Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2020, included in our Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.
Overview
We are a commercial-stage medical device company focused on developing products to treat and transform the lives of patients suffering from venous diseases. Our primary product offering consists of two minimally-invasive, novel catheter-based mechanical thrombectomy devices. We purpose-built our products for the specific characteristics of the venous system and the treatment of the two distinct manifestations of VTE – deep vein thrombosis and pulmonary embolism. Our ClotTriever product is FDA-cleared for the treatment of deep vein thrombosis, or DVT. Our FlowTriever product is the first thrombectomy system FDA-cleared for the treatment of pulmonary embolism, or PE, and is also FDA-cleared for clot in transit in the right atrium.
We believe the best way to treat VTE and improve the quality of life of patients suffering from this disease is to safely and effectively remove the blood clot. With that in mind, we designed and purpose-built our ClotTriever and FlowTriever products to remove large clots from large vessels and eliminate the need for thrombolytic drugs. We believe our products are transformational and could be the catalyst to drive an evolution of treatment for venous diseases, establishing our products as the standard of care for DVT and PE.
We believe our venous-focused commercial organization provides a significant competitive advantage. Our most important relationships are between our sales representatives and our treating physicians, which include interventional cardiologists, interventional radiologists and vascular surgeons. We have developed systems and processes to harness the information gained from these relationships and we leverage this information to rapidly iterate products, introduce and execute physician education and training programs and scale our sales organization. We market and sell our products to hospitals, which are reimbursed by various third-party payors. We have dedicated meaningful resources to building a direct sales force in the United States, and we continue to expand our sales organization through additional sales representatives and territories.
On May 27, 2020, we completed our IPO, which resulted in the issuance and sale of 9,432,949 shares of common stock, including 1,230,384 shares sold pursuant to the exercise of the underwriters’ over-allotment option, at the IPO price of $19.00 per share. We received net proceeds of approximately $163.0 million from the IPO, after deducting underwriters’ discounts and commissions of $12.6 million and offering costs of $3.7 million.
Prior to our IPO, our primary sources of capital were private placements of preferred stock, debt financing arrangements and revenue from sales of our products. Since inception, we had raised a total of approximately $54.2 million in net proceeds from private placements of preferred stock. As of June 30, 2021, we had cash, cash equivalents, and short-term investment of $176.1 million, no long-term debt outstanding and an accumulated deficit of $15.9 million.
For the three months ended June 30, 2021, the Company generated $63.5 million in revenues with a gross margin of 92.4% and net income of $4.1 million, as compared to revenues of $25.4 million with a gross margin of 86.3% and net loss of $3.8 million for the three months ended June 30, 2020.
For the six months ended June 30, 2021, the Company generated $120.9 million in revenues with a gross margin of 92.2% and net income of $11.5 million, as compared to revenues of $52.3 million with a gross margin of 88.2% and net income of $0.3 million for the six months ended June 30, 2020.
COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease, COVID-19, has spread to most countries, including all 50 states in the United States. The global healthcare system continues to face an unprecedented challenge as a result of the COVID-19 situation and its impact. COVID-19 has had and may continue to have an adverse impact on aspects of our Company and business, including the demand for our products, our operations, and the ability to research and develop and bring to market new products and services.
In response to the pandemic, in March 2020, many governmental authorities suspended or canceled elective, specialty and other procedures and appointments, and some states and countries issued “stay at home” orders limiting non-essential activities, travel and business operations. These orders significantly decreased the number of procedures performed using our products during March and April 2020 and otherwise negatively impacted our operations. In response to the impact of COVID-19, we implemented a variety of measures to help manage through the impact and position us to resume operations quickly and efficiently once these restrictions were lifted. The results for the first half of 2021 reflect some recovery from the declines we experienced in the first half of 2020. However, with cases continuing to resurge in certain areas, and hospitals at capacity in some instances due to non-COVID-19 treatments, to the
24
extent individuals and hospital systems de-prioritize, delay or cancel deferrable medical procedures, our business, cash flows, financial condition and results of operations may continue to be negatively affected.
In addition, COVID-19 has strained hospital systems around the world, resulting in adverse financial impacts to those systems, which has resulted in and may continue to result in reduced expenditures for the products we provide and may adversely affect the collectability of our current and future accounts receivable balance. We continue to actively monitor the COVID-19 situation and its impact.
While we are encouraged by our first half of the year results, we are aware that the actual and perceived impact of COVID-19 is changing and cannot be predicted. As a result, we cannot assure you that our recent procedure volumes are indicative of future results or that we will not experience additional negative impacts associated with COVID-19, which could be significant. We continue to focus our efforts on the health and safety of patients, healthcare providers and employees, while executing our mission of transforming lives of VTE patients. While we expect the COVID-19 pandemic may continue to negatively impact 2021 performance, we believe the long-term fundamentals remain strong and we will continue to effectively manage through these challenges.
Procedure Volume
We regularly review various operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. We believe the number of procedures performed to treat DVT and PE using our products is an indicator of our ability to drive adoption and generate revenue. We believe this is an important metric for our business; however, we anticipate that additional metrics may become important as our business grows. The following table lists the number of procedures performed in each of the three-month periods as indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Procedures(1)
|
|
June 30, 2021
|
|
|
March 31, 2021
|
|
|
Dec 31, 2020
|
|
|
Sept 30, 2020
|
|
|
June 30, 2020
|
|
DVT
|
|
|
3,100
|
|
|
|
2,800
|
|
|
|
2,400
|
|
|
|
2,000
|
|
|
|
1,400
|
|
PE
|
|
|
2,800
|
|
|
|
2,700
|
|
|
|
2,200
|
|
|
|
1,700
|
|
|
|
1,100
|
|
|
|
|
5,900
|
|
|
|
5,500
|
|
|
|
4,600
|
|
|
|
3,700
|
|
|
|
2,500
|
|
(1)
We define a procedure as any instance in which a physician treats DVT or PE using our products. We estimate the number of procedures performed based on records created by our sales representatives. This metric has limitations as we only have records for the procedures where our sales representatives have notice that a procedure has been performed. Revenue is recognized based on hospital purchase orders, not based on the procedure records created by our sales representatives. Numbers are rounded to the nearest hundred.
Components of Our Results of Operations
Revenue
We currently derive substantially all our revenue from the sale of our ClotTriever and FlowTriever products to hospitals primarily in the United States. Our customers typically purchase an initial stocking order of our products and then reorder replenishment products as procedures are performed. No single customer accounted for 10% or more of our revenue during the three and six months ended June 30, 2021 and 2020. We expect revenue to increase in absolute dollars as we expand our sales organization and sales territories, add customers, expand the base of physicians that are trained to use our products, expand awareness of our products with new and existing customers and as physicians perform more procedures using our products. Revenue for ClotTriever and FlowTriever products as a percentage of total revenue is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ClotTriever
|
|
|
33
|
%
|
|
|
40
|
%
|
|
|
34
|
%
|
|
|
38
|
%
|
FlowTriever
|
|
|
67
|
%
|
|
|
60
|
%
|
|
|
66
|
%
|
|
|
62
|
%
|
For the six months ended June 30, 2021, our blended revenue per procedure averaged approximately $9,000, as compared to $9,100 for the six months ended June 30, 2020, respectively.
Cost of Goods Sold and Gross Margin
We manufacture and/or assemble all our products at our facility in Irvine, California. Cost of goods sold consists primarily of the cost of raw materials, components, direct labor and manufacturing overhead. Overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management, including stock-based
25
compensation. Cost of goods sold also includes depreciation expense for production equipment and certain direct costs such as shipping costs and royalty expense. Shipping costs billed to customers are reported as a reduction of cost of goods sold. We expect cost of goods sold to increase in absolute dollars as our revenue grows and more of our products are sold; however, we also expect to realize opportunities to increase operating leverage in our manufacturing operations.
We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, including average selling prices, product sales mix, production and ordering volumes, manufacturing costs, product yields, headcount and cost-reduction strategies. Our gross margin could fluctuate from quarter to quarter as we introduce new products, adopt new manufacturing processes and technologies, and as we expand internationally.
Treatments using the FlowTriever may involve one or more Triever aspiration catheters and one or more FlowTriever catheters. We charge customers the same price for each FlowTriever procedure, regardless of the number of components used. As a result, changes in the number of components used, the cost of these components and the introduction of additional components can impact our gross margin.
Research and Development Expenses
Research and development, or R&D, expenses consist primarily of engineering, product development, clinical studies to develop and support our products, regulatory expenses, and other costs associated with products that are in development. These expenses include employee compensation, including stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation and an allocation of facility overhead expenses. Additionally, R&D expenses include costs associated with our clinical trials and registries, including clinical study design, clinical study site initiation and study costs, data management, and internal and external costs associated with our regulatory compliance, including the costs of outside consultants and contractors that assist in the process of submitting and maintaining regulatory filings. We expense R&D costs as incurred. We expect R&D expenses as a percentage of revenue to vary over time depending on the level and timing of our new product development efforts, as well as our clinical development, clinical trials and registries and other related activities.
Selling, General and Administrative Expenses
Selling, general and administrative, or SG&A, expenses consist primarily of compensation for personnel, including stock-based compensation, related to selling and marketing functions, physician education programs, commercial operations and analytics, finance, information technology and human resource functions. Other SG&A expenses include sales commissions, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, physician training, professional services fees (including legal, audit and tax fees), insurance costs, general corporate expenses and facilities-related expenses. We expect SG&A expenses to continue to increase in absolute dollars as we expand our sales and marketing organization and infrastructure to both drive and support the anticipated growth in revenue and due to additional legal, accounting, insurance and other expenses associated with being a public company.
Interest Income
Interest income consists primarily of interest income earned on our cash, cash equivalents and short-term investments.
Interest Expense
Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with our indebtedness.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of gains and losses resulting from the remeasurement of the fair value of our preferred stock warrant liabilities at each balance sheet date. Upon the closing of our IPO, our outstanding preferred stock warrants automatically converted into warrants to purchase shares of our common stock. At such time, the final fair value of the warrant liabilities was reclassified to stockholders’ equity (deficit). We will no longer record any related periodic fair value adjustments.
26
Results of Operations
Comparison of the three months ended June 30, 2021 and 2020
The following table sets forth the components of our unaudited condensed consolidated statements of operations in dollars and as percentage of revenue for the periods presented (dollars in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
|
%
|
|
|
2020
|
|
|
%
|
|
|
Change $
|
|
Revenue
|
|
$
|
63,453
|
|
|
|
100.0
|
%
|
|
$
|
25,392
|
|
|
|
100.0
|
%
|
|
$
|
38,061
|
|
Cost of goods sold
|
|
|
4,814
|
|
|
|
7.6
|
%
|
|
|
3,487
|
|
|
|
13.7
|
%
|
|
|
1,327
|
|
Gross profit
|
|
|
58,639
|
|
|
|
92.4
|
%
|
|
|
21,905
|
|
|
|
86.3
|
%
|
|
|
36,734
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
11,630
|
|
|
|
18.3
|
%
|
|
|
3,628
|
|
|
|
14.3
|
%
|
|
|
8,002
|
|
Selling, general and administrative
|
|
|
42,897
|
|
|
|
67.6
|
%
|
|
|
18,880
|
|
|
|
74.4
|
%
|
|
|
24,017
|
|
Total operating expenses
|
|
|
54,527
|
|
|
|
85.9
|
%
|
|
|
22,508
|
|
|
|
88.7
|
%
|
|
|
32,019
|
|
Income (loss) from operations
|
|
|
4,112
|
|
|
|
6.5
|
%
|
|
|
(603
|
)
|
|
|
(2.4
|
%)
|
|
|
4,715
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
35
|
|
|
|
0.1
|
%
|
|
|
146
|
|
|
|
0.6
|
%
|
|
|
(111
|
)
|
Interest expense
|
|
|
(74
|
)
|
|
|
(0.1
|
%)
|
|
|
(463
|
)
|
|
|
(1.8
|
%)
|
|
|
389
|
|
Change in fair value of warrant liabilities
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
(2,884
|
)
|
|
|
(11.4
|
%)
|
|
|
2,884
|
|
Other expenses
|
|
|
7
|
|
|
|
0.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
7
|
|
Total other expenses, net
|
|
|
(32
|
)
|
|
|
0.0
|
%
|
|
|
(3,201
|
)
|
|
|
(12.6
|
%)
|
|
|
3,169
|
|
Income (loss) before income taxes
|
|
$
|
4,080
|
|
|
|
6.5
|
%
|
|
$
|
(3,804
|
)
|
|
|
(15.0
|
%)
|
|
$
|
7,884
|
|
Revenue. Revenue increased $38.1 million, or 149.9%, to $63.5 million during the three months ended June 30, 2021, compared to $25.4 million during the three months ended June 30, 2020. The increase in revenue was due primarily to an increase in the number of products sold. Revenue for the three months ended June 30, 2020 was also negatively impacted by a rapid deceleration in the number of products sold due to the COVID-19 pandemic.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased $1.3 million, or 38.1%, to $4.8 million during the three months ended June 30, 2021, compared to $3.5 million during the three months ended June 30, 2020. This increase was due to the increase in the number of products sold and additional manufacturing overhead costs incurred as we invested significantly in our operational infrastructure to support anticipated future growth. Gross margin for the three months ended June 30, 2021 increased to 92.4%, compared to 86.3% for the three months ended June 30, 2020, due primarily to $1.1 million in idle production capacity costs associated with the COVID-19 pandemic recognized in 2020, combined with improved operating leverage and a change in product mix.
Research and Development Expenses. R&D expenses increased $8.0 million, or 220.6%, to $11.6 million during the three months ended June 30, 2021, compared to $3.6 million during the three months ended June 30, 2020. The increase in R&D expenses was primarily due to increases of $4.1 million of personnel-related expenses, $1.5 million in materials and supplies, $1.0 million of clinical study and registry expenses, and $0.8 million in professional fees, in support of our growth drivers to increase our new product pipeline and build the clinical evidence base.
Selling, General and Administrative Expenses. SG&A expenses increased $24.0 million, or 127.2%, to $42.9 million during the three months ended June 30, 2021, compared to $18.9 million during the three months ended June 30, 2020. The increase in SG&A costs was primarily due to an increase of $17.7 million in personnel-related expenses as a result of increased headcount across our organization and increased commissions due to higher revenue, an increase of $1.7 million in professional fees, an increase of $1.7 million in travel costs, an increase of $0.7 million in sales & marketing, an increase of $0.6 million in depreciation and software license fees, and an increase of $0.5 million in insurance costs.
Interest Income. Interest income decreased by $111,000 or 76.0% to $35,000 during the three months ended June 30, 2021, compared to $146,000 during the three months ended June 30, 2020. The decrease in interest income was primarily due to lower interest rates during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.
Interest Expense. Interest expense decreased by $389,000 or 84.0% to $74,000 during the three months ended June 30, 2021, compared to $463,000 during the three months ended June 30, 2020. This decrease was primarily due to lower average borrowings under our credit facilities during the three months ended June 30, 2021.
Change in Fair Value of Warrant Liabilities. We recorded no change in fair value of warrant liabilities for the three months ended June 30, 2021, compared to $2.9 million during the three months ended June 30, 2020.
Other Expenses. Other expenses of $7,000 for the three months ended June 30, 2021 consisted primarily of foreign currency losses.
27
Comparison of the six months ended June 30, 2021 and 2020
The following table sets forth the components of our unaudited condensed consolidated statements operations in dollars and as percentage of revenue for the periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
|
%
|
|
|
2020
|
|
|
%
|
|
|
Change $
|
|
Revenue
|
|
$
|
120,850
|
|
|
|
100.0
|
%
|
|
$
|
52,345
|
|
|
|
100.0
|
%
|
|
$
|
68,505
|
|
Cost of goods sold
|
|
|
9,437
|
|
|
|
7.8
|
%
|
|
|
6,193
|
|
|
|
11.8
|
%
|
|
|
3,244
|
|
Gross profit
|
|
|
111,413
|
|
|
|
92.2
|
%
|
|
|
46,152
|
|
|
|
88.2
|
%
|
|
|
65,261
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
19,793
|
|
|
|
16.4
|
%
|
|
|
6,646
|
|
|
|
12.7
|
%
|
|
|
13,147
|
|
Selling, general and administrative
|
|
|
79,795
|
|
|
|
66.0
|
%
|
|
|
35,273
|
|
|
|
67.4
|
%
|
|
|
44,522
|
|
Total operating expenses
|
|
|
99,588
|
|
|
|
82.4
|
%
|
|
|
41,919
|
|
|
|
80.1
|
%
|
|
|
57,669
|
|
Income from operations
|
|
|
11,825
|
|
|
|
9.8
|
%
|
|
|
4,233
|
|
|
|
8.1
|
%
|
|
|
7,592
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
103
|
|
|
|
0.1
|
%
|
|
|
201
|
|
|
|
0.4
|
%
|
|
|
(98
|
)
|
Interest expense
|
|
|
(147
|
)
|
|
|
(0.1
|
%)
|
|
|
(809
|
)
|
|
|
(1.5
|
%)
|
|
|
662
|
|
Change in fair value of warrant liabilities
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
(3,317
|
)
|
|
|
(6.3
|
%)
|
|
|
3,317
|
|
Other expenses
|
|
|
(34
|
)
|
|
|
0.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
(34
|
)
|
Total other expenses, net
|
|
|
(78
|
)
|
|
|
0.0
|
%
|
|
|
(3,925
|
)
|
|
|
(7.4
|
%)
|
|
|
3,847
|
|
Income before income taxes
|
|
$
|
11,747
|
|
|
|
9.8
|
%
|
|
$
|
308
|
|
|
|
0.7
|
%
|
|
$
|
11,439
|
|
Revenue. Revenue increased $68.5 million, or 130.9%, to $120.8 million during the six months ended June 30, 2021, compared to $52.3 million during the six months ended June 30, 2020. The increase in revenue was due primarily to an increase in the number of products sold. Revenue for the six months ended June 30, 2020 was also negatively impacted by a rapid deceleration in the number of products sold due to the COVID-19 pandemic.
Cost of Goods Sold and Gross Margin. Cost of goods sold increased $3.2 million, or 52.4%, to $9.4 million during the six months ended June 30, 2021, compared to $6.2 million during the six months ended June 30, 2020. This increase was due to the increase in the number of products sold and additional manufacturing overhead costs incurred as we invested significantly in our operational infrastructure to support anticipated future growth. Gross margin for the six months ended June 30, 2021 increased to 92.2%, compared to 88.2% for the six months ended June 30, 2020, due to improved operating leverage and a change in product mix. Gross margin for the six months ended June 30, 2020 was also impacted by $1.1 million in idle production capacity costs associated with the COVID-19 pandemic.
Research and Development Expenses. R&D expenses increased $13.2 million, or 197.8%, to $19.8 million during the six months ended June 30, 2021, compared to $6.6 million during the six months ended June 30, 2020. The increase in R&D expenses was primarily due to increases of $7.2 million of personnel-related expenses, $2.3 million in materials and supplies, $1.5 million of clinical study and registry expenses, and $1.3 million in professional fees, in support of our growth drivers to increase our new product pipeline and build the clinical evidence base.
Selling, General and Administrative Expenses. SG&A expenses increased $44.5 million, or 126.2%, to $79.8 million during the six months ended June 30, 2021, compared to $35.3 million during the six months ended June 30, 2020. The increase in SG&A costs was primarily due to an increase of $34.3 million in personnel-related expenses as a result of increased headcount across our organization and increased commissions due to higher revenue, an increase of $2.9 million in professional fees, an increase of $2.0 million in travel costs, an increase of $1.5 million in insurance costs, an increase of $1.1 million in depreciation and software license fees, and increase of $0.9 million in sales & marketing expenses.
Interest Income. Interest income decreased by $98,000 or 48.8% to $103,000 during the six months ended June 30, 2021, compared to $201,000 during the six months ended June 30, 2020. The decrease in interest income was primarily due to lower interest rates during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.
Interest Expense. Interest expense decreased by $662,000 or 82% to $147,000 during the six months ended June 30, 2021, compared to $809,000 for the six months ended June 30, 2020. This decrease was primarily due to lower average borrowings under our credit facilities during the six months ended June 30, 2021.
Change in Fair Value of Warrant Liabilities. We recorded no change in fair value of warrant liabilities for the six months ended June 30, 2021, compared to $3.3 million for the six months ended June 30, 2020.
Other Expenses. Other expenses of $34,000 for the six months ended June 30, 2021 consisted primarily of foreign currency losses.
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Liquidity and Capital Resources
To date, our primary sources of capital have been the net proceeds we received through private placements of preferred stock, debt financing agreements, the sale of common stock in our IPO, and revenue from the sale of our products. On May 27, 2020, we completed our IPO, including the underwriters full exercise of their over-allotment option, selling 9,432,949 shares of our common stock at $19.00 per share. Upon completion of our IPO, we received net proceeds of approximately $163.0 million, after deducting underwriting discounts and commissions and offering expenses. In August 2020, we repaid in full the $30.0 million of principal owed under the credit facility with Signature Bank. As of June 30, 2021, we had cash and cash equivalents of $91.3 million, short-term investments of $84.7 million and an accumulated deficit of $15.9 million. In September 2020, we entered into a new revolving Credit Agreement with Bank of America which provides for loans up to a maximum of $30 million. As of June 30, 2021, we had no principal outstanding under the Credit Agreement and the amount available to borrow was approximately $23.2 million.
Based on our current planned operations, we expect that our cash and cash equivalents and available borrowings will enable us to fund our operating expenses for at least 12 months from the date hereof.
If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products as a result of the risks described in this Quarterly Report, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us. Additional capital may not be available on reasonable terms, or at all.
Cash Flows
The following table summarizes our cash flows for each of the six-month periods indicated (in thousands):
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|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
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|
|
|
2021
|
|
|
2020
|
|
Net cash provided by (used in):
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|
|
|
|
|
|
Operating activities
|
|
$
|
16,068
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|
|
$
|
(1,805
|
)
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Investing activities
|
|
|
(40,937
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)
|
|
|
(1,418
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)
|
Financing activities
|
|
|
1,700
|
|
|
|
174,420
|
|
Effect of foreign exchange rate on cash and cash equivalents
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|
|
(126
|
)
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|
|
—
|
|
Net increase (decrease) in cash and cash equivalent
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|
$
|
(23,295
|
)
|
|
$
|
171,197
|
|
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2021 was $16.1 million, consisting primarily of net income of $11.5 million and non-cash charges of $10.2 million, offset by an increase in net operating assets of $5.6 million. The increase in net operating assets was primarily due to increases in accounts receivable of $3.5 million and inventories of $7.5 million to support the growth of our operations, an increase in prepaid and other assets of $11.3 million primarily from deposits related to Oak Canyon and prepaid insurance, which were partially offset by increases in accounts payable of $7.3 million and accrued liabilities of $9.8 million due to timing of payments and growth of our operations and a decrease in operating lease liabilities of $0.4 million. The non-cash charges primarily consisted of $8.4 million in stock-based compensation, $1.3 million in depreciation, $0.4 million in amortization of the right-of-use assets.
Net cash used in operating activities for the six months ended June 30, 2020 was $1.8 million was primarily the results of our net income of approximately $0.3 million and $5.0 million in non-cash items, primarily for depreciation expenses of 0.6 million, share-based compensation expenses of $1.0 million and loss on change in fair value of warrant liabilities of $3.3 million, offset by an increase in net operating assets of $7.2 million. The increase in net operating assets was primarily due to the increases in accounts receivable of $4.1 million, inventories of $1.7 million and prepaid expenses and other current assets of $3.4 million, coupled with a decrease in accounts payable of $0.3 million, offset by an increase in payroll-related accruals, accrued expenses and other liabilities of $2.3 million.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2021 was $40.9 million consisting of $84.7 million purchases of short-term securities coupled with $6.2 million purchases of property and equipment, offset by the maturity of short-term investment of $50.0 million.
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Net cash used in investing activities for the six months ended June 30, 2020 was $1.4 million, consisting of purchases of property and equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities in the six months ended June 30, 2021 was $1.7 million, consisting of proceeds of $1.9 million in proceeds from the issuance of common stock under our employee stock purchase plan and $0.6 million of proceeds from exercise of stock options, offset by $0.8 million of tax payments related to vested RSUs.
Net cash provided by financing activities in the six months ended June 30, 2020 was $174.4 million, consisting primarily of net IPO proceeds of $164.4 million and net proceeds of $10.0 million received from additional borrowings under the credit facility with Signature Bank.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable regulations of the U.S. Securities and Exchange Commission, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of business to the Company’s contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.
There were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020 with the exception of the Company’s adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASC 842"). See the section entitled “Recently Adopted Accounting Pronouncements” within the Company’s Summary of Significant Accounting Policies and Note 7, Commitments and Contingencies for further discussion of the Company’s adoption of ASC 842 and related disclosures.