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



	☐	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 other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2340-2348 Walsh Avenue, Suite 2344

Santa Clara, CA 95051

(Address of principal executive offices) (Zip Code)

(877) 774-4211

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		SMLR		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232,405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2023, there were 6,851,498 shares of the issuer’s common stock, $0.001 par value per share, outstanding.

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TABLE OF CONTENTS

		Page
Part I.	Financial Information	1

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	20

Part II.	Other Information	21

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

Signatures		23

In this report, unless otherwise stated or as the context otherwise requires, references to “Semler Scientific,” “the Company,” “we,” “us,” “our” and similar references refer to Semler Scientific, Inc. The Semler Scientific logo, QuantaFlo and other trademarks or service marks of Semler Scientific, Inc. appearing in this report are the property of Semler Scientific, Inc. This report also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. In some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,” “estimates,” “plans,” “believes,” “seeks,” “may,” “should,” “continue,” “could” or the negative of such terms or other similar expressions. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this report. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements, including risks associated with:

●

implementation of our business strategy and the fact that we actively market only two U.S. Food and Drug Administration, or FDA, cleared products and may not benefit from our recent investments in other companies developing complementary products or the extension of QuantaFlo to test for other cardiovascular diseases;

●

changes in the regulatory reimbursement landscape, such as the recent 2024 Medicare Advantage and Part D Final Rate Announcement issued by the Centers for Medicare and Medicaid Services, or CMS, could impact the perceived value of using our products to aid diagnosis of cardiovascular diseases;

●

the failure of physicians and other customers to widely adopt our products, or to determine that our product provides a safe and effective alternative to existing ankle brachial index, or ABI, devices;

●

our testing product is generally but not specifically approved for reimbursement under any third-party payor codes;

●

our reliance on the talents of a small number of key personnel, and a small direct sales force;

●

not requiring customers to enter into long-term licenses;

●

concentration of our revenues and accounts receivable with a limited number of customers;

●

our reliance on a small number of independent suppliers and facilities for the manufacturing of our product;

●

our business being subject to many laws and government regulations, including governing the manufacture and sale of medical devices, patient data, and others;

●

our ability to protect our intellectual property;

●

impacts of the ongoing Covid-19 pandemic and macroeconomic factors that could impact our business, such as the effects of the Russian invasion of Ukraine on the global economy and supply chain and inflation, as well as the recent bank failures; and

●

the other factors set forth under the caption “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 23, 2023.

Because the risks and uncertainties referred to above and in our SEC reports could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements.

You should read this quarterly report and the documents that we reference herein and therein and have filed as exhibits to this report and our other filings with the SEC. You should assume that the information appearing in this quarterly report is accurate as of the date of this quarterly report only. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking

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statements. We qualify all of the information presented in this quarterly report, and particularly our forward-looking statements, by these cautionary statements.

iii

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Semler Scientific, Inc.

Condensed Statements of Income

Unaudited

(In thousands of U.S. Dollars, except share and per share data)


	For the three months ended March 31,
	2023		2022

Revenues	$	18,206	$	14,016
Operating expenses:
Cost of revenues		1,269		970
Engineering and product development		1,630		1,126
Sales and marketing		5,192		4,676
General and administrative		3,859		3,302
Total operating expenses		11,950		10,074
Income from operations		6,256		3,942
Interest income		484		1
Change in fair value of notes held for investment		(107)		—
Other income, net		377		1
Pre-tax net income		6,633		3,943
Income tax provision		1,664		583
Net income	$	4,969	$	3,360
Net income per share, basic	$	0.74	$	0.50
Weighted average number of shares used in computing basic income per share		6,701,199		6,777,950
Net income per share, diluted	$	0.63	$	0.41
Weighted average number of shares used in computing diluted income per share		7,896,043		8,116,456

See accompanying notes to unaudited condensed financial statements.

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Semler Scientific, Inc.

Condensed Balance Sheets

Unaudited

(In thousands of U.S. Dollars, except share and per share data)


	March 31,		December 31,
	2023		2022

Assets
Current Assets:
Cash and cash equivalents	$	5,305	$	23,014
Short-term investments		37,663		20,073
Trade accounts receivable, net of reserves of $154 and $109, respectively		9,343		3,884
Inventory, net		512		469
Prepaid expenses and other current assets		2,769		1,468
Total current assets		55,592		48,908
Assets for lease, net		2,873		2,478
Property and equipment, net		703		667
Long-term investments		821		821
Notes held for investment (includes measured at fair value of $4,072 and $3,679, respectively)		5,072		4,679
Other non-current assets		2,818		2,842
Long-term deferred tax assets		2,378		2,298
Total assets	$	70,257	$	62,693

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	298	$	835
Accrued expenses		7,206		4,748
Deferred revenue		1,286		1,160
Other short-term liabilities		128		114
Total current liabilities		8,918		6,857

Long-term liabilities:
Other long-term liabilities		138		160
Total long-term liabilities		138		160
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.001 par value; 50,000,000 shares authorized; 6,920,643, and 6,906,544 shares issued, and 6,706,221 and 6,692,122 shares outstanding (treasury shares of 214,422 and 214,422), respectively		7		7
Additional paid-in capital		17,005		16,449
Retained earnings		44,189		39,220

Total stockholders’ equity		61,201		55,676

Total liabilities and stockholders’ equity	$	70,257	$	62,693

See accompanying notes to unaudited condensed financial statements.

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Semler Scientific, Inc.

Condensed Statements of Stockholders’ Equity

Unaudited

(In thousands of U.S. Dollars, except share and per share data)


	For the Three Months Ended March 31, 2022
	Common Stock			Treasury Stock			Additional
		Common Stock					Paid-In		Retained Earnings		Total Stockholders'
	Shares Issued	Amount		Shares	Amount		Capital				Equity
Balance at December 31, 2021	6,824,380	$	7	(65,922)	$	—	$	20,645	$	24,895	$	45,547
Treasury stock acquired	—		—	(2,030)		—		(99)		—		(99)
Employee stock grants	8,406		—	—		—		628		—		628
Taxes paid related to net share settlement of equity awards	(1,418)		—	—		—		(106)		—		(106)
Stock option exercises	23,800		—	—		—		62		—		62
Net income	—		—	—		—		—		3,360		3,360
Balance at March 31, 2022	6,855,168	$	7	(67,952)	$	—	$	21,130	$	28,255	$	49,392


	For the Three Months Ended March 31, 2023
	Common Stock				Treasury Stock			Additional
		Common Stock						Paid-In		Retained Earnings		Total Stockholders'
	Shares Issued	Amount			Shares	Amount		Capital				Equity
Balance at December 31, 2022	6,906,544	$	7		(214,422)	$	—	$	16,449	$	39,220	$	55,676
Employee stock grant	18,048		—		—		—		695		—		695
Taxes paid related to net share settlement of equity awards	(3,949)		—	,	—		—		(146)		—		(146)
Stock-based compensation	—		—		—		—		7		—		7
Net income	—		—		—		—		—		4,969		4,969
Balance at March 31, 2023	6,920,643	$	7		(214,422)	$	—	$	17,005	$	44,189	$	61,201

See accompanying notes to unaudited condensed financial statements

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Semler Scientific, Inc.

Condensed Statements of Cash Flows

Unaudited

(In thousands of U.S. Dollars)


	Three months ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,969	$	3,360

Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Depreciation		129		155
Deferred tax (income) expense		(80)		179
Loss on disposal of assets for lease		78		74
Allowance for credit losses		48		21
Change in fair value of notes held for investment		107		—
Gain on short-term investments		(305)		—
Stock-based compensation		702		628
Changes in Operating Assets and Liabilities:
Trade accounts receivable		(5,507)		(1,818)
Inventory		(43)		(45)
Prepaid expenses and other current assets		(1,301)		(1,988)
Other non-current assets

SEC Form 10-Q filed by Semler Scientific Inc.