# Neuronetics, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Neuronetics, Inc.](/companies/stim.md) (CIK 1227636)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 07:31 ET
- Period: 2024-09-30
- Accession: 0001558370-24-015160
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1227636/000155837024015160/stim-20240930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1227636/000155837024015160/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $18.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $52.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $4.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $13.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $14.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $39.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $2.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $7.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$7.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$23.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $1.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $5.5m | us-gaap:InterestExpense |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$13.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$31.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.44 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.44 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 30,267,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 29,931,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$22.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $1.4m | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2024-09-30 | $20.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $53.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $74.1m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $16.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $64.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $46.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $9.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,984 characters.

*The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim financial statements and related notes thereto included elsewhere herein. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.*

*In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “should,” “expect,” “plan,” “design,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “outlook” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 8, 2024.These risks and uncertainties include, without limitation, risks and uncertainties related to: the effect of the Arrangement with Greenbrook, initially announced on August 11, 2024 and approved by the Greenbrook Shareholders and Neuronetics Stockholders on November 8, 2024, on our business relationships, operating results and business generally;*

*our ability to achieve or sustain profitable operations due to our history of losses; our reliance on the sale and usage of our NeuroStar Advanced Therapy System to generate revenues; the scale and efficacy of our salesforce; availability of coverage and reimbursement from third-party payors for treatments using our products; physician and patient demand for treatments using our products; developments in respect of competing technologies and therapies for the indications that our products treat; product defects; our revenue has been concentrated among a small number of customers; our ability to obtain and maintain intellectual property protection for our technology; developments in clinical trials or regulatory review of the NeuroStar Advanced Therapy System for additional indications; developments in regulation in the U.S. and other applicable jurisdictions; the terms of our credit facility; our ability to successfully roll-out our Better Me Provider Program on the planned timeline; our self-sustainability and existing cash balances; and our ability to achieve cash flow break-even in the fourth quarter of 2024 and on a full-year basis in 2025. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. The Company cautions investors not to place undue reliance on these forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q as a result of any new information, future events or changed circumstances or otherwise.*

### Overview

We are a commercial stage medical technology company focused on designing, developing and marketing products that improve the quality of life for patients who suffer from neurohealth disorders. Our first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office- based treatment that uses TMS to create a pulsed, MRI-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The NeuroStar Advanced Therapy System is cleared by the FDA to treat adult patients with MDD that have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode. It is also cleared by the FDA as an adjunct for adults with OCD, and to decrease anxiety symptoms in adult patients with MDD that may exhibit comorbid anxiety symptoms (anxious depression), and as an adjunct for the treatment of MDD in adolescent patients aged 15-21. The NeuroStar Advanced Therapy System is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system. We believe we are the market leader in TMS therapy based on over 188,662 global patients treated with over 6.9 million of our treatment sessions through September 30, 2024. We generated revenues of $18.5 million and $17.9 million for the three months ended September 30, 2024 and 2023, respectively, and $52.4 million and $51.0 million for the nine months ended September 30, 2024 and 2023, respectively.

We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of other treatment options. We generate revenues from initial capital sales of our systems, recurring treatment sessions, service and repair and extended warranty contracts. We derive the majority of our revenues from recurring treatment sessions. For the three months ended September 30, 2024, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 74% and 23% of our U.S. revenues, respectively, and for the three months ended September 30, 2023 revenues from sales of our treatment sessions and NeuroStar Therapy Systems represented 76% and 21% of our U.S. revenues, respectively. For the nine months ended September 30, 2024, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 75% and 22% of our U.S. revenues, respectively, and for the nine months ended September 30, 2023 revenues from sales of our treatment sessions and NeuroStar Therapy Systems represented 73% and 24% of our U.S. revenues, respectively.

We currently sell our NeuroStar Advanced Therapy System and recurring treatment sessions in the U.S. with the collaborative support of our 201 employees as of September 30, 2024. Symphony Health estimates that there are approximately 26,300 group and solo practice sites in the U.S. with psychiatrists that prescribe antidepressant medications. Our direct sales force primarily targets 53,000 psychiatrists at 26,300 psychiatric practices that treat approximately 13.9 million patients based on data from the *Journal of the American Medical Association*. Some of our customers have purchased or may purchase more than one NeuroStar Advanced Therapy System. Based on our commercial data, we believe our customers can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe our customers can generate approximately $8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their practices. We have a diverse customer base, including psychiatrists in group psychiatric practices, pain management physicians and other medical professionals in the U.S. For the three and nine months ended September 30, 2024, one customer accounted for more than 10% of our revenues.

We market our products in a few select markets outside the U.S. through independent distributors. International revenues represented 3% and 4% of our total revenues for the three months ended September 30, 2024 and 2023, respectively and 3% for the nine months ended September 30, 2024 and 2023. We received regulatory approval for our system in Japan in September 2017. We obtained reimbursement coverage for the NeuroStar Advanced Therapy System in Japan, which went into effect on June 1, 2019 and covers patients who are treated in the largest inpatient and outpatient psychiatric facilities in Japan. We expect our international revenues to be consistent as a percentage of our total revenue.

Our research and development efforts are focused on hardware and software product developments, enhancements of our NeuroStar Advanced Therapy System, and clinical development relating to additional indications. We outsource the manufacture of components of our NeuroStar Advanced Therapy Systems that are produced to our specifications, and individual components are either shipped directly from our third-party contract manufacturers to our customers or consolidated into pallets at our Malvern, Pennsylvania facility prior to shipment. Final installation of these systems occurs at the customer site.

Total revenues increased by $0.6 million, or 4%, from $17.9 million for the three months ended September 30, 2023 to $18.5 million for the three months ended September 30, 2024 and increased by $1.4 million, or 3%, from $51.0 million for the nine months ended September 30, 2023 to $52.4 million for the nine months ended September 30, 2024.

For the three months ended, September 30, 2024, our U.S revenue was $17.9 million, compared to $17.2 million for the three months ended September 30, 2023, which represents an increase of 4% period over period. The increase was primarily attributable to an increase in U.S. treatment sessions and U.S NeuroStar Advanced Therapy System sales period over period.

For the nine months ended September 30, 2024, our U.S. revenue was $51.0 million, compared to $49.5 million for nine months ended September 30, 2023, which represents an increase of 3% period over period. The increase was primarily attributable to an increase in U.S. treatment sessions period over period.

We incurred net losses of $13.3 million and $31.0 million for the three and nine months ended September 30, 2024 compared to net losses of $9.4 million and $24.8 million for three and nine months ended September 30, 2023. As we continue to reduce our expenses we expect to lower our losses and reach profitability in the upcoming years. As of September 30, 2024, we had an accumulated deficit of $407.1 million.

### Greenbrook Acquisition

On August 11, 2024, the Company and Greenbrook entered into an arrangement agreement (the “Arrangement Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding common shares of Greenbrook (each a “Greenbrook Share”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (Ontario) (the “Arrangement”).

Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, each Greenbrook Share outstanding immediately prior to the effective time of the Arrangement (other than the shares held by Greenbrook Shareholders who have exercised rights of dissent in respect of the Arrangement) would be transferred to the Company in exchange for such number of shares of the Company’s Common Stock, as provided for in the Arrangement Agreement.

On November 8, 2024, Greenbrook Shareholders approved the Greenbrook Arrangement Resolution and Neuronetics Stockholders approved the Neuronetics Charter Amendment Proposal and Neuronetics Share Issuance Proposal (as such terms are defined in the Company’s Definitive Proxy Statement on Schedule 14A filed on October 4, 2024). Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, the Company and Greenbrook intend to consummate the Arrangement upon the satisfaction of the conditions precedent to closing.

### Global Economic Conditions

We are continuing to closely monitor macroeconomic impacts, including, but not limited to inflationary and potential recessionary pressures, on our business, results of operations and financial results. We currently believe these conditions have no material impact.

### Components of Our Results of Operations

#### Revenues

We have generated revenues primarily from the capital portion of our business and related sales and rentals of the NeuroStar Advanced Therapy System and the recurring revenues from our sale of treatment sessions in the U.S.

***NeuroStar Advanced Therapy System Revenues***. NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including equipment upgrades to the initial sale of the NeuroStar Advanced Therapy System. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers.

***Treatment Session Revenues***. Treatment session revenues primarily include sales of NeuroStar treatment sessions and SenStar treatment links. The NeuroStar treatment sessions are access codes that are delivered electronically in the U.S. The SenStar treatment links are disposable units containing single-use access codes that are sold and used outside the U.S. Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions.

***Other Revenues***. Other revenues are derived primarily from service and repair and extended warranty contracts with our existing customers.

We refer you to the section titled “Critical Accounting Policies and Use of Estimates—Revenue Recognition” in our Annual Report on Form 10-K filed with the SEC on March 8, 2024. We also refer you to “Note 3. Summary of Significant Accounting Policies” in Notes to Interim Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements.

#### Cost of Revenues and Gross Margin

Cost of revenues primarily consists of the costs of components and products purchased from our third-party contract manufacturers of our NeuroStar Advanced Therapy Systems as well as the cost of treatment packs for individual treatment sessions. We use third-party contract manufacturing partners to produce the components for and assemble the completed NeuroStar Advanced Therapy Systems. Cost of revenues also includes costs related to personnel, warranty, shipping, and our operations and field service departments. We expect our cost of revenues to increase to the extent our revenues grow.

Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross margin as our gross profit divided by our revenues. Our gross margin has been and will continue to be affected by a variety of factors, primarily product sales mix, pricing and third-party contract manufacturing costs. Our gross margins on revenues from sales of NeuroStar Advanced Therapy Systems are lower than our gross margins on revenues from sales of treatment sessions and, as a result, the sales mix between NeuroStar Advanced Therapy Systems and treatment sessions can affect the gross margin in any reporting period.

#### Sales and Marketing Expenses

Sales and marketing expenses consist of market research and commercial activities related to the sale of our NeuroStar Advanced Therapy Systems and treatment sessions and salaries and related benefits, sales commissions and share-based compensation for employees focused on these efforts. Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing, practice support programs and radio media campaigns, co-op marketing, travel, training expenses and bad debt expense.

We anticipate that our sales and marketing expenses will remain materially consistent during 2024 compared to 2023, within this category our reduced personnel and marketing program expense have been offset by increases related to bad debt expense.

#### General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries and related benefits, share-based compensation and travel expenses, for employees in executive, finance, information technology, legal and human resource functions. General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors’ fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.

We anticipate that our general and administrative expenses will increase from 2023 mainly due to legal and professional fees in connection with our proposed transaction with Greenbrook (the “Greenbrook Acquisition”).

#### Research and Development Expenses

Research and development expenses consist primarily of personnel expenses, including salaries and related benefits and share-based compensation for employees in clinical development, product development, regulatory and quality assurance functions, as well as expenses associated with outsourced professional scientific development services and costs of investigative sites and consultants that conduct our preclinical and clinical development programs. We typically use our employee, consultant and infrastructure resources across our research and development programs.

#### Interest Expense

Interest expense consists of cash interest payable under our credit facility and non-cash interest attributable to the accrual of final payment fees and the amortization of deferred financing costs related to our indebtedness.

#### Loss on extinguishment of debt

Loss on debt extinguishment consist of prepayment penalties and impairment of deferred financing costs associated with the extinguishment of debt, as well as fees incurred with third parties in connection with debt extinguishment.

#### Other Income, Net

Other income, net consists primarily of interest income earned on our money market account balances and notes receivable.

### Results of Operations

### Comparison of the three months ended September 30, 2024 and 2023

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ Increase / (Decrease) Dollars | ​ ​ | ​ ​ ​ ​ Percentage |
| --- | --- | ---: | ---: | ---: | --- | ---: |
| Revenues | ​ | $18,530 ​ | $17,884 ​ | $646 |  | 4% |
| Cost of revenues | ​ | 4,529 ​ | 6,120 ​ | (1,591) |  | (26)% |
| Gross Profit | ​ | 14,001 ​ | 11,764 ​ | 2,237 |  | 19% |
| Gross Margin | ​ | 75.6% | 65.8% | ​ |  | ​ |
| ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ |
| Operating expenses: | ​ | ​ | ​ | ​ |  | ​ |
| Sales and marketing | ​ | 11,877 ​ | 12,141 ​ | (264) |  | (2)% |
| General and administrative | ​ | 7,436 ​ | 6,339 ​ | 1,097 |  | 17% |
| Research and development | ​ | 2,416 ​ | 2,155 ​ | 261 |  | 12% |
| Total operating expenses | ​ | 21,729 ​ | 20,635 ​ | 1,094 | ​ | 5% |
| Loss from Operations | ​ | (7,728) ​ | ​ (8,871) ​ | 1,143 |  | 13% |
| Other (income) expense: | ​ | ​ ​ | ​ | ​ |  | ​ |
| Interest expense | ​ | 1,725 ​ | 1,184 ​ | 541 |  | 46% |
| Loss on extinguishment of debt | ​ | 4,427 ​ | — ​ | 4,427 |  | 100% |
| Other income, net | ​ | (539) ​ | (664) ​ | 125 |  | (19)% |
| Net Loss | ​ | $(13,341) ​ | $(9,391) ​ | $(3,950) |  | (42)% |

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Revenues by Geography Three Months Ended September 30, 2024 ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Revenues | ​ ​ 2023 ​ ​ Amount | ​ ​ | ​ ​ % of Revenues |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| U.S. | ​ | $17,922 | ​ | 97% | $17,211 | ​ | 96% |
| International | ​ | 608 |  | 3% | 673 |  | 4% |
| Total revenues | ​ | $18,530 |  | 100% | $17,884 |  | 100% |

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ U.S. Revenues by Product Category Three Months Ended September 30, 2024 ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Revenues | ​ ​ 2023 ​ ​ Amount | ​ ​ | ​ ​ % of Revenues |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| NeuroStar Advanced Therapy System | ​ | $4,108 | ​ | 23% | $3,597 | ​ | 21% |
| Treatment sessions | ​ | 13,326 |  | 74% | 13,060 |  | 76% |
| Other | ​ | 488 |  | 3% | 554 |  | 3% |
| Total U.S. revenues | ​ | $17,922 |  | 100% | $17,211 |  | 100% |

#### Revenues

Total revenue for the three months ended September 30, 2024 was $18.5 million, an increase of 4% compared to the three months ended September 30, 2023 revenue of $17.9 million. During the quarter, total U.S. revenue increased by 4% and international revenue decreased marginally compared to prior year quarter. The increase in U.S. revenue was primarily attributable to an increase in U.S. treatment sessions and U.S. NeuroStar Advanced Therapy System sales period over period.

U.S. NeuroStar Advanced Therapy System revenue for the three months ended September 30, 2024 was $4.1 million, an increase of 14% compared to the three months ended September 30, 2023 revenue of $3.6 million. For the three months ended September 30, 2024 and 2023, the Company sold 48 and 43 systems, respectively, that were recognized as NeuroStar Advanced Therapy System capital revenue during each period. Increase in U.S. NeuroStar Advanced Therapy System revenue is mainly due to the increase in the sales price of the systems.

U.S. treatment session revenue for the three months ended September 30, 2024 was $13.3 million, an increase of 2% compared to the three months ended September 30, 2023 revenue of $13.1 million. The increase in revenue was primarily attributable to an increase in treatment session volume over the prior year quarter.

#### Cost of Revenues and Gross Margin

Cost of revenues decreased by $1.6 million, or 26%, from $6.1 million for the three months ended September 30, 2023 to $4.5 million for the three months ended September 30, 2024. Gross margin increased from 65.8% for the three months ended September 30, 2023 to 75.6% for the three months ended September 30, 2024. The increase in gross margin was primarily a result of the change in product mix, the absence of one-time manufacturing cost by our new contract manufacturer and inventory impairment incurred in 2023.

#### Sales and Marketing Expenses

Sales and marketing expenses decreased by $0.2 million, or 2%, from $12.1 million for the three months ended September 30, 2023 to $11.9 million for the three months ended September 30, 2024. The decrease was primarily due to lower headcount partially offset by an increase in bad debt expense.

#### General and Administrative Expenses

General and administrative expenses increased by $1.1 million, or 17% from $6.3 million for the three months ended September 30, 2023 to $7.4 million for the three months ended September 30, 2024. The increase was primarily due to an increase in legal costs and professional fees in connection with the Greenbrook Acquisition.

#### Research and Development Expenses

Research and development expenses increased by $0.2 million, or 12%, from $2.2 million for the three months ended September 30, 2023 to $2.4 million for the three months ended September 30, 2024. The increase was primarily due to software maintenance expense for previously released software.

#### Interest Expense

Interest expense increased by $0.5 million, or 46%, from $1.2 million for the three months ended September 30, 2023, to $1.7 million for the three months ended September 30, 2024 due increases in interest rates.

#### Loss on extinguishment of debt

Loss on extinguishment of debt amounting to $4.4 million was recorded during the three months ended September 30, 2024, related to the SLR Facility. This included $1.2 million of early prepayment fees and $3.2 million of deferred financing expense related to extinguishment of debt.

#### Other Income, Net

Other income, net decreased by $0.1 million, or 19%, from $0.6 million for the three months ended September 30, 2023 to $0.5 million for the three months ended September 30, 2024, primarily as a result of decreased interest income earned on the Company’s money market accounts.

### Comparison of the nine months ended September 30, 2024 and 2023

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ Increase / (Decrease) Dollars | ​ ​ | ​ ​ ​ ​ Percentage | ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- |
| Revenues | ​ | $52,397 ​ | $51,034 ​ | $1,363 |  | 3% | ​ |
| Cost of revenues | ​ | 13,129 ​ | 15,100 ​ | (1,971) |  | (13)% | ​ |
| Gross Profit | ​ | 39,268 ​ | 35,934 ​ | 3,334 |  | 9% | ​ |
| Gross Margin | ​ | 74.9% | 70.4% | ​ |  | ​ | ​ |
| ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ |
| Operating expenses: | ​ | ​ | ​ | ​ |  | ​ | ​ |
| Sales and marketing | ​ | 35,820 ​ | 35,602 ​ | 218 |  | 1% | ​ |
| General and administrative | ​ | 19,540 ​ | 19,151 ​ | 389 |  | 2% | ​ |
| Research and development | ​ | 6,999 ​ | 7,308 ​ | (309) |  | (4)% | ​ |
| Total operating expenses | ​ | 62,359 ​ | 62,061 ​ | 298 |  | 0% | ​ |
| Loss from Operations | ​ | (23,091) ​ | (26,127) ​ | 3,036 |  | 12% | ​ |
| Other (income) expense: | ​ | ​ | ​ | ​ |  | ​ | ​ |
| Interest expense | ​ | 5,529 ​ | 3,580 ​ | 1,949 |  | 54% | ​ |
| Loss on extinguishment of debt | ​ | 4,427 ​ | — ​ | 4,427 |  | 100% | ​ |
| Other income, net | ​ | (2,001) ​ | (4,895) ​ | 2,894 |  | 59% | ​ |
| Net Loss | ​ | $(31,046) ​ | $(24,812) ​ | $(6,234) |  | (25)% | ​ |

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Revenues by Geography Nine Months Ended September 30, 2024 ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Revenues | ​ ​ 2023 ​ ​ Amount | ​ ​ | ​ ​ % of Revenues | ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: | --- |
| United States | ​ | $50,845 | ​ | 97% | $49,464 | ​ | 97% | ​ |
| International | ​ | 1,552 |  | 3% | 1,570 |  | 3% | ​ |
| Total revenues | ​ | $52,397 |  | 100% | $51,034 |  | 100% | ​ |

*(in thousands, except percentages)*

| ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ U.S. Revenues by Product Category Nine Months Ended September 30, 2024 ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Revenues | ​ ​ 2023 ​ ​ Amount | ​ ​ | ​ ​ % of Revenues | ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: | --- |
| NeuroStar Advanced Therapy System | ​ | $11,418 | ​ | 22% | $11,936 | ​ | 24% | ​ |
| Treatment sessions | ​ | 37,974 |  | 75% | 36,018 |  | 73% | ​ |
| Other | ​ | 1,453 |  | 3% | 1,510 |  | 3% | ​ |
| Total U.S. revenues | ​ | $50,845 |  | 100% | $49,464 |  | 100% | ​ |

Total revenue for the nine months ended September 30, 2024 was $52.4 million, an increase of 3% compared to the nine months ended September 30, 2023 revenue of $51.0 million. During the nine months ended September 30, 2024, total U.S. revenue increased by 3% and international revenue decreased by 1%. The increase in U.S. revenue was primarily attributable to an increase in U.S. treatment sessions sales period over period. The decrease in international revenue was primarily driven by a decrease in treatment session sales and NeuroStar Advanced Therapy System sales period over period.

U.S. NeuroStar Advanced Therapy System revenue for the nine months ended September 30, 2024 was $11.4 million, a decrease of $0.5 million compared to the nine months ended September 30, 2023 revenue of $11.9 million. For the nine months ended September 30, 2024 and 2023, the Company sold 137 and 146 systems, respectively, that were recognized as NeuroStar Advanced Therapy System capital revenue during each period. Additionally, for the nine months ended September 30, 2024 the Company executed 1 operating lease agreement, which contributed to operating lease revenue.

U.S. treatment session revenue for the nine months ended September 30, 2024 was $38.0 million, an increase of 5% compared to the nine months ended September 30, 2023 revenue of $36.0 million. The revenue growth was primarily driven by an increase in treatment session volume and utilization over the comparative period.

#### Cost of Revenues and Gross Margin

Cost of revenues decreased by $2.0 million, or 13%, from $15.1 million for the nine months ended September 30, 2023 to $13.1 million for the nine months ended September 30, 2024. Gross margin increased from 70.4% for the nine months ended September 30, 2023 to 74.9% for the nine months ended September 30, 2024. The increase in gross margin was primarily a result of increased sales volume of our treatment session sales resulting in a more favorable product mix, absence of one-time manufacturing cost by our new contract manufacturer and inventory impairment incurred in 2023.

#### Sales and Marketing Expenses

Sales and marketing expenses increased by $0.2 million, or 1%, from $35.6 million for the nine months ended September 30, 2023 to $35.8 million for the nine months ended September 30, 2024. The increase was primarily driven by higher bad debt expense.

#### General and Administrative Expenses

General and administrative expenses increased by $0.4 million, or 2% from $19.2 million for the nine months ended September 30, 2023 to $19.6 million for the nine months ended September 30, 2024. The increase was primarily due to an increase in legal costs and professional fees in connection with the Greenbrook Acquisition.

#### Research and Development Expenses

Research and development expenses decreased by $0.3 million, or 4%, from $7.3 million for the nine months ended September 30, 2023 to $7.0 million for the nine months ended September 30, 2024. The decrease in research and development was primarily due to higher capitalization of product development costs related to certain of the Company’s software project costs.

#### Interest Expense

Interest expense increased by $1.9 million from $3.6 million for the nine months ended September 30, 2023 to $5.5 million for the nine months ended September 30, 2024 due to increases in interest rates.

#### Loss on extinguishment of debt

Loss on extinguishment of debt amounting to $4.4 million was recorded during the three months ended September 30, 2024, related to the SLR Facility. This included $1.2 million of early prepayment fees and $3.2 million of deferred financing expense related to extinguishment of debt.

#### Other Income, Net

Other income, net decreased by $2.9 million from $4.9 million for the nine months ended September 30, 2023 to $2.0 million for the nine months ended September 30, 2024, primarily as a result of ERC of $2.9 million recorded for the nine months ended September 30, 2023 and decreased interest income earned on the Company’s money market accounts, which was partially offset by increase in notes receivable interest.

### Liquidity and Capital Resources

#### Overview

As of September 30, 2024, we had cash and cash equivalents of $20.9 million and an accumulated deficit of $407.1 million, compared to cash and cash equivalents of $59.7 million and an accumulated deficit of $376.1 million as of December 31, 2023. We incurred negative cash flows from operating activities of $22.4 million and $34.2 million for the nine months ended September 30, 2024 and 2023, respectively. We have incurred operating losses since our inception, and we anticipate that our operating losses will lessen in the near term as we adjust our sales and marketing initiatives, research and development activities and other corporate initiatives. The Company’s primary sources of capital to date have been proceeds from its IPO, private placements of its convertible preferred securities, borrowings under its credit facility, proceeds from its secondary public offering of common stock and revenues from sales of its products. As of September 30, 2024, the Company had $50.0 million of borrowings outstanding under its credit facility, which has a final maturity in July 2029. Management believes that the Company’s cash and cash equivalents as of September 30, 2024 and anticipated revenues from sales of its products are sufficient to fund the Company’s operations for at least 12 months from the issuance of these financial statements.

If our cash and cash equivalents and anticipated revenues from sales or our products are insufficient to satisfy our liquidity requirements, we may seek to sell additional common equity or seek to sell preferred equity or debt securities or enter into a new credit facility or another form of third-party funding or seek other debt financing. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all. It is also possible that we may allocate significant amounts of capital towards products or technologies for which market demand is lower than expected and, as a result, abandon such efforts. If we are unable to maintain our current financing or obtain adequate additional financing when we require it, or if we obtain financing on terms which are not favorable to us, or if we expend capital on products or technologies that are unsuccessful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may be required to delay the development, commercialization and marketing of our products.

Our current and future funding requirements will depend on many factors, including:

- our ability to achieve revenue growth and improve operating margins;
- compliance with the terms and conditions, including covenants, set forth in our credit facility;
- the cost of expanding our operations and offerings, including our sales and marketing efforts;
- our ability to improve or maintain coverage and reimbursement arrangements with domestic and international third-party and government payors;
- our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors;
- our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers;
- the cost of research and development activities, including research and development relating to additional indications of neurohealth disorders;
- the effect of competing technological and market developments;
- costs related to international expansion;
- the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products; and
- the consummation of the Greenbrook Acquisition.

As of September 30, 2024, there were no significant changes to our material cash requirements as set forth in our Annual Report on Form 10-K filed with the SEC on March 8, 2024 outside of the Company prepaying the Solar Facility in July 2024 and obtaining new financing through the Perceptive Facility. The principal payment associated with the Perceptive Facility will be paid in July 2029.

#### Cash Flows

The following table sets forth a summary of our cash flows for the nine months ended September 30, 2024 and 2023:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: |
| Net Cash used in Operating activities | ​ | $(22,401) | ​ | $(34,171) |
| Net Cash used in Investing activities | ​ | (37) | ​ | (759) |
| Net Cash (used in) provided by Financing activities | ​ | (16,372) | ​ | 437 |
| Net (Decrease) in Cash and Cash Equivalents | ​ | $(38,810) | ​ | $(34,493) |

#### Net Cash used in Operating activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $22.4 million, consisting primarily of a net loss of $31.0 million and an increase in net operating assets of $4.6 million, offset by non-cash charges of $8.8 million and a loss on extinguishment of debt of $4.4 million. The increase in net operating assets was primarily due to decreases in accrued expenses related to the final payment fee to SLR, payment of our 2024 bonus accrued as of December 31, 2023 and increases in our accounts receivable offset by lower inventory levels from the prior year. Non-cash charges primarily consisted of depreciation and amortization, loss on extinguishment related to the SLR Facility, allowance for credit losses and share-based compensation.

Net cash used in operating activities for the nine months ended September 30, 2023 was $34.2 million, consisting primarily of a net loss of $24.8 million and an increase in net operating assets of $19.3 million, partially offset by non-cash charges of $9.9 million. The increase in net operating assets was primarily due to increases in accounts receivable, the ERC and a decrease in accrued expense. Non-cash charges consisted of depreciation and amortization, inventory impairment, non-cash interest expense and share-based compensation.

#### Net Cash used in Investing activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $0.04 million, which was attributable to purchases of property and equipment and capitalized software costs, partially offset by the repayment of notes receivable.

Net cash used in investing activities for the nine months ended September 30, 2023 was $0.8 million, which was attributable to purchase of property and equipment and capitalized software costs, partially offset by the repayment of notes receivable.

#### Net Cash (used in) provided by Financing activities

Net cash used in financing activities for the nine months ended September 30, 2024 was $16.4 million and primarily consisted of the repayment of the SLR Facility, proceeds from the Perceptive Facility and payment of debt issuance costs related to the Perceptive Facility.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $0.4 million and primarily consisted of the additional debt net of the final payment and amendment fee paid in connection with the SLR Fourth Amendment.

### Indebtedness

For information regarding the Perceptive Facility, refer to “Note 14. Debt” in Notes to Interim Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements.

### Recent Accounting Pronouncements

We refer you to “Note 3. Summary of Significant Accounting Policies” and “Note 4. Recent Accounting Pronouncements” in Notes to Interim Financial Statements located in Part I – FINANCIAL INFORMATION, Item 1. Financial Statements.

## Market risk

As filed, 858 characters.

We refer you to the information described in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2024. There have been no material changes to our market risk described therein.

We continue to monitor inflationary factors, such as increases in our cost of revenues and operating expenses that may adversely affect our operating results. Although we do not believe inflation has had a material impact on our financial condition, results of operations or cash flows to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin or decrease our operating expenses as a percentage of our revenues if the selling prices of our products do not increase as much or more than our costs increase.

## Controls and procedures

As filed, 1,804 characters.

### Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls and procedures 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 SEC’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 officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Principal Executive Officer and our Principal Financial and Accounting Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2024, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,252 characters.

You should carefully consider the information described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2024. There have been no material changes to the risk factors described therein.

*The Company’s failure to meet the continued listing requirements of Nasdaq could result in a delisting of the Company’s common stock.*

On October 3, 2024, the Company received a deficiency letter from the Staff notifying the Company that, for the 30 consecutive business days prior to such letter, the closing bid price for the Company’s common stock had been below the Minimum Bid Price Requirement.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was given 180 calendar days, or until April 1, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before April 1, 2025, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff will provide written confirmation that the Company has achieved compliance.

If the Company fails to regain compliance with the Minimum Bid Price Requirement or fails to satisfy another continued listing requirements of Nasdaq, Nasdaq may take steps to delist the Company’s common stock, which could have a materially adverse effect on the Company’s ability to raise additional funds as well as the price and liquidity of the Company’s common stock. Such a delisting would likely have a negative effect on the price of the Company’s common stock, would impair the Company’s ability to sell or purchase the Company’s common stock when it wishes to do so, could place restrictions on the Company’s operating flexibility and subject the Company to potential default under the Perceptive Facility. In the event of a delisting, the Company could not provide assurances that any action taken by the Company to restore compliance with listing requirements would allow the Company’s common stock to become listed again, stabilize the market price or improve the liquidity of the Company’s common stock, prevent the Company’s common stock from dropping below the Minimum Bid Price Requirement, or prevent future non-compliance with Nasdaq’s listing requirements.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-015160. Last ingested by Listed: Nov 4, 2026, 08:02 ET. No prices; not investment advice.