continuing to enhance the underlying technology and applications for life sciences research related to our Rebel, ZipChip Interface, Maven and related sampling devices. We regularly solicit feedback from our customers and focus our research and development efforts on enhancing our devices and enabling our customers to use additional applications that address their needs, which we believe in turn helps to drive additional sales of our devices and consumables.

Our sales process varies considerably depending upon the type of customer to whom we are selling. Historically, our handheld devices have been used by state, federal and foreign governments and governmental agencies. Our sales process with government customers is often long and involves multiple levels of approvals, testing and, in some cases, trials. Device orders from a government customer are typically large orders and can be impacted by the timing of their capital budgets. As a result, the revenue for our handheld devices can vary significantly from period-to-period and has been and may continue to be concentrated in a small number of customers in any given period.

Our desktop devices are typically used by the pharmaceutical, biotechnology and academia markets. Our sales cycles within these markets tend to vary based on the size of the customer and the number of devices they purchase. Our shortest sales cycles are typically for small laboratories and individual researchers where, in some cases, we receive purchase orders from these customers within three months. Our sales process with other institutions can be longer with most customers submitting purchase orders within six to twelve months. Given the variability of our sales cycle, we have in the past experienced, and likely will in the future experience, fluctuations in our desktop device sales on a period-to-period basis.

### Recurring revenue

We regularly assess trends relating to recurring revenue which includes consumables, accessories and services based on our product offerings, our customer base and our understanding of how our customers use our products. Recurring revenue was 39% and 29% of total product and service revenue for the six months ended June 30, 2023 and 2022, respectively. Our recurring revenue as a percentage of total product and service revenue will vary based upon new device placements in the period. As our device installed base expands, recurring revenue on an absolute basis is expected to increase and over time should be an increasingly important contributor to our revenue.

Revenue from the sales of consumables will vary by type of device. We expect that recurring revenue as a percentage of the original device price to be higher for our desktop devices (Rebel, ZipChip Interface, Maven and related sampling devices) than for our handheld device (MX908). While we sell single-use swab samplers for MX908 to be used in liquid and solid materials analysis, there are a number of other applications that the MX908 can be used for that do not require consumables. Rebel and ZipChip Interface require consumables kits for all areas of operations. Currently, Rebel customers, who are actively utilizing the device, are consuming on average approximately half a 200-sample kit per month; however, Rebel is a new product and purchasing patterns related to our consumables kits are evolving. We expect that the number of kits sold per month will vary over the short term. In time, we expect Rebel consumables kits sales to become more consistent as our installed base grows and our customers establish usage patterns. At maximum potential capacity, with continuous operation, the Rebel can consume approximately one 200-sample kit per day. Maven and related sampling devices require consumable sets of buffers, probes and biosensors for all areas of operations.

### Revenue mix and gross margin

Our revenue is derived from sales of our devices, consumables, accessories and services. There will be fluctuations in mix between devices and recurring from period-to-period. Over time, as our device installed base grows and we see adoption of Rebel, we expect consumables revenue to constitute a larger percentage of product and service revenue. However, the percentage will be subject to fluctuation based upon our handheld sales in a period. In addition, our selling price and, consequently, our margins, are higher for those devices and recurring revenue that we sell directly to customers as compared to those that we sell through distributors. While we expect the mix of direct sales as compared to sales through distributors to remain relatively constant in the near term, we are currently evaluating increasing our direct sales capabilities in certain geographies.

Future device and recurring selling prices and gross margins may fluctuate due to a variety of factors, including the introduction by others of competing products and solutions. We aim to mitigate downward pressure on our average selling prices by increasing the value proposition offered by our devices and consumables and accessories, primarily by expanding the applications for our devices and increasing the quantity and quality of data that can be obtained using our consumables.

### Product adoption

We monitor our customers’ stage of adoption of our products to provide insight into the timing of future potential sales and to help us formulate financial projections. Typical stages of adoption include testing, trials, pilot and deployment as follows:

- Testing—a customer is actively engaged with internal or external testing of our products. This may include an onsite or virtual demonstration with a salesperson, a customer submitting samples for testing in one of our facilities or testing by a third party.
- Trials—a customer has committed to a trial of one of our products, which may include a defined period to assess functionality of the device in their operational environment (in the field or onsite within the customer’s facility).
- Pilot—a customer commits to the purchase of an initial quantity of devices to deploy in their operational environment to assess a broader opportunity that may grow to tens or hundreds of devices.
- Deployment—a customer has completed testing, a trial, and/or a pilot and intends to roll out the technology across their enterprise (either at a site or throughout the entire organization).

### Key Business Metrics

We regularly review the number of product placements and cumulative product placements as key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. We group our products into handheld and desktop devices that have average selling prices that are meaningful and are actively being sold to our customer base. We believe that these metrics are representative of our current business; however, we anticipate these will change or may be substituted for additional or different metrics as our business grows.

During the three and six months ended June 30, 2023 and 2022, our product placements (units recognized as revenue) were as follows:

| ​ ​ ​ ​ ​ Product Placements: ​ | ​ ​ Three Months Ended June 30, 2023 ​ ​ | ​ ​ ​ 2022 ​ | ​ ​ Six Months Ended June 30, 2023 ​ ​ | ​ ​ ​ 2022 ​ ​ |
| --- | ---: | ---: | ---: | ---: |
| Handheld | 107 | 102 | 169 | 165 |
| Desktop | 15 | 22 | 31 | 42 |

The number of product placements vary considerably from period-to-period due to the type and size of our customers and concentrations among larger government customers as described above. We expect continued fluctuations in our period-to-period number of product placements.

Our cumulative product placements consist of the following number of devices:

| ​ ​ ​ ​ ​ Cumulative Product Placements: ​ | ​ ​ June 30, 2023 ​ ​ | ​ ​ ​ 2022 ​ ​ |
| --- | ---: | ---: |
| Handheld | 2,189 | 1,815 |
| Desktop | 401 | 327 |

### Components of Our Results of Operations

### Revenue

#### Product and Service Revenue

We generate product and service revenue from the sale of our devices and recurring revenue from the sale of consumables, accessories and services. Device sales accounted for 61% and 71% of our product and service revenue for the six months ended June 30, 2023 and 2022, respectively. Recurring revenue accounted for 39% and 29% of our product and service revenue for the six months ended June 30, 2023 and 2022, respectively.

Our current device offerings include:

- Handheld devices—MX908; and
- Desktop devices—Rebel and ZipChip Interface, Maven and related sampling devices.

We sell our devices directly to customers and through distributors. Each of our device sales drives various streams of recurring revenue comprised of consumable and accessory product sales and service revenue.

Our consumables consist of:

- MX908—accessories and swabs;
- Rebel—consumables kit with a microfluidic chip and standards;
- ZipChip Interface—microfluidic chip, reagent and assay kits; and
- Maven and related sampling devices—probes, tubing sets and accessories.

Rebel and ZipChip Interface consumables can only be used with our devices and there are no alternative after-market options that can be used as a substitute. Each chip is used for a defined number of samples (or runs). We recognize revenue from the sale of consumables as the consumable products are shipped.

We also offer our customers extended warranty and service plans. Our extended warranty and service plans are offered for periods beyond the standard one-year warranty that all of our customers receive. These extended warranty and service plans generally have fixed fees and terms ranging from one additional year to four additional years. We recognize revenue from the sale of extended warranty and service plans over the respective coverage period, which approximates the service effort provided by us.

We expect consumables and service revenue to increase in future periods as our installed base grows and we are able to generate recurring sales.

#### Contract revenue

Contract agreements are arrangements whereby we provide engineering services for the development of our technology platform for specific programs or new and expanding applications of our technologies for future commercial endeavors. Our contract agreements are with the U.S. government and commercial entities (who may be contracting with the government). Contracts typically include compensation for labor effort and materials incurred related to the deliverables under the contract. Our contract revenue was primarily related to one customer during the three and six months ended June 30, 2023 and was comprised of three customers during the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2023 and 2022, our revenue was comprised of revenue from the following sources:

| ​ ​ ​ Product and service revenue: | ​ ​ | ​ ​ Three Months Ended June 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ | ​ ​ Six Months Ended June 30, 2023 ​ | ​ | ​ ​ 2022 ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Device sales revenue | ​ | $7,959 | ​ | $7,755 | ​ | $13,042 | ​ | $13,287 |
| Recurring revenue | ​ | 3,990 | ​ | 2,853 | ​ | 8,169 | ​ | 5,350 |
| Total product and service revenue | ​ | 11,949 | ​ | 10,608 | ​ | 21,211 | ​ | 18,637 |
| Contract revenue | ​ | 145 | ​ | 498 | ​ | 370 | ​ | 775 |
| Total revenue | ​ | $12,094 | ​ | $11,106 | ​ | $21,581 | ​ | $19,412 |

Our product and service revenue is comprised of sales of our handheld and desktop devices and related consumables, accessories and service contracts to end-users in the government, pharmaceuticals/biotechnology and academia markets as follows:

| ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Government | $8,812 | ​ | $7,002 | ​ | $14,992 | ​ | $11,719 | ​ |
| Pharmaceutical/Biotechnology | ​ 3,106 | ​ | 3,577 | ​ | ​ 6,158 | ​ | 6,705 | ​ |
| Academia and other | ​ 31 | ​ | 29 | ​ | ​ 61 | ​ | 213 | ​ |
| Total product and service revenue | $11,949 | ​ | $10,608 | ​ | $21,211 | ​ | $18,637 | ​ |

We sell our products primarily in the United States; however, we continue to expand our global sales efforts as we see traction in our products and assess global market needs. The majority of our international sales are through a distribution channel.

### Cost of Revenue, Gross Profit and Gross Margin

Product cost of revenue primarily consists of costs for raw material parts and associated freight, shipping and handling costs, royalties, contract manufacturer costs, salaries and other personnel costs, overhead, amortization of intangibles and other direct costs related to those sales recognized as product revenue in the period.

Cost of revenue for services primarily consists of salaries and other personnel costs, travel related to services provided, facility costs associated with training, warranties and other costs of servicing equipment on a return-to-factory basis and at customer sites. Contract cost of revenue primarily consists of salaries and other personnel costs, materials, travel and other direct costs related to the revenue recognized in the period. The contract cost of revenue will vary based upon the type of contract, including whether it is primarily for development services or for both materials and development services.

We expect that our cost of revenue will increase or decrease to the extent that our revenue increases and decreases and depending on how many contracts we have ongoing at any given point in time and the stage of those contracts.

Gross profit is calculated as revenue less cost of revenue. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including: market conditions that may impact our pricing, sales mix among devices, sales mix changes among consumables, excess and obsolete inventories, our cost structure for manufacturing operations relative to volume, and product warranty obligations. Our gross profit in future periods will vary based upon our channel mix and may decrease based upon our distribution channels and the potential to establish original equipment manufacturing channels for certain components of our technology platform which would have a lower gross margin.

We expect that our gross profit margin for product and service will increase over the long term as our sales and production volumes increase and our cost per unit decreases due to efficiencies of scale. We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing, which we believe will reduce costs and increase our gross margin. We expect that our gross profit margin for contract will remain consistent for our contracts that are cost reimbursement contracts.

### Operating Expenses

#### Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering and consultant services and other costs associated with our technology platform and products, which include:

- employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and hardware and software development functions;
- the cost of maintaining and improving our product designs, including third party development costs for new products and materials for prototypes;
- research materials and supplies; and
- facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.

We believe that our continued investment in research and development is essential to our long-term competitive position and expect these expenses to increase in future periods.

#### Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries and other personnel costs, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal, audit and accounting services. We expect selling, general and administrative expenses, amortization of customer relationship and tradename intangibles to increase in future periods as the number of sales, sales application specialists and marketing and administrative personnel grows and we continue to introduce new products, invest in demonstration equipment, broaden our customer base and grow our business. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

### Other Income (Expense)

#### Interest income

Interest income consists of interest earned on our invested cash balances.

#### Interest expense

Interest expense consists of interest expense associated with outstanding borrowings under our loan and security agreements and the amortization of deferred financing costs and debt discounts associated with such arrangements. In the three and six months ended June 30, 2023, our interest expense also includes our loss on debt extinguishment resulting from the write off of the initial fees incurred and potential termination fees related to our 2022 Revolver.

#### Other income (expense), net

Other income (expense), net consists of miscellaneous other income and expense unrelated to our core operations.

### Provision for Income Taxes

We have not recorded any U.S. federal or state income tax benefits for the net operating losses we have incurred in each year or for the research and development tax credits we generated in the United States and have recorded a full valuation allowance against our net deferred assets, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. As of December 31, 2022, we had gross federal and state operating loss carryforwards of $92.3 million and $64.0 million, respectively, which may be available to offset future taxable income and begin to expire in 2032 and 2025, respectively, of which $57.9 million of federal gross operating losses do not expire. As of December 31, 2022, we also had U.S. federal and state research and development tax credit carryforwards of $5.9 million and $2.8 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2032 and 2029, respectively.

### Results of Operations

### Comparison of the three months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:

*(in thousands)*

| ​ ​ ​ ​ Revenue: | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ | ​ ​ ​ ​ Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Product revenue | ​ | $9,595 | ​ | $9,082 | ​ | $513 |
| Service revenue | ​ | ​ 2,354 | ​ | ​ 1,526 | ​ | ​ 828 |
| Contract revenue | ​ | 145 | ​ | 498 | ​ | (353) |
| Total revenue | ​ | 12,094 | ​ | 11,106 | ​ | 988 |
| Cost of revenue: | ​ |  | ​ |  | ​ |  |
| Product cost of revenue | ​ | 4,800 | ​ | 3,304 | ​ | 1,496 |
| Service cost of revenue | ​ | ​ 1,448 | ​ | ​ 1,057 | ​ | ​ 391 |
| Contract cost of revenue | ​ | 52 | ​ | 111 | ​ | (59) |
| Total cost of revenue | ​ | 6,300 | ​ | 4,472 | ​ | 1,828 |
| Gross profit | ​ | 5,794 | ​ | 6,634 | ​ | (840) |
| Operating expenses: | ​ |  | ​ |  | ​ |  |
| Research and development | ​ | 5,525 | ​ | 4,293 | ​ | 1,232 |
| Selling, general and administrative | ​ | 11,208 | ​ | 10,710 | ​ | 498 |
| Total operating expenses | ​ | 16,733 | ​ | 15,003 | ​ | 1,730 |
| Loss from operations | ​ | (10,939) | ​ | (8,369) | ​ | (2,570) |
| Other income (expense): | ​ |  | ​ |  | ​ |  |
| Interest income | ​ | ​ 1,689 | ​ | ​ 293 | ​ | ​ 1,396 |
| Interest expense | ​ | — | ​ | (15) | ​ | 15 |
| Other expense, net | ​ | (167) | ​ | (8) | ​ | (159) |
| Total other income, net | ​ | 1,522 | ​ | 270 | ​ | 1,252 |
| Loss from operations before income taxes | ​ | ​ (9,417) | ​ | ​ (8,099) | ​ | ​ (1,318) |
| Benefit for income taxes | ​ | ​ 71 | ​ | ​ — | ​ | ​ 71 |
| Net loss | ​ | $(9,346) | ​ | $(8,099) | ​ | $(1,247) |

### Revenue, Cost of Revenue and Gross Profit

#### Product

Our product revenue is comprised of revenue from sales of devices and related accessories and consumables and service as follows:

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Product revenue | ​ | $9,595 ​ | $9,082 ​ | $513 | 6% |
| Product cost of revenue | ​ | 4,800 ​ | 3,304 ​ | 1,496 | 45% |
| Gross profit | ​ | $4,795 ​ | $5,778 ​ | $(983) | (17)% |
| Gross profit margin | ​ | 50% | 64% | (14)% | ​ ​ |

Product revenue increased by $0.5 million, or 6%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was primarily related to $1.1 million in higher handheld device revenues resulting from five additional placements and a higher average selling price resulting from channel mix with more devices placed through distribution in the prior year period. In addition, consumable and accessory revenue increased $0.3 million during the three months ended June 30, 2023, compared to the prior year period, with the increase split across both desktops and handhelds.

These increases were offset, in part, by a $0.8 million decrease in desktop device sales, primarily related to a nine unit decrease in Rebel device placements for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Product cost of revenue increased by $1.5 million, or 45%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase in product cost of revenue was primarily related to $0.5 million in higher costs related to unabsorbed facility and labor overhead from lower production builds in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, which was the highest build quarter in calendar year 2022. In addition cost of revenue increased $0.5 million due to higher materials and supplies consumed in warranty and production activities, $0.2 million from higher product revenue volume, $0.2 million in material costs from the mix of products sold, and $0.1 million in intangibles amortization.

Product gross profit decreased by $1.0 million, or 17%, and gross profit margin decreased by fourteen percentage points for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. The decreases in product gross profit margin was primarily due to lower production builds in the three months ended June 30, 2023 resulting in an approximately five percentage point decrease, an increase in materials and supplies used in warranty and production activities resulting in an approximately five percentage point decrease, higher non-cash charges for intangible amortization of approximately one percentage points and a gross profit decrease related to the product mix, mainly with the handheld accessory and consumables that have a lower gross profit contribution, compared to handheld devices.

#### Service

Our service revenue is comprised of revenue from sales of extended warranty and service plans and customer training as follows:

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Service revenue | ​ | $2,354 ​ | $1,526 ​ | $828 | 54% |
| Service cost of revenue | ​ | 1,448 ​ | 1,057 ​ | 391 | 37% |
| Gross profit | ​ | $906 ​ | $469 ​ | $437 | 93% |
| Gross profit margin | ​ | 38% | 31% | 7% | ​ ​ |

Service revenue increased by $0.8 million, or 54%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was primarily related to an increase in handheld service revenues related to extended service contracts for MX908 devices and to a lesser extent increases in handheld training revenue and desktop service arrangements.

Service cost of revenue increased by $0.4 million, or 37%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase in service cost of revenue was primarily related to higher personnel costs to support the increase in service revenue as well as an increase in contract trainers used to support the higher handheld training revenue.

Service gross profit increased by $0.4 million, or 93%, and gross profit margin increased by seven percentage points for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to the ability to leverage the fixed infrastructure with the service team across both handhelds and desktops.

#### Contract

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Contract revenue | ​ | $145 ​ | $498 ​ | $(353) | (71)% |
| Contract cost of revenue | ​ | 52 ​ | 111 ​ | (59) | (53)% |
| Gross profit | ​ | $93 ​ | $387 ​ | $(294) | (76)% |
| Gross profit margin | ​ | ​ 64% | ​ 78% | ​ (14)% | ​ ​ |

Contract revenue decreased by $0.4 million, or 71%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The majority of contract revenue for the three months ended June 30, 2023, was related to activities under our subcontract agreement with a commercial entity that holds a U.S. government prime contract and funding was relatively unchanged in the three months ended June 30, 2023, compared to the prior year period. The decrease in contract revenue for the three months ended June 30, 2023 is primarily related to the completion of work in 2022 related to a prime contract directly with the U.S. government and a subcontract agreement with a commercial entity that holds a U.K. government prime contract.

Contract cost of revenue decreased by $0.1 million, or 53%, for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily related to the reduction in material costs related to the contract deliverables for the prime contract held directly with the U.S. government and a subcontract agreement with a commercial entity that holds a U.K. government prime contract for the three months ended June 30, 2022.

Contract gross profit decreased by $0.3 million and gross profit margin decreased by 14 percentage points for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily due to the mix in contract deliverables, including a mix of materials with lower costs during the three months ended June 30, 2023, which resulted in a higher gross profit margin for that period, as compared to the three months ended June 30, 2022.

### Operating Expenses

#### Research and development

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ Change Amount% | ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: |
| Research and development expenses | ​ | $5,525 ​ | $4,293 | $1,232 |  | 29% |
| Percentage of total revenue | ​ | 46% | 39% | ​ | ​ | ​ ​ |

Our research and development expenses were $5.5 million for the three months ended June 30, 2023, an increase of $1.2 million from research and development expenses of $4.3 million for the three months ended June 30, 2022. The increase was due primarily to a $0.5 million increase in salaries and related costs from the impact of headcount added in 2022, a $0.3 million increase in stock-based compensation and a $0.2 million increase in occupancy related expenses.

#### Selling, general and administrative expenses

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ Change Amount% | ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: |
| Selling, general and administrative expenses | ​ | $11,208 ​ | $10,710 ​ | $498 |  | 5% |
| Percentage of total revenue | ​ | 93% | 96% | ​ ​ | ​ | ​ ​ |

Our selling, general and administrative expenses were $11.2 million for the three months ended June 30, 2023, an increase of $0.5 million from selling, general and administrative expenses of $10.7 million for the three months ended June 30, 2022. The increase was due primarily to a $0.3 million increase in stock-based compensation, a $0.2 million increase in acquisition-related costs for intangible amortization and valuation of contingent milestones, a $0.2 million increase is personnel related costs and a $0.1 million increase in a provision for credit losses. These increases were partially offset by a $0.4 million decrease in insurance costs, primarily related to our director and officer insurance premiums that decreased with market rates for 2023.

### Other Income

#### Interest income

Interest income increased by $1.4 million for the three months ended June 30, 2023 from $0.3 million for the three months ended June 30, 2022. The increase was primarily due to higher interest rates on our interest bearing accounts.

#### Other income (expense), net

Other income (expense), net was $0.2 million for the three months ended June 30, 2023 and did not change materially from the three months ended June 30, 2022.

### Comparison of the six months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:

*(in thousands)*

| ​ ​ ​ ​ Revenue: | ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 ​ | ​ ​ | ​ ​ 2022 ​ | ​ ​ ​ | ​ ​ ​ ​ Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Product revenue | ​ | $16,617 | ​ | $15,589 | ​ | $1,028 |
| Service revenue | ​ | ​ 4,594 | ​ | ​ 3,048 | ​ | ​ 1,546 |
| Contract revenue | ​ | 370 | ​ | 775 | ​ | (405) |
| Total revenue | ​ | 21,581 | ​ | 19,412 | ​ | 2,169 |
| Cost of revenue: | ​ |  | ​ |  | ​ |  |
| Product cost of revenue | ​ | 8,586 | ​ | 6,276 | ​ | 2,310 |
| Service cost of revenue | ​ | ​ 2,718 | ​ | ​ 2,126 | ​ | ​ 592 |
| Contract cost of revenue | ​ | 99 | ​ | 247 | ​ | (148) |
| Total cost of revenue | ​ | 11,403 | ​ | 8,649 | ​ | 2,754 |
| Gross profit | ​ | 10,178 | ​ | 10,763 | ​ | (585) |
| Operating expenses: | ​ |  | ​ |  | ​ |  |
| Research and development | ​ | 10,923 | ​ | 8,198 | ​ | 2,725 |
| Selling, general and administrative | ​ | 23,211 | ​ | 20,455 | ​ | 2,756 |
| Total operating expenses | ​ | 34,134 | ​ | 28,653 | ​ | 5,481 |
| Loss from operations | ​ | (23,956) | ​ | (17,890) | ​ | (6,066) |
| Other income: | ​ |  | ​ |  | ​ |  |
| Interest income | ​ | ​ 2,706 | ​ | ​ 464 | ​ | ​ 2,242 |
| Interest expense | ​ | (551) | ​ | (35) | ​ | (516) |
| Other expense, net | ​ | ​ (200) | ​ | (53) | ​ | (147) |
| Total other income, net | ​ | 1,955 | ​ | 376 | ​ | 1,579 |
| Loss from operations before income taxes | ​ | ​ (22,001) | ​ | ​ (17,514) | ​ | ​ (4,487) |
| Benefit for income taxes | ​ | ​ 122 | ​ | ​ — | ​ | ​ 122 |
| Net loss | ​ | $(21,879) | ​ | $(17,514) | ​ | $(4,365) |

### Revenue, Cost of Revenue and Gross Profit

#### Product

Our product revenue is comprised of revenue from sales of devices and related accessories and consumables as follows:

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Product revenue | ​ | $16,617 ​ | $15,589 ​ | $1,028 | 7% |
| Product cost of revenue | ​ | 8,586 ​ | 6,276 ​ | 2,310 | 37% |
| Gross profit | ​ | $8,031 ​ | $9,313 ​ | $(1,282) | (14)% |
| Gross profit margin | ​ | 48% | 60% | (12)% | ​ |

Product revenue increased by $1.0 million, or 7%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was primarily related to $1.2 million in higher consumable and accessory revenue, which included a $0.8 million increase in handheld accessories and consumables. The increase in consumable and accessory revenue was offset in part by a decrease in device sales of $0.2 million which was due to a decrease of $1.7 million in desktop device sales, primarily related to a 20 unit decrease in Rebel device placements, offset in part by an increase of $1.5 million in handheld device sales for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, which was attributable to higher device placements and higher average selling prices primarily due to channel mix with direct sales.

Product cost of revenue increased by $2.3 million, or 37%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase in product cost of revenue was primarily related to $0.7 million in higher costs related to unabsorbed facility and labor overhead from lower production builds in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, $0.6 million in higher materials and supplies consumed in warranty and production activities, $0.3 million in material costs from higher product volume, $0.2 million in intangibles amortization and a $0.2 million increase in shipping costs.

Product gross profit decreased by $1.3 million, or 14%, and gross profit margin decreased by twelve percentage points for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due the lower production builds in the six months ended June 30, 2023 resulting in an approximately four percentage point decrease, an increase in materials and supplies used in warranty and production activities resulting in an approximately four percentage point decrease, the higher non-cash charges for intangible amortization of approximately one percentage point and a gross profit decrease related to the product mix with the handheld accessory and consumables that have a lower gross profit contribution, compared to handheld devices.

#### Service

Our service revenue is comprised of revenue from sales of extended warranty and service plans and customer training as follows:

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Service revenue | ​ | $4,594 ​ | $3,048 ​ | $1,546 | 51% |
| Service cost of revenue | ​ | 2,718 ​ | 2,126 ​ | 592 | 28% |
| Gross profit | ​ | $1,876 ​ | $922 ​ | $954 | 103% |
| Gross profit margin | ​ | 41% | 30% | 11% | ​ |

Service revenue increased by $1.5 million, or 51%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was primarily related to an increase in handheld service revenues related to extended service contracts for MX908 devices and to a lesser extent increases in handheld training revenue and desktop service arrangements.

Service cost of revenue increased by $0.6 million, or 28%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase in service cost of revenue was primarily related to higher personnel costs to support the increase in service revenue as well as an increase in contract trainers used to support the higher handheld training revenue.

Service gross profit increased by $1.0 million, or 103%, and gross profit margin increased by eleven percentage points for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to the ability to leverage the fixed infrastructure with the service team across both handhelds and desktops.

#### Contract

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ Change Amount% | ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Contract revenue | ​ | $370 ​ | $775 ​ | $(405) | (52)% |
| Contract cost of revenue | ​ | 99 ​ | 247 ​ | (148) | (60)% |
| Gross profit | ​ | $271 ​ | $528 ​ | $(257) | (49)% |
| Gross profit margin | ​ | 73% | ​ 68% | ​ 5% | ​ |

Contract revenue decreased by $0.4 million, or 52%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The majority of contract revenue, for the six months ended June 30, 2023, was related to activities under our subcontract agreement with a commercial entity that holds a U.S. government prime contract. The decrease in contract revenue for the six months ended June 30, 2023 is primarily related to the completion of work in 2022 related to a prime contract directly with the U.S. government and a subcontract agreement with a commercial entity that holds a U.K. government prime contract.

Contract cost of revenue decreased by $0.1 million, or 60% for the six months ended June 30, 2023, compared to the six months ended June 30, 2023 had lower material costs with the subcontract agreement with a commercial entity that holds a U.S. government prime contract compared to the contract deliverables for the prime contract held directly with the U.S. government and a subcontract agreement with a commercial entity that holds a U.K. government prime contract for the six months ended June 30, 2022.

Contract gross profit decreased by $0.2 million and gross profit margin increased by 5 percentage points for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the mix in contract deliverables, including a mix of materials with lower costs during the six months ended June 30, 2023, which resulted in a higher gross profit margin for that period, as compared to the six months ended June 30, 2022.

### Operating Expenses

#### Research and development

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ Change Amount% | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Research and development expenses | ​ | $10,923 ​ | $8,198 ​ | $2,725 | 33% |
| Percentage of total revenue | ​ | 51% | 42% |  | ​ |

Our research and development expenses were $10.9 million for the six months ended June 30, 2023, an increase of $2.7 million from research and development expenses of $8.2 million for the six months ended June 30, 2022. The increase was due primarily to a $1.2 million increase in salaries and related costs from the impact of headcount added in 2022, a $0.6 million increase in stock-based compensation, a $0.4 million increase in occupancy related expenses, and a $0.2 million increase in program spend, mainly consulting related to product development efforts.

#### Selling, general and administrative expenses

*(dollars in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ Change Amount% | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative expenses | ​ | $23,211 ​ | $20,455 ​ | $2,756 | 13% |
| Percentage of total revenue | ​ | 108% | 105% |  | ​ |

Our selling, general and administrative expenses were $23.2 million for the six months ended June 30, 2023, an increase of $2.8 million from selling, general and administrative expenses of $20.5 million for the six months ended June 30, 2022. The increase was due primarily to a $1.5 million increase in salaries and related costs from the impact of headcount added in 2022, a $0.8 million increase in stock-based compensation, a $0.3 million increase in acquisition-related costs for intangible amortization and valuation of contingent milestones and, a $0.2 million increase in travel expenses and marketing-related spend. These increases were partially offset by a $0.7 million decrease in insurance costs, primarily related to our director and officers insurance premiums that decreased with market rates for 2023.

### Other Income

#### Interest income

Interest income increased by $2.2 million for the six months ended June 30, 2023 from $0.5 million for the six months ended June 30, 2022. The increase was due to higher interest rates on our interest bearing accounts.

#### Interest expense

Interest expense increased by $0.5 million for the six months ended June 30, 2023 from less than $0.1 million for the six months ended June 30, 2022. The increase was primarily due to a loss on extinguishment of debt of $0.5 million recorded for the write off of the initial fees incurred and potential termination fees related to our 2022 Revolver.

#### Other expense, net

Other expense, net was $0.2 million for the six months ended June 30, 2023 and did not change materially from the six months ended June 30, 2022.

### Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. To date, we have funded our operations primarily with proceeds from sales of redeemable preferred stock, borrowings under loan agreements and revenue from sales of our products and services and contract revenue, proceeds from our initial public offering in December 2020, and, most recently, with proceeds from an underwritten public offering in November 2021. As of June 30, 2023, we had cash, cash equivalents and marketable securities of $152.7 million. We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Our future funding requirements will depend on many factors, including:

- market uptake of our products and growth into new and existing markets;
- the cost of our research and development efforts to expand the applications of our current devices and to create enhanced products with our platform of technologies;
- the cost of expanding our commercial operations, including distribution capabilities, and accelerating planned investments, such as hiring additional support, service, and sales management in Europe, Asia Pacific and Latin America, bolstering our infrastructure in these regions;
- the cost of acquiring complementary businesses, products, services or technologies, when and if required;
- the success of our existing collaborations and our ability to enter additional collaborations in the future;
- the effect of competing technological and market developments; and
- the level of our selling, general and administrative expenses.

On March 11, 2021, the Company entered into the 2021 Revolver to replace the 2019 Loan. This agreement created a revolving line of credit totaling $25.0 million and eliminated the existing term loan. Borrowings under the revolving line of credit bore interest at an annual rate equal to the greater of (i) one-half percent (0.5%) above the prime rate or (ii) four percent (4.0%), and were scheduled to mature on March 11, 2024. Borrowings were collateralized by substantially all of the Company’s property, excluding intellectual property, which was subject to a negative pledge. The 2021 Revolver subjected the Company to various customary covenants, including requirements as to financial reporting and financial covenants (including an unrestricted minimum cash level of $10.0 million), and restrictions on the Company’s ability to dispose of its business or property, to change its line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on the Company’s property, to pay any dividends or make other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to enter into in-bound licensing agreements, to engage in transactions with affiliates, and to encumber the Company’s intellectual property. Events of default under the 2021 Revolver included failure to make payments when due, insolvency events, failure to comply with covenants or material adverse events with respect to the Company. Upon the occurrence of an event of default and until such event of default was no longer continuing, the annual interest rate would be five percent (5.0%) above the otherwise applicable rate.

The terms of the 2021 Revolver required that the existing term loan outstanding under the 2019 Loan be repaid with an advance under the line of credit. Accordingly, on March 11, 2021, the Company used $14.5 million of proceeds from the 2021 Revolver to repay all amounts then due on the existing term loan. The Company accounted for the transaction as a debt extinguishment and recorded a loss on extinguishment of $0.2 million, which was included in interest expense in the consolidated statements of operations and comprehensive loss.

On November 2, 2022, the Company satisfied in full all of its outstanding obligations and voluntarily terminated the 2021 Revolver. The Company did not incur any early termination penalties in connection with the termination of the 2021 Revolver. The amount outstanding under the 2021 Revolver was fully repaid in October 2022 and no amounts were outstanding upon termination of the 2021 Revolver.

On November 2, 2022, we entered into the 2022 Revolver.

The 2022 Revolver provided for a revolving line of credit of up to $35.0 million. We were permitted to make interest-only payments on the revolving line of credit through November 2, 2025, at which time all outstanding indebtedness would be immediately due and payable. The outstanding principal amount of any advance accrued interest at a floating rate per annum equal to the greater of (i) three and one-half percent (3.50%) and (ii) the “prime rate” as published in The Wall Street Journal for the relevant period minus one-half percent (0.50%). Our obligations under the 2022 Revolver were secured by substantially all of our assets, excluding our intellectual property, which was subject to a negative pledge. The revolving line of credit under the 2022 Revolver was scheduled to terminate on November 2, 2025.

As of June 30, 2023, there were no balances outstanding under the 2022 Revolver. As of December 31, 2022, the outstanding principal balance under the 2022 Revolver was $15.0 million, which was repaid in full on January 4, 2023. The interest rate applicable to borrowing under the 2022 Revolver was 7.0% as of December 31, 2022.

The 2022 Revolver also contained certain financial covenants, including a requirement that the amount of unrestricted and unencumbered cash minus advances under the 2022 Revolver was not less than the amount equal to the greater of (i) $10.0 million or (ii) nine (9) months of cash burn. The 2022 Revolver contained customary representations and warranties, as well as certain non-financial covenants, including limitations on, among other things, our ability to change the principal nature of our business, dispose of our business or property, engage in any change of control transaction, merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, incur additional indebtedness or liens, pay dividends or make other distributions on capital stock, redeem our capital stock, engage in transactions with affiliates or otherwise encumber our intellectual property, in each case, subject to customary exceptions.

On March 10, 2023, SVB, one of our financial institutions, was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

As of March 31, 2023, the Company had transferred substantially all its cash and cash equivalents away from SVB and deposited the funds with new financial institutions. As a result of the transfer of the Company’s cash, cash equivalents and marketable securities, the Company was in default, and continued to be in default as of June 30, 2023, of its financial covenants under the 2022 Revolver. The Company recorded a loss on extinguishment of $0.5 million in the three months ended March 31, 2023, which was included in interest expense in the condensed consolidated statements of operations and comprehensive loss.

On August 4, 2023, the Company entered into the Amended 2022 Revolver, by and between, the Company, as borrower, and SVB, as lender. The Amended 2022 Revolver provides for a revolving line of credit of up to $10.0 million. The Company is permitted to make interest-only payments on the revolving line of credit through November 2, 2025, at which time all outstanding indebtedness shall be immediately due and payable. The outstanding principal amount of any advance shall accrue interest at a floating rate per annum equal to the greater of (i) four and one-half percent (4.50%) and (ii) the “prime rate” as published in The Wall Street Journal for the relevant period minus one-half percent (0.50%). The Company’s obligations under the Amended 2022 Revolver are secured by substantially all of the Company’s assets, excluding its intellectual property, which is subject to a negative pledge. The revolving line of credit under the Amended 2022 Revolver terminates on November 2, 2025.

Pursuant to the Amended 2022 Revolver, SVB waived filing any legal action or instituting or enforcing any rights and remedies it may have had against the Company in connection with the Company’s failing to maintain all of its operating accounts, depository accounts and excess cash with SVB, as previously required prior to the effectiveness of the Amended 2022 Revolver.

The Amended 2022 Revolver also contains certain financial covenants, including a requirement that the Company maintain $20.0 million on account at or through SVB and the amount of unrestricted and unencumbered cash minus advances under the Amended 2022 Revolver, is not less than the amount equal to the greater of (i) $10.0 million or (ii) nine (9) months of cash burn. The Amended 2022 Revolver contains customary representations and warranties, as well as certain non-financial covenants, including limitations on, among other things, the Company’s ability to change the principal nature of its business, dispose of the Company’s business or property, engage in any change of control transaction, merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, incur additional indebtedness or liens, pay dividends or make other distributions on capital stock, redeem the Company’s capital stock, engage in transactions with affiliates or otherwise encumber the Company’s intellectual property, in each case, subject to customary exceptions.

We may seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants, in addition to our existing covenants, restricting our operations or our ability to incur additional debt or potentially limiting our ability to obtain new debt financing or the refinance of our existing debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.

### Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | ---: |
| Cash used in operating activities | ​ | $(18,529) | ​ | $(10,876) |
| Cash used in investing activities | ​ | (21,121) | ​ | (689) |
| Cash (used in) provided by financing activities | ​ | (15,782) | ​ | 597 |
| Effect of foreign exchange rate changes on cash and cash equivalents | ​ | ​ 6 | ​ | ​ — |
| Net decrease in cash, cash equivalents and restricted cash | ​ | $(55,426) | ​ | $(10,968) |

#### Operating Activities

During the six months ended June 30, 2023, net cash used in operating activities was $18.5 million, primarily resulting from our net loss of $21.9 million and net cash used in changes in our operating assets and liabilities of $3.4 million, partially offset by noncash charges of $6.8 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2023 consisted primarily of a $1.7 million decrease from changes in inventory and a $0.9 million decrease from changes in accounts payable and accrued expenses.

During the six months ended June 30, 2022, net cash used in operating activities was $10.9 million, primarily resulting from our net loss of $17.5 million, partially offset by net cash provided by changes in our operating assets and liabilities of $2.8 million and noncash charges of $3.8 million. Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2022 consisted primarily of a $5.3 million increase from changes in accounts receivable and a $1.4 million increase from changes in deferred revenue, partially offset by a $3.9 million decrease from changes in inventory and a $1.0 million decrease from changes in accounts payable and accrued expenses.

#### Investing Activities

During the six months ended June 30, 2023, net cash used in investing activities was $21.1 million, due to $19.6 million in purchases of marketable securities and $1.5 million in purchases of property and equipment.

During the six months ended June 30, 2022, net cash used in investing activities was $0.7 million, due to purchases of property and equipment.

#### Financing Activities

Cash used in financing activities during the six months ended June 30, 2023 was $15.8 million, consisting primarily of the repayment of $15.0 million outstanding under the 2022 Revolver and a $0.9 million payment for release of pension liability.

Cash provided by financing activities during the six months ended June 30, 2022, was $0.6 million, consisting primarily of proceeds from issuance of common stock upon option exercises. We also paid off and drew down $30.0 million under the 2021 Revolver resulting in no net proceeds by June 30, 2022.

### Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events 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 values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

For a further discussion of our critical accounting policies, please refer to Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and our 2022 Report on Form 10-K. There were no significant changes to our critical accounting policies for the six months ended June 30, 2023.

### Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and is incorporated herein by reference.

## Market risk

As filed, 183 characters.

We are a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act for this reporting period and are not required to provide the information required under this item.

## Controls and procedures

As filed, 2,175 characters.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 478 characters.

Our operations and financial results are subject to various risks and uncertainties. A detailed discussion of the risks that affect our business is included in the section titled “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 15, 2023, or 2022 Form 10-K. There have been no material changes to our risk factors during the three months ended June 30, 2023 from those discussed in our 2022 Form 10-K.

Filed Aug 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-013779. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.