Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number 001-36305 SEMLER SCIENTIFIC, INC. (Exact name of registrant as specified in its charter) Delaware 26-1367393 (State o ...

Financial Data and Key Metrics Changes - In Q1 2023, the company reported record high quarterly revenues of $18.2 million, an increase of 30% compared to Q1 2022 [40] - Pre-tax net income for Q1 2023 was $6.6 million, reflecting a 68% increase period-over-period [27] - Net income was $5 million, or $0.74 per basic share and $0.63 per fully diluted share, marking a 48% increase period-over-period [27] - Operating expenses, including cost of revenue, were $12 million, an increase of 18% period-over-period due to increased headcount and wage inflation [41] - Cash, cash equivalents, and short-term investments totaled $43 million as of March 31, 2023 [42] Business Line Data and Key Metrics Changes - Fixed fee revenues were $9.3 million, an increase of 18% period-over-period, driven by growth from both existing and new customers [26] - Variable fee revenues reached $8.6 million, representing a 46% increase period-over-period [26] - Equipment and other revenue was $340,000, an increase of 19% period-over-period, indicating strength in the fee per test market [11] Market Data and Key Metrics Changes - The diabetes market in the U.S. includes over 35 million diagnosed individuals, growing at 4% to 5% annually, with 96 million people having pre-diabetes [4] - Heart failure affects approximately 6.5 million adults in the U.S., with over 1 million hospitalizations annually and care costs exceeding $30 billion [1] Company Strategy and Development Direction - The company aims to establish QuantaFlo for PAD as a standard of care and expand its customer base to include hospitals and value-based care providers [15] - Plans to market and install Insulin Insights more broadly are in place, focusing on improving clinical outcomes and reducing total cost of care [18] - The company is also exploring investments to diversify its product pipeline, particularly in the diabetes space [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the clinical benefits of early diagnosis of chronic diseases and the relevance of their mission to stakeholders [18] - The management team is prepared to adjust growth strategies as market conditions evolve, emphasizing the importance of their technology in reducing health inequities [33] - There are concerns regarding the impact of CMS's 2024 final rate announcement on the PAD testing business, as many customers rely on HCC payments [31] Other Important Information - Two new independent directors were appointed to the board, bringing expertise in capital allocation and strategic planning [9] - The company has $15 million remaining under the stock repurchase program [12] Q&A Session Summary Question: No questions were posed during the Q&A session - The operator indicated that there were no questions from participants and encouraged reaching out for any inquiries [49]

Financial Performance - Total revenues for the year ended December 31, 2022, were $56.7 million, an increase from $53.0 million in 2021, while net income decreased to $14.3 million from $17.2 million[29]. - The company needs to generate significant sales to maintain profitability, and any slower-than-expected sales growth could adversely affect financial performance[162]. - The company has experienced material weaknesses in its internal control over financial reporting, which could adversely affect its operations if additional weaknesses are identified in the future[185][186]. - The company does not anticipate paying any cash dividends on its capital stock in the foreseeable future, with capital appreciation being the sole source of gain for shareholders[203]. - Changes in tax regulations could materially impact the company's effective tax rates and overall financial performance[216]. Product Offerings and Market Potential - QuantaFlo, a patented and FDA-cleared product, is marketed primarily through a licensing model, with approximately 62% of customers on a fixed-fee model and 38% on a variable fee model based on usage[33]. - The estimated evaluable patient population for QuantaFlo is over 80 million patients in the United States annually, targeting those over 50 years old[55]. - The annual cost of care for heart failure exceeds $30 billion, with over one million hospitalizations per year in the United States[43]. - Approximately 21% of Type 2 diabetics in the U.S. require insulin, highlighting the market potential for Insulin Insights[50]. - The market opportunity for QuantaFlo is significant, given the under-diagnosed prevalence of cardiac and vascular diseases in the U.S.[42]. - The company is exploring additional product offerings through marketing and distribution arrangements, including potential acquisitions to expand its service offerings[62]. - The company is developing several updates and modifications to QuantaFlo in conjunction with engineering consultants to enhance product offerings[68]. - The company is exploring new sales models, including a fee-per-test model, to generate revenues from its products[155]. Customer and Revenue Concentration - The two largest customers accounted for 40.4% and 29.0% of revenues in 2022, compared to 40.8% and 28.6% in 2021[34]. - Two customers accounted for 40.4% and 29.0% of the company's revenues for the year ended December 31, 2022, indicating a significant revenue concentration risk[157]. - As of December 31, 2022, three customers represented 26.8%, 25.9%, and 16.8% of the company's accounts receivable, highlighting reliance on a limited customer base[157]. Regulatory and Compliance Issues - The FDA requires either 510(k) clearance or PMA approval for the commercial distribution of QuantaFlo and future medical devices[88]. - Compliance with FDA regulations is mandatory post-market, including reporting adverse events and conducting post-market surveillance[101]. - The company is subject to unannounced inspections by the FDA and must comply with stringent quality assurance procedures[101]. - The company’s cardiac and vascular testing product is subject to extensive FDA regulations, and any delays in obtaining necessary approvals could adversely affect market introduction[169]. Operational Challenges - The company faces challenges in gaining market acceptance for its products, which may not be viewed as attractive alternatives to existing devices[143]. - The company relies on a small number of independent suppliers for manufacturing, which poses risks of delays and disruptions that could impact operations[158]. - The ongoing COVID-19 pandemic has adversely affected the company’s business, particularly in terms of decreased test volumes[140]. - The company may incur significant costs related to replacing damaged products under its service model, which could affect profitability[156]. Employee and Organizational Structure - The company had 127 full-time employees as of December 31, 2022, representing a 2% increase from the previous year[127]. - The company expects to continue experiencing growth in the number of employees, particularly in sales, marketing, and distribution[127]. - The company had 81 sales and marketing employees as of December 31, 2022, and faces risks in managing its distribution network[154]. Financial Risks and Investments - The company has invested $2.5 million in licenses for Insulin Insights, an FDA-cleared software product for optimizing insulin dosing, with distribution under a SaaS model[36]. - The company has prepaid an aggregate of $2.5 million for software licenses related to Insulin Insights, with $2.0 million paid in April 2021 and $0.5 million in December 2022[141]. - The company wrote down $1.2 million of inventory in Q4 2021 due to inaccurate expectations regarding marketing and distribution of a product line[137]. - The company has a minority investment in NeuroDiagnostics Inc. and committed to loan up to $5.0 million to Monarch, a digital health company[141]. - The company may face significant costs due to potential product recalls or market withdrawals, which could adversely affect its business[207]. Market Competition - Competitors are beginning to market digital devices for vascular testing, indicating a growing competitive landscape[67]. - The company operates in a highly competitive medical device market, facing competition from larger firms with greater resources[215]. Stock and Shareholder Information - Approximately 47.0% of the company's common stock is beneficially owned by executive officers, directors, and significant stockholders, allowing them to substantially influence shareholder decisions[195]. - The company's stock price has been volatile, influenced by various factors, which could result in substantial losses for purchasers of its common stock[200]. - The company is classified as a "smaller reporting company," which allows it to take advantage of reduced disclosure requirements, potentially making its stock less attractive to investors[217]. - The company may experience future dilution from additional equity offerings to raise capital or pursue acquisitions[222]. Legal and Regulatory Environment - The company is subject to federal and state healthcare laws, including anti-kickback and false claims laws, which could result in substantial penalties for non-compliance[112]. - The federal Anti-Kickback Law prohibits unlawful inducements for referrals of business reimbursable under federally-funded healthcare programs[108]. - The U.S. Department of Justice has increased scrutiny of interactions between healthcare companies and providers, leading to a rise in investigations and settlements[115]. - Future legislation could impact the company's prospects and the actions of payors for healthcare treatment and services[120]. Financial Management and Cash Holdings - The company holds approximately $30.1 million in U.S. Treasury bills as of December 31, 2022, with the remainder of cash in non-interest bearing accounts[211]. - The company is taking steps to diversify its cash holdings to mitigate risks associated with financial institutions in receivership[211]. - Fluctuations in insurance costs could adversely affect the company's profitability and risk management profile[214]. - Increased costs are anticipated as a result of operating as a public company, including compliance with the Sarbanes-Oxley Act and other regulations[221].

Semler Scientific, Inc. (NASDAQ:SMLR) Q4 2022 Results Conference Call March 21, 2023 4:30 PM ET Company Participants Douglas Murphy-Chutorian - CEO, Corporate Secretary Wayne Pan - New CEO Renae Cormier - Head, Corporate Communication and Business Strategy Andrew Weinstein - SVP, Finance & Accounting Dennis Rosenberg - Chief Marketing Officer Conference Call Participants Brooks O'Neil - Lake Street Capital Markets Operator Good afternoon, and welcome to the Semler Scientific 2022 Fourth Quarter and Full Yea ...

Financial Data and Key Metrics Changes - For Q3 2022, revenue was $14 million, unchanged from the same period in 2021. Fixed fee revenues increased by 10% year-over-year to $8.6 million, while variable fee revenues decreased by 16% year-over-year to $4.9 million. Equipment and other revenues rose by 79% year-over-year to $500,000 [7][8] - Operating expenses increased by 10% year-over-year to $9.6 million, primarily due to increased headcount, wage inflation, and higher insurance and professional fees [9] - Net income was $3.7 million, down 11% year-over-year from $4.2 million, resulting in net income of $0.46 per diluted share compared to $0.51 per diluted share in the same period last year [10] Business Line Data and Key Metrics Changes - Fixed fee revenues showed growth at the largest customer and other existing and new fixed fee customers, indicating positive revenue growth [7] - Variable fee revenues declined due to a volume pricing discount from a large customer and market share shifts from higher-priced customers to lower-priced customers [8][14] - Equipment and other revenues significantly increased, suggesting a positive trend in product sales [8] Market Data and Key Metrics Changes - The largest two customers accounted for 41% and 26% of total revenues, indicating a concentration risk [9] - Market share shifts were noted within the HRA industry, with larger customers gaining share from smaller ones [31][43] Company Strategy and Development Direction - The company aims to diversify its product range through licenses or acquisitions, focusing on maximizing stockholder value [18] - R&D goals include upgrading existing products and commercializing new services, with a focus on the QuantaFlo product as a standard of care in the industry [19][20] - The company is optimistic about future growth opportunities, particularly in vascular disease testing [25][26] Management's Comments on Operating Environment and Future Outlook - Management noted disruptions in business at certain large customers and market share shifts, which impacted expected revenues [30][31] - The company has updated its guidance for annual revenue to a range of $55.5 million to $58 million, down from previous guidance due to lower-than-expected variable fee revenue [12] - Management remains optimistic about customer interest and a robust pipeline, despite challenges faced in Q3 [13][26] Other Important Information - The company repurchased 47,500 shares for $2 million during the quarter, with $15 million remaining on the stock repurchase program [10][17] - The company does not expect significant revenue from new product extensions in 2022, focusing instead on existing customer growth [15][25] Q&A Session Summary Question: Comments on seasonality and business performance - Management acknowledged that expected seasonality did not materialize as anticipated, with disruptions noted at large customers [30][31] Question: Impact of M&A transactions on business - Management indicated potential disruptions but lacked solid evidence to confirm this [32] Question: Customer response to QuantaFlo line extension - Customers are interested but cautious due to the novelty of routine testing [34] Question: Incremental premiums for Medicare Advantage health plans - There could be incremental premiums available for the product extension, potentially as much or more than current offerings [37][38] Question: Volume and pricing dynamics affecting variable fee revenue - A volume pricing milestone was reached with a large customer, impacting revenue dynamics [42] Question: Expense management and growth impact - Management improved expense management without cutting costs, ensuring no anticipated impact on future revenue growth [51][52] Question: Dynamics needed for Q4 revenue guidance - Management provided a wide guidance range due to uncertainties in customer discussions and pilot programs [54]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number 001-36305 SEMLER SCIENTIFIC, INC. (Exact name of registrant as specified in its charter) Delaware 26-1367393 (State or ...

[Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) For Q1 2022, Semler Scientific reported a 6% revenue increase to $14.0 million, but net income decreased 31% to $3.4 million due to a 41% rise in operating expenses, with cash flow from operations declining significantly Condensed Statements of Income (Q1 2022 vs Q1 2021) | Financial Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Revenues** | $14,016 | $13,183 | +6.3% | | **Income from operations** | $3,942 | $6,019 | -34.5% | | **Net income** | $3,360 | $4,877 | -31.1% | | **Diluted EPS** | $0.41 | $0.60 | -31.7% | Condensed Balance Sheet Highlights | Account | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $38,426 | $37,323 | | Total current assets | $50,470 | $45,536 | | Total assets | $55,435 | $50,672 | | Total current liabilities | $5,819 | $4,880 | | Total stockholders' equity | $49,392 | $45,547 | Condensed Statements of Cash Flows (Q1 2022 vs Q1 2021) | Cash Flow Activity | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,502 | $4,606 | | Net Cash Used in Investing Activities | ($256) | ($216) | | Net Cash (Used in) Provided by Financing Activities | ($143) | $9 | | **Increase in Cash** | **$1,103** | **$4,399** | [Notes to Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes detail financial preparation, revenue recognition, COVID-19 impact, customer concentration, strategic investments, and a new share repurchase program - The company attributes a new pattern in the home-testing market, with higher volumes earlier in the year, to a COVID-19 related timing change in customer ordering behavior, resulting in **67% sequential revenue growth** from the home-testing market compared to Q4 2021[27](index=27&type=chunk)[28](index=28&type=chunk) Revenue Breakdown (Three months ended March 31) | Revenue Source | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Variable-fee licenses | $5,842 | $5,658 | | Hardware and accessories | $285 | $331 | | Fixed-fee leases (calculated) | $7,889 | $7,194 | | **Total Revenue** | **$14,016** | **$13,183** | Customer Concentration | Metric | Period | Concentration Details | | :--- | :--- | :--- | | **Revenues** | Q1 2022 | Two customers accounted for 35.4% and 31.7% | | | Q1 2021 | Two customers accounted for 38.3% and 30.4% | | **Accounts Receivable** | Mar 31, 2022 | Three customers accounted for 30.2%, 26.8%, and 22.5% | | | Dec 31, 2021 | Three customers accounted for 21.9%, 20.1%, and 16.6% | - On March 14, 2022, the Board authorized a share repurchase program of up to **$20.0 million**, with the company purchasing 2,030 shares for approximately **$99 thousand** during the quarter[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes 6% revenue growth to increased installed units, but a 41% surge in operating expenses, driven by higher headcount and salary increases, led to a 31% net income decrease, while the company maintains strong liquidity [Overview](index=26&type=section&id=Overview) Semler Scientific provides technology solutions for chronic disease evaluation and treatment, with its primary product QuantaFlo for PAD diagnosis, and is expanding into diabetes and early Alzheimer's disease diagnostics - The company's mission is to develop, manufacture, and market innovative products for chronic disease evaluation and treatment[96](index=96&type=chunk) - Strategic expansion includes an exclusive marketing and distribution agreement for 'Insulin Insights' and investments in a company developing 'Discern,' a test for early Alzheimer's disease[97](index=97&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) In Q1 2022, revenues increased 6% to $14.0 million, driven by growth in both fixed-fee and variable-fee licenses, but total operating expenses rose 41% to $10.0 million, leading to a 31% net income decline to $3.4 million Revenue by Type (Q1 2022 vs Q1 2021) | Revenue Type | Q1 2022 (in millions) | Q1 2021 (in millions) | | :--- | :--- | :--- | | Fixed-fee licenses | $7.9 | $7.2 | | Variable-fee licenses | $5.8 | $5.7 | | **Total Vascular Testing Fees** | **$13.7** | **$12.9** | - Total operating expenses increased by **41% YoY**, from **$7.1 million to $10.0 million**, primarily due to increased personnel expenses associated with business expansion[108](index=108&type=chunk) - Key drivers for increased operating expenses across Engineering, Sales & Marketing, and G&A were increased headcount, annual pay raises, and the expiry of COVID-19 related payroll tax credits[110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company held $38.4 million in cash and cash equivalents and $44.7 million in working capital, despite a decrease in net cash from operating activities to $1.5 million - The company had cash and cash equivalents of **$38.4 million** and working capital of approximately **$44.7 million** as of March 31, 2022[116](index=116&type=chunk) - Net cash provided by operating activities decreased from **$4.6 million** in Q1 2021 to **$1.5 million** in Q1 2022, primarily due to lower net income and increased working capital requirements[118](index=118&type=chunk) - Financing activities used **$0.1 million**, which included **$0.1 million** for treasury stock acquisition under the new share purchase program[122](index=122&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable for the reporting period - Not applicable[125](index=125&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2022, the Chief Executive Officer and senior finance officers concluded that the company's disclosure controls and procedures were effective[127](index=127&type=chunk) - There were no material changes in internal control over financial reporting during the first quarter ended March 31, 2022[128](index=128&type=chunk)[129](index=129&type=chunk) [Part II. Other Information](index=34&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[132](index=132&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section is not applicable, indicating no material changes to previously disclosed risk factors - Not applicable[133](index=133&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, but purchased 2,030 shares under its new $20 million share repurchase program, leaving approximately $19.9 million available Issuer Purchases of Equity Securities (March 15-31, 2022) | Total Shares Purchased | Average Price Paid Per Share | Maximum Dollar Value Remaining for Purchase | | :--- | :--- | :--- | | 2,030 | $48.45 | $19,901,359 | - On March 14, 2022, the Board of Directors authorized a share repurchase program for up to **$20.0 million** of its outstanding common stock with no expiration date[137](index=137&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, officer certifications, and XBRL data files - Exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[141](index=141&type=chunk)

Semler Scientific, Inc. (NASDAQ:SMLR) Q1 2022 Earnings Conference Call May 2, 2022 10:30 AM ET Company Participants Douglas Murphy-Chutorian - CEO Dennis Rosenberg - Chief Marketing Officer Andrew Weinstein - SVP, Finance and Accounting Conference Call Participants Brooks O’Neil - Lake Street Capital Markets LLC Marc Wiesenberger - B. Riley Securities, Inc. Operator Good day, and welcome to the Semler Scientific First Quarter 2022 Financial Results Conference Call. All participants will be in listen-only mo ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: to Commission file number: 001-36305 SEMLER SCIENTIFIC, INC. (Exact name of registrant as specified in its charter) of incorporation or organization) Iden ...

Part I. Financial Information [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for Q3 and YTD September 2021 highlight strong revenue and net income growth, alongside increased assets and cash [Condensed Statements of Income](index=7&type=section&id=Condensed%20Statements%20of%20Income) The condensed statements of income show strong nine-month revenue and net income growth, but Q3 net income declined despite revenue gains due to higher operating expenses Condensed Statements of Income (Unaudited, in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $13,991 | $10,727 | $41,485 | $26,530 | | **Income from operations** | $5,253 | $5,555 | $17,735 | $9,966 | | **Net income** | $4,150 | $4,866 | $15,715 | $8,614 | | **Diluted EPS** | $0.51 | $0.61 | $1.93 | $1.07 | [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) As of September 30, 2021, the company's balance sheet strengthened, with cash and cash equivalents rising to **$35.9 million** and total assets growing to **$51.0 million** Condensed Balance Sheet Highlights (in thousands) | Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $35,930 | $22,079 | | **Total current assets** | $46,095 | $26,603 | | **Total assets** | $50,973 | $34,639 | | **Total current liabilities** | $6,693 | $4,514 | | **Total stockholders' equity** | $44,014 | $29,793 | [Condensed Statements of Cash Flows](index=10&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, the company generated **$14.4 million** in cash from operating activities, resulting in a total cash increase of **$13.9 million** Condensed Statements of Cash Flows (Unaudited, in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $14,399 | $9,568 | | **Net Cash Used in Investing Activities** | ($602) | ($690) | | **Net Cash Provided by Financing Activities** | $54 | $174 | | **Increase in Cash** | $13,851 | $9,052 | | **Cash and cash equivalents, end of period** | $35,930 | $16,793 | [Notes to Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Key notes to the financial statements detail COVID-19 impacts, revenue composition, inventory commitments, strategic investments, and significant customer concentration - The company's revenues rebounded after the initial COVID-19 impact in 2020, but management believes the Delta variant may have negatively impacted sequential revenue growth in Q3 2021, particularly for variable-fee licenses[24](index=24&type=chunk) - For the nine months ended September 30, 2021, revenue was composed of approximately **$22.7 million** from fixed-fee leases and **$18.0 million** from variable-fee licenses[42](index=42&type=chunk)[49](index=49&type=chunk) - The company has a significant concentration of credit risk, with two customers accounting for **39.7%** and **27.9%** of total revenues for the three months ended September 30, 2021[66](index=66&type=chunk) - The company has entered into distribution agreements and made investments in private companies to expand its product lines, including a commitment to purchase **$1.2 million** in inventory from one partner[43](index=43&type=chunk)[44](index=44&type=chunk)[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue growth driven by QuantaFlo® adoption, noting a Q3 2021 sequential growth slowdown, increased operating expenses, and a strong liquidity position [Results of Operations: Three Months Ended September 30, 2021 vs 2020](index=29&type=section&id=Results%20of%20Operations%3A%20Three%20Months%20Ended%20September%2030%2C%202021%20vs%202020) In Q3 2021, revenues increased **30%** to **$14.0 million**, but a **69%** rise in operating expenses to **$8.7 million** led to a **15%** decrease in net income to **$4.2 million** Q3 2021 vs Q3 2020 Performance (in millions) | Metric | Q3 2021 | Q3 2020 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $14.0 | $10.7 | +30% | | *Fixed-fee licenses* | $7.8 | $6.3 | +24% | | *Variable-fee licenses* | $5.9 | $4.1 | +44% | | **Total Operating Expenses** | $8.7 | $5.2 | +69% | | **Net Income** | $4.2 | $4.9 | -15% | [Results of Operations: Nine Months Ended September 30, 2021 vs 2020](index=33&type=section&id=Results%20of%20Operations%3A%20Nine%20Months%20Ended%20September%2030%2C%202021%20vs%202020) For the first nine months of 2021, revenues grew **56%** to **$41.5 million**, outpacing a **43%** increase in operating expenses to **$23.8 million**, resulting in an **82%** increase in net income to **$15.7 million** Nine Months 2021 vs 2020 Performance (in millions) | Metric | Nine Months 2021 | Nine Months 2020 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $41.5 | $26.5 | +56% | | *Fixed-fee licenses* | $22.7 | $18.7 | +21% | | *Variable-fee licenses* | $18.0 | $7.1 | +154% | | **Total Operating Expenses** | $23.8 | $16.6 | +43% | | **Net Income** | $15.7 | $8.6 | +82% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position, with cash and cash equivalents increasing by **$13.8 million** to **$35.9 million** as of September 30, 2021, primarily driven by **$14.4 million** in operating cash flow - Cash and cash equivalents increased to **$35.9 million** at September 30, 2021, from **$22.1 million** at December 31, 2020[127](index=127&type=chunk) Cash Flow Summary - Nine Months Ended Sep 30, 2021 (in millions) | Cash Flow Source | Amount | | :--- | :--- | | **Net Cash from Operating Activities** | $14.4 | | **Net Cash Used in Investing Activities** | ($0.6) | | **Net Cash Provided by Financing Activities** | $0.054 | - As of September 30, 2021, the company had working capital of approximately **$39.4 million**[127](index=127&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable for the reporting period - The company states that this item is not applicable[135](index=135&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the third quarter - Based on an evaluation as of September 30, 2021, the Chief Executive Officer and senior finance executives concluded that the company's disclosure controls and procedures were effective[138](index=138&type=chunk) - There were no changes in internal control over financial reporting during the third fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[139](index=139&type=chunk) Part II. Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[141](index=141&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section is not applicable, indicating no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K - Not applicable[142](index=142&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[143](index=143&type=chunk) [Defaults upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[144](index=144&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[145](index=145&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - Not applicable[146](index=146&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report lists exhibits including Rule 13a-14(a) certifications for the Principal Executive Officer and Principal Financial Officer, a Section 1350 Certification, and Inline XBRL documents[148](index=148&type=chunk)