Outset Medical(OM) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed financial statements for Outset Medical, Inc., including balance sheets, statements of operations, comprehensive loss, stockholders' equity, cash flows, and detailed notes Condensed Balance Sheets The condensed balance sheets provide a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Balance Sheet Highlights (in thousands) | Metric | September 30, 2024 | December 31, 2023 | | :-------------------------- | :----------------- | :---------------- | | Total Assets | $292,890 | $313,801 | | Total Liabilities | $245,068 | $190,915 | | Total Stockholders' Equity | $47,822 | $122,886 | - Total assets decreased by $20.911 million (6.66%) from December 31, 2023, to September 30, 2024, primarily due to a decrease in cash and cash equivalents[5] - Total liabilities increased by $54.153 million (28.37%) from December 31, 2023, to September 30, 2024, largely driven by an increase in term loans[5] - Total stockholders' equity decreased significantly by $75.064 million (61.09%) over the nine-month period, mainly due to accumulated deficit[5] Condensed Statements of Operations The condensed statements of operations present the company's financial performance over specific periods, including revenue, gross profit, operating loss, and net loss Condensed Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $28,666 | $30,362 | $84,222 | $99,869 | | Gross Profit | $9,820 | $7,157 | $27,817 | $21,288 | | Loss from Operations | $(23,839) | $(45,454) | $(91,515) | $(132,417) | | Net Loss | $(27,940) | $(46,180) | $(102,338) | $(134,197) | | Net Loss Per Share, Basic and Diluted| $(0.55) | $(0.93) | $(1.98) | $(2.72) | - Total revenue decreased by 5.6% for the three months ended September 30, 2024, and by 15.6% for the nine months ended September 30, 2024, compared to the prior year periods[7] - Gross profit increased by 37.2% for the three months and 30.7% for the nine months ended September 30, 2024, despite lower revenue, indicating improved gross margins[7] - Net loss significantly narrowed for both the three-month period (from $(46.18) million to $(27.94) million) and the nine-month period (from $(134.20) million to $(102.34) million) year-over-year[7] Condensed Statements of Comprehensive Loss The condensed statements of comprehensive loss detail the net loss and other comprehensive income or loss components, reflecting changes in equity from non-owner sources Condensed Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss | $(27,940) | $(46,180) | $(102,338) | $(134,197) | | Unrealized gain on available-for-sale securities | $654 | $140 | $284 | $311 | | Comprehensive Loss | $(27,286) | $(46,040) | $(102,054) | $(133,886) | - The company reported a comprehensive loss of $(27.29) million for the three months and $(102.05) million for the nine months ended September 30, 2024, an improvement from the prior year periods[8] - Unrealized gains on available-for-sale securities contributed positively to comprehensive income in both periods of 2024, with a gain of $654 thousand in Q3 2024[8] Condensed Statements of Stockholders' Equity The condensed statements of stockholders' equity track changes in equity components, including common stock, additional paid-in capital, accumulated other comprehensive income, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Metric | Balance as of Dec 31, 2023 | Balance as of Sep 30, 2024 | | :--------------------------------------- | :------------------------- | :------------------------- | | Common Stock (Amount) | $50 | $52 | | Additional Paid-in Capital | $1,084,515 | $1,111,503 | | Accumulated Other Comprehensive Income | $68 | $352 | | Accumulated Deficit | $(961,747) | $(1,064,085) | | Total Stockholders' Equity | $122,886 | $47,822 | - Total stockholders' equity decreased from $122.89 million at December 31, 2023, to $47.82 million at September 30, 2024, primarily due to the accumulated deficit from net losses[10] - Additional paid-in capital increased by $26.99 million, driven by stock-based compensation expense and common stock issuances through employee plans[10] - The accumulated deficit grew by $102.34 million during the nine months ended September 30, 2024, reflecting the net loss incurred[10] Condensed Statements of Cash Flows The condensed statements of cash flows categorize cash movements into operating, investing, and financing activities, showing the overall change in cash and cash equivalents Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(99,815) | $(106,931) | | Net cash (used in) provided by investing activities | $(4,215) | $59,601 | | Net cash provided by financing activities | $68,808 | $10,423 | | Net decrease in cash, cash equivalents and restricted cash | $(35,222) | $(36,907) | - Net cash used in operating activities decreased by $7.12 million (6.66%) for the nine months ended September 30, 2024, compared to the prior year, indicating improved operational cash burn[15] - Investing activities shifted from providing $59.60 million in cash in 2023 to using $4.22 million in 2024, primarily due to changes in purchases and maturities of investment securities[15] - Financing activities provided significantly more cash, $68.81 million in 2024 versus $10.42 million in 2023, mainly due to proceeds from term loans[15] Notes to Unaudited Condensed Financial Statements These notes provide essential disclosures and explanations for the figures presented in the unaudited condensed financial statements, covering business description, accounting policies, and specific balance sheet items 1. Description of Business This note describes Outset Medical, Inc.'s core business, its primary product, and its financial viability outlook - Outset Medical, Inc. is a medical technology company focused on reducing the cost and complexity of dialysis with its Tablo® Hemodialysis System, cleared by the FDA for hospital to home use[16] - The company has incurred net losses and negative cash flows from operations since inception, with an accumulated deficit of $1.1 billion as of September 30, 2024[17] - Management believes existing cash, cash equivalents, short-term investments, sales-generated cash, and debt financing proceeds will be sufficient for at least the next 12 months[17] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including new accounting standards and their potential impact - The company is evaluating the impact of new accounting standards: ASU 2023-07 (Segment Reporting) effective for FY2024, and ASU 2023-09 (Income Tax Disclosures) effective for FY2025[19] - The SEC adopted new rules for climate-related disclosures, with compliance phased in from FY2025 for large accelerated filers; the company is evaluating the impact[19] - No new or material changes to the company's significant accounting policies have had a material impact on the condensed financial statements[20] 3. Revenue and Deferred Revenue This note disaggregates revenue by source and details the company's remaining performance obligations for customer contracts Revenue by Source (in thousands) | Revenue Source | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Consoles | $7,709 | $12,506 | $24,080 | $51,053 | | Consumables | $12,596 | $11,025 | $35,891 | $29,587 | | Total Product Revenue | $20,305 | $23,531 | $59,971 | $80,640 | | Service and Other Revenue | $8,361 | $6,831 | $24,251 | $19,229 | | Total Revenue | $28,666 | $30,362 | $84,222 | $99,869 | - Console revenue decreased significantly by 38.4% in Q3 2024 and 52.8% in YTD 2024, while consumable revenue increased by 14.2% and 21.3% respectively, indicating a shift in revenue mix[21] - Service and other revenue grew by 22.4% in Q3 2024 and 26.1% in YTD 2024, driven by the growth in the console installed base[21] - As of September 30, 2024, remaining performance obligations for customer service contracts totaled $12.9 million, with $12.8 million expected to be recognized within the next 12 months[22] 4. Fair Value Measurements This note provides information on the fair value of financial instruments, particularly cash equivalents and short-term investments, and the valuation methodologies used Fair Value of Cash Equivalents and Short-term Investments (in thousands) | Asset Category | September 30, 2024 (Fair Value) | December 31, 2023 (Fair Value) | | :-------------------------------------------- | :------------------------------ | :----------------------------- | | Money market funds (Level 1) | $16,136 | $44,883 | | U.S. Treasury securities (Level 1) | $72,920 | $53,816 | | U.S. government-sponsored enterprises debt securities (Level 2) | $11,534 | $29,631 | | Corporate debt (Level 2) | $57,892 | $33,270 | | Commercial paper (Level 2) | $0 | $18,098 | | Total | $158,482 | $179,698 | - Total cash equivalents and short-term investments decreased from $179.70 million at December 31, 2023, to $158.48 million at September 30, 2024[23] - The company experienced unrealized losses on available-for-sale debt securities due to interest rate increases, but does not intend to sell them before recovery of amortized cost[25] 5. Balance Sheet Components This note offers detailed breakdowns of specific balance sheet accounts, including cash, inventories, and accrued liabilities Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | September 30, 2024 | September 30, 2023 | | :----------------------------------------- | :----------------- | :----------------- | | Cash and cash equivalents | $33,287 | $36,297 | | Restricted cash | $3,329 | $3,329 | | Total cash, cash equivalents and restricted cash | $36,616 | $39,626 | Allowance for Credit Losses Activity (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of Dec 31, 2023 | $203 | | Increase in allowance | $1,821 | | Write-offs | $(7) | | Balance as of Sep 30, 2024 | $2,017 | Inventories (in thousands) | Category | September 30, 2024 | December 31, 2023 | | :------------------ | :----------------- | :---------------- | | Raw materials | $25,138 | $18,706 | | Work in process | $13,911 | $8,728 | | Finished goods | $22,387 | $21,781 | | Total inventories | $61,436 | $49,215 | Accrued Expenses and Other Current Liabilities (in thousands) | Category | September 30, 2024 | December 31, 2023 | | :------------------------------------- | :----------------- | :---------------- | | Inventory | $1,384 | $3,395 | | Research and development expenses | $116 | $1,050 | | Professional services | $716 | $1,153 | | Customer rebates | $1,738 | $2,100 | | Other | $2,795 | $5,761 | | Total accrued expenses and other current liabilities | $6,749 | $13,459 | 6. Commitments and Contingencies This note discloses the company's legal proceedings, including stockholder class action lawsuits, and other contractual commitments - Two purported stockholder class action lawsuits were filed in August and October 2024, alleging violations of federal securities laws related to statements about Tablo Hemodialysis System and TabloCart with Prefiltration[33] - The company intends to vigorously defend against the litigation and cannot currently estimate the potential loss[33] - The company includes standard indemnification provisions in arrangements with partners, customers, and suppliers, but has not incurred material costs to date[34] 7. Term Loans This note details the company's debt obligations, including principal amounts, interest rates, and associated covenants Term Loans (in thousands) | Metric | September 30, 2024 | December 31, 2023 | | :-------------------------- | :----------------- | :---------------- | | Principal of term loans | $200,000 | $133,476 | | Unamortized debt discount | $(2,818) | $(3,363) | | Term loans, noncurrent | $197,182 | $130,113 | - The company has SLR Credit Facilities providing up to $300.0 million, including a $250.0 million term loan facility and a $50.0 million asset-based revolving credit facility[36] - As of September 30, 2024, the company borrowed the full $200.0 million available under the SLR Term Loan Facility's borrowing limitations[36] - Term loans accrue interest at one-month term SOFR (2.75% floor) plus 5.15% (10.32% as of Sep 30, 2024), with principal due November 1, 2027[37] - The SLR Revolver has aggregate commitments of $25.0 million, potentially increasing to $50.0 million, but no amounts were outstanding as of September 30, 2024, due to overall borrowing limitations[38] - The credit facility agreements contain financial covenants, including maintaining minimum cash or revenue levels, and restrictions on additional debt, capital expenditures, and dividends[40] 8. Equity Incentive Plan This note describes the company's equity compensation plans, including shares reserved and stock-based compensation expense - As of September 30, 2024, 3,218,000 shares were reserved for future issuance under the 2020 Equity Incentive Plan, and 667,000 shares under the Employee Share Purchase Plan (ESPP)[41] - The company grants Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) with service-based and performance/market-based vesting conditions, respectively[41] Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of revenue | $296 | $620 | $1,092 | $1,381 | | Research and development | $1,400 | $2,793 | $6,025 | $8,232 | | Sales and marketing | $945 | $3,765 | $4,898 | $9,908 | | General and administrative | $3,747 | $3,715 | $12,396 | $10,015 | | Total stock-based compensation expense | $6,388 | $10,893 | $24,411 | $29,536 | 9. Income Taxes This note explains the company's income tax provision and the status of its deferred tax assets and valuation allowance - The income tax provision for the three and nine months ended September 30, 2024 and 2023, was insignificant, primarily related to foreign income taxes from Mexico operations[44] - U.S. federal and state net deferred tax assets are fully offset by a valuation allowance, as their realization is not considered more likely than not[44] 10. Net Loss Per Share This note presents the calculation of net loss per share and identifies potentially dilutive securities Potentially Dilutive Securities (in thousands) | Security Type | Three and Nine Months Ended Sep 30, 2024 | Three and Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Stock options to purchase common stock | 1,521 | 1,978 | | Restricted stock units | 3,961 | 2,760 | | Performance stock units | 273 | 95 | | Shares committed under ESPP | 319 | 42 | | Warrant to purchase common stock | 63 | 63 | | Total | 6,137 | 4,938 | - The total number of potentially dilutive securities increased from 4.94 million in 2023 to 6.14 million in 2024, primarily driven by an increase in restricted stock units[45] 11. Workforce reduction This note details the company's organizational restructuring plans and the associated severance and termination benefit charges - The company implemented three organizational restructuring plans in Q4 2023, May 2024, and Q3 2024 to improve operational efficiencies and reduce operating expenses[46] - Restructuring charges for employee severance and termination benefits totaled $1.4 million in Q3 2024, primarily impacting the commercial organization[46] Severance and Related Benefits Charges (in thousands) | Expense Category | Nine Months Ended Sep 30, 2024 | | :--------------------------- | :----------------------------- | | Cost of revenue | $530 | | Research and development | $1,260 | | Sales and marketing | $1,884 | | General and administrative | $475 | | Total | $4,149 | 12. Subsequent Event This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On October 18, 2024, a second purported stockholder class action lawsuit was filed against the company and certain officers, as detailed in Note 6[49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting the Tablo Hemodialysis System's market position, recent FDA developments, and key performance factors Overview This overview introduces Outset Medical's core product, its benefits, revenue generation model, and summary financial performance - Outset Medical's Tablo Hemodialysis System integrates water purification and on-demand dialysate production, enabling dialysis across multiple care settings (hospital, clinic, home) with a user-friendly interface and cloud connectivity[51] - Tablo offers significant operational efficiencies, including up to 80% cost reduction in the ICU, and quality of life benefits for patients[51] - The company generates revenue from Tablo console placements (up-front) and recurring sales of consumables and services (over life of consoles)[53] - Total revenues were $28.7 million for Q3 2024 (down from $30.4 million in Q3 2023) and $84.2 million for YTD 2024 (down from $99.9 million in YTD 2023)[53] Recent Developments This section discusses recent regulatory developments, specifically an FDA warning letter and subsequent clearance for a key product component - In July 2023, the company received an FDA warning letter regarding promotion of CRRT (outside indications) and the need for 510(k) clearance for TabloCart with Prefiltration[54] - The company paused distribution of TabloCart with Prefiltration and received 510(k) clearance in early May 2024, resuming distribution and believing all matters in the warning letter are addressed[54] Key Factors Affecting Our Performance This section identifies critical drivers of the company's financial performance, including market acceptance, gross margin expansion, profitability initiatives, and macroeconomic conditions - Performance is driven by market acceptance of Tablo in acute settings, expansion into the home dialysis market, gross margin expansion, profitability initiatives, and macroeconomic factors[55] - Macroeconomic conditions (inflation, rising interest rates, labor shortages) have led to customers deferring Tablo purchases, elongating sales cycles, and negatively impacting bookings and revenues since H2 2023[61] - Gross margin expansion relies on increasing consumable and service revenue, reducing service costs, and lowering Tablo console production costs through in-house manufacturing in Mexico[59] - Profitability initiatives include optimizing operating expenses through organizational restructurings (Q4 2023, Q2 2024, Q3 2024) and improving working capital management, especially inventory[60] Results of Operations This section provides a detailed comparison of the company's revenue, gross profit, operating expenses, and other income/expenses for the reported periods Revenue Comparison (in thousands) | Revenue Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | | Product revenue | $20,305 | $23,531 | $(3,226) | (14)% | | Service and other revenue | $8,361 | $6,831 | $1,530 | 22% | | Total revenue | $28,666 | $30,362 | $(1,696) | (6)% | | Revenue Category | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Product revenue | $59,971 | $80,640 | $(20,669) | (26)% | | Service and other revenue | $24,251 | $19,229 | $5,022 | 26% | | Total revenue | $84,222 | $99,869 | $(15,647) | (16)% | - Product revenue decreased due to fewer console sales, offset by increased consumable revenue from a growing installed base[65] Gross Profit and Gross Margin Comparison | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Gross profit | $9,820 | $7,157 | $2,663 | 37% | | Gross margin | 34.3% | 23.6% | | 10.7 pp | | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Gross profit | $27,817 | $21,288 | $6,529 | 31% | | Gross margin | 33.0% | 21.3% | | 11.7 pp | - Gross profit and margin improved significantly due to a higher mix of consumable and service revenue, which have higher margins and lower costs per unit[66] Operating Expenses Comparison (in thousands) | Expense Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :--------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Research and development | $8,139 | $16,076 | $(7,937) | (49)% | | Sales and marketing | $15,417 | $24,720 | $(9,303) | (38)% | | General and administrative | $10,103 | $11,815 | $(1,712) | (14)% | | Total operating expenses | $33,659 | $52,611 | $(18,952) | (36)% | | Expense Category | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :--------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Research and development | $30,508 | $44,775 | $(14,267) | (32)% | | Sales and marketing | $54,593 | $74,038 | $(19,445) | (26)% | | General and administrative | $34,231 | $34,892 | $(661) | (2)% | | Total operating expenses | $119,332 | $153,705 | $(34,373) | (22)% | - Operating expenses decreased across all categories for both periods, primarily due to cost reduction efforts, including lower compensation, stock-based compensation, consulting, and travel expenses[67] Other Income (Expenses), Net Comparison (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | | Interest income and other income, net | $2,149 | $2,573 | $(424) | (16)% | | Interest expense | $(6,068) | $(3,213) | $(2,855) | 89% | | Total other expenses, net | $(3,919) | $(640) | $(3,279) | 512% | | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest income and other income, net | $7,718 | $7,889 | $(171) | (2)% | | Interest expense | $(18,046) | $(9,258) | $(8,788) | 95% | | Total other expenses, net | $(10,328) | $(1,369) | $(8,959) | 654% | - Interest expense significantly increased due to a higher outstanding balance under the SLR Term Loan Facility in 2024[68] Liquidity and Capital Resources This section discusses the company's cash position, compliance with debt covenants, Nasdaq listing status, and management's outlook on future liquidity - As of September 30, 2024, the company had $179.0 million in cash, cash equivalents, restricted cash, and short-term investments[69] - The company must comply with SLR Credit Facility covenants, including financial reporting and minimum cash/revenue, with non-compliance potentially leading to immediate debt repayment[69] - On September 23, 2024, the company received a Nasdaq notice for non-compliance with the minimum bid price requirement, with a compliance period until March 24, 2025[69] - Management believes existing liquidity and debt financing proceeds will be sufficient for at least the next 12 months[69] Cash Flows Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(99,815) | $(106,931) | | Investing activities | $(4,215) | $59,601 | | Financing activities | $68,808 | $10,423 | | Net decrease in cash, cash equivalents and restricted cash | $(35,222) | $(36,907) | - Net cash used in operating activities decreased due to a lower net loss and favorable adjustments, partially offset by increased inventories and decreases in certain liabilities[71] - Net cash used in investing activities was primarily due to purchases of short-term investment securities, partially offset by maturities[72] - Net cash provided by financing activities was mainly from $66.5 million in net proceeds from term loans and employee stock option exercises[73] Critical Accounting Estimates This section confirms that there have been no new or significant changes to the company's critical accounting estimates since its last annual report - There have been no new or significant changes in the company's critical accounting estimates compared to those disclosed in its 2023 Annual Report[74] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the company's exposure to market risks, specifically related to interest rate and foreign currency exchange rates, has not materially changed since December 31, 2023 - The company's exposure to market risks, including interest rate and foreign currency exchange rates, has not materially changed since December 31, 2023[75] Item 4. Controls and Procedures This section confirms that management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of September 30, 2024, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2024[77] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[78] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section incorporates by reference the details of legal proceedings, specifically litigation, as described in Note 6, Commitments and Contingencies, of the unaudited condensed financial statements - Information regarding legal proceedings is incorporated by reference from Note 6, Commitments and Contingencies, in the unaudited condensed financial statements[80] Item 1A. Risk Factors This section updates the risk factors, emphasizing the risk of not maintaining Nasdaq listing compliance due to minimum bid price requirements and the potential adverse effects of ongoing stockholder class action lawsuits - The company received a Nasdaq notice on September 23, 2024, for non-compliance with the minimum bid price requirement ($1.00 per share for 30 consecutive trading days) and has until March 24, 2025, to regain compliance[82] - Failure to regain Nasdaq compliance could lead to delisting, adversely affecting liquidity, trading volume, market price, and the ability to raise additional financing[82] - Two stockholder class action lawsuits were filed in August and October 2024, alleging federal securities law violations related to statements about the Tablo Hemodialysis System and TabloCart with Prefiltration[84] - The company's credit agreements require meeting certain operating and financial covenants, place restrictions on financial flexibility, and subject the company to interest rate risk, with additional borrowings tied to revenue milestones and lender approval[85][86] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the period[87] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the period[87] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[87] Item 5. Other Information This section confirms that none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the reporting period - None of the company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reporting period[88] Item 6. Exhibits This section provides a list of exhibits filed with the quarterly report, including organizational documents, stock certificates, registration rights agreements, warrant agreements, and certifications from executive officers - The report includes exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Common Stock Certificate, Registration Rights Agreement, Series A Warrant Agreements, and certifications from the Principal Executive Officer and Principal Financial Officer[88][89] Signatures This section contains the official signatures of the company's President, Chief Executive Officer, and Chief Financial Officer, certifying the report - The report is signed by Leslie Trigg, President and Chief Executive Officer, and Nabeel Ahmed, Chief Financial Officer, on November 6, 2024[90]