Bionano Genomics, Inc. 10-Q

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 consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K, or our Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 10, 2020. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Bionano Genomics, Inc. and its subsidiaries or, as the context may require, Bionano Genomics, Inc. only. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to any statements concerning the potential effects of the COVID-19 pandemic on our business, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. Overview We are a life sciences instrumentation company in the genome analysis space that provides tools and services based on its Saphyr system to scientists and clinicians conducting genetic research and patient testing, and provides diagnostic testing for those with autism spectrum disorder (“ASD”) and other neurodevelopmental disabilities through Lineagen, Inc., our wholly owned subsidiary (“Lineagen”). We develop and market the Saphyr system, a platform for ultra-sensitive and ultra-specific structural variation detection that enables researchers and clinicians to accelerate the search for new diagnostics and therapeutic targets and to streamline the study of changes in chromosomes, which is known as cytogenetics. Our Saphyr system comprises an instrument, chip consumables, reagents and a suite of data analysis tools, and genome analysis services to provide access to data generated by the Saphyr system for researchers who want to evaluate Saphyr data quickly and with a low up-front investment. Lineagen has been providing genetic testing services to families and their healthcare providers for over nine years and has performed over 65,000 tests for those with neurodevelopmental concerns. We have incurred losses in each year since our inception. Our net losses were $10.8 million and $6.4 million for the three months ended September 30, 2020 and 2019, respectively, and $29.4 million and $21.9 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $132.0 million. We expect to continue to incur significant expenses and operating losses as we: • expand our sales and marketing efforts to further commercialize our products; • continue research and development efforts to improve our existing products; • hire additional personnel; 18 Table of Contents • enter into collaboration arrangements, if any; • add operational, financial and management information systems; and • incur increased costs as a result of operating as a public company. COVID-19 Overview The COVID-19 pandemic, and the measures imposed to contain this pandemic in areas where we operate our business and elsewhere have disrupted and are expected to continue to impact our business. For example, to comply with applicable regulations and to safeguard the health and safety of our employees and customers, we temporarily reduced our on-site business operations, implemented work-from-home practices, and modified other business practices, including those related to employee travel and physical participation in meetings, events, and conferences. In addition, the quarantine of our personnel and the inability to access our facilities or customer sites adversely affected, and is expected to continue to adversely affect, our operations. During the nine months ended September 30, 2020, we experienced a $2.8 million decrease in revenue, as compared to the same period of the prior year, which is largely due to the COVID-19 pandemic. While the COVID-19 pandemic did not prevent us from operating our business during the nine months ended September 30, 2020, we had to take steps to reduce our cash used in operations in order to offset the decrease in cash generated from sales. For example, we implemented salary reductions for most of our salaried employees and reduced the number of working hours of most of our hourly employees by 25% from April through June of 2020. Disruptions resulting from the COVID-19 pandemic may continue to impact our operations and overall business. The impact of COVID-19 is evolving rapidly and its future effects remain uncertain. As a result of such uncertainties, the duration of the disruption and the related impact on our business, operating results and financial condition cannot be reasonably estimated at this time. We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and are taking proactive efforts designed to protect the health and safety of our workforce, continue our business operations and advance our corporate objectives. Financial Overview Revenue We generate product revenue from sales of our instruments and consumables. We currently sell our products for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies. Consumable revenue consists of sales of complete assays which are developed internally by us, plus sales of kits which contain all the elements necessary to run tests. We also generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through our wholly owned subsidiary Lineagen. Other revenue consists of warranty and other service-based revenue. The following table presents our revenue for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Product revenue $ 1,580,000 $ 3,162,000 $ 3,503,000 $ 6,870,000 Service and other revenue 1 616,000 151,000 1,010,000 470,000 Total $ 2,196,000 $ 3,313,000 $ 4,513,000 $ 7,340,000 19 Table of Contents 1 Includes 100% of the $445,000 revenue generated from Lineagen during the three and nine months ended September 30, 2020. The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers. North America consists of the United States and Canada. EMEIA consists of Europe, Middle East, India and Africa. Asia Pacific includes China, Japan, South Korea, Singapore and Australia. Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 $ % $ % $ % $ % North America 2 $ 874,000 40 % $ 1,831,000 56 % $ 2,388,000 53 % $ 4,050,000 55 % EMEIA 1,204,000 55 % 943,000 28 % 1,908,000 42 % 2,367,000 32 % Asia Pacific 118,000 5 % 539,000 16 % 217,000 5 % 923,000 13 % Total $ 2,196,000 100 % $ 3,313,000 100 % $ 4,513,000 100 % $ 7,340,000 100 % 2 Includes 100% of the $445,000 revenue generated from Lineagen during the three and nine months ended September 30, 2020 from August 21, 2020 onward. Cost of Revenue Cost of product revenue for our instruments and consumables includes costs from the manufacturer, raw material parts costs and associated freight, shipping and handling costs, contract manufacturer costs, salaries and other personnel costs, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of service revenue consists of third-party laboratory costs to process the diagnostic samples, salaries of our clinical technicians who interpret and deliver the results to patients, warranty services, and other costs of servicing equipment at customer sites. Research and Development Expenses Research and development expenses consist of salaries and other personnel costs, stock-based compensation, research supplies, third-party development costs for new products, materials for prototypes, and allocated overhead costs that include facility and other overhead costs. We have made substantial investments in research and development since our inception, and plan to continue to make investments in the future. Our research and development efforts have focused primarily on the tasks required to support development and commercialization of new and existing products. We believe that our continued investment in research and development is essential to our long-term competitive position. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and other personnel costs, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal and accounting services. 20 Table of Contents Results of Operations Comparison of the Three Months Ended September 30, 2020 and 2019 The following table sets forth our results of operations for the three months ended September 30, 2020 and 2019: Three Months Ended September 30, Period-to-Period Change 2020 2019 $ % Revenues: Product revenue $ 1,580,000 $ 3,162,000 $ (1,582,000) (50.0) % Service and other revenue 616,000 151,000 465,000 307.9 % Total revenue 2,196,000 3,313,000 (1,117,000) (33.7) % Cost of revenue: Cost of product revenue 1,136,000 2,238,000 (1,102,000) (49.2) % Cost of other revenue 324,000 137,000 187,000 136.5 % Total cost of revenue 1,460,000 2,375,000 (915,000) (38.5) % Operating expenses: Research and development 2,304,000 2,174,000 130,000 6.0 % Selling, general and administrative 8,659,000 4,449,000 4,210,000 94.6 % Total operating expenses 10,963,000 6,623,000 4,340,000 65.5 % Loss from operations (10,227,000) (5,685,000) (4,542,000) 79.9 % Other income (expenses): Interest expense (589,000) (578,000) (11,000) 1.9 % Other income (expenses) 54,000 (131,000) 185,000 (141.2) % Total other income (expenses) (535,000) (709,000) 174,000 (24.5) % Loss before income taxes (10,762,000) (6,394,000) (4,368,000) 68.3 % Provision for income taxes (30,000) (4,000) (26,000) 650.0 % Net loss $ (10,792,000) $ (6,398,000) $ (4,394,000) 68.7 % Revenue Total revenue decreased by $1.1 million, or 33.7%, to $2.2 million for the three months ended September 30, 2020 compared to $3.3 million for the same period in 2019. The decrease was driven by a change in the mix of revenue between instrument sales and our reagent rental program. Below is a summary of changes for the three months ended September 30, 2020 as compared to the same period in 2019, by region: • North America revenue decreased by $1.0 million, or 52%; • EMEIA revenue increased by $0.3 million, or 28%; and • Asia Pacific revenue decreased by $0.4 million, or 78%. Revenue for the three months ended September 30, 2020 includes service revenue of $0.4 million from our recently acquired subsidiary, Lineagen, from the date of the acquisition of August 21, 2020 to September 30, 2020. Cost of Revenue Total cost of revenue decreased by $0.9 million, or 38.5%, to $1.5 million for the three months ended September 30, 2020 compared to $2.4 million for the same period in 2019. The decrease was driven by a change in the mix of revenue between instrument sales and our reagent rental program. In addition, This was partially offset by an increase in consumable units sold of 34% and cost of service revenue of $0.2 million from our recently acquired subsidiary, Lineagen, from the date of the acquisition of August 21, 2020 to September 30, 2020. Selling, General and Administrative Expenses 21 Table of Contents Selling, general and administrative expenses increased by $4.2 million, or 94.6%, to $8.7 million for the three months ended September 30, 2020 compared to $4.4 million for the same period in 2019. This is primarily due to an increase in wage expenses and transaction expenses related to our acquisition of Lineagen. In addition to the 33 employees added as a result of the Lineagen acquisition, we increased headcount in our global sales and marketing teams and back-office support teams to assist with the growth of our world-wide product distribution. Also, we incurred increased legal and accounting fees to support business operations and our international presence. A total of $1.5 million in transaction-related expenses were recorded for the Lineagen acquisition. Reduced travel and trade show expenses, in response to COVID travel protocols, have partially offset the increases in wages and professional services. Comparison of the Nine Months Ended September 30, 2020 and 2019 The following table sets forth our results of operations for the nine months ended September 30, 2020 and 2019: Nine Months Ended September 30, Period-to-Period Change 2020 2019 $ % Revenues: Product revenue $ 3,503,000 $ 6,870,000 $ (3,367,000) (49.0) % Service and other revenue 1,010,000 470,000 540,000 114.9 % Total revenue 4,513,000 7,340,000 (2,827,000) (38.5) % Cost of revenue: Cost of product revenue 2,426,000 4,883,000 (2,457,000) (50.3) % Cost of other revenue 493,000 194,000 299,000 154.1 % Total cost of revenue 2,919,000 5,077,000 (2,158,000) (42.5) % Operating expenses: Research and development 7,379,000 6,682,000 697,000 10.4 % Selling, general and administrative 21,640,000 14,295,000 7,345,000 51.4 % Total operating expenses 29,019,000 20,977,000 8,042,000 38.3 % Loss from operations (27,425,000) (18,714,000) (8,711,000) 46.5 % Other income (expenses): Interest expense (1,911,000) (1,613,000) (298,000) 18.5 % Loss on debt extinguishment — (1,333,000) 1,333,000 — % Other income (expenses) — (241,000) 241,000 (100.0) % Total other income (expenses) (1,911,000) (3,187,000) 1,276,000 (40.0) % Loss before income taxes (29,336,000) (21,901,000) (7,435,000) 33.9 % Provision for income taxes (40,000) (13,000) (27,000) 207.7 % Net loss $ (29,376,000) $ (21,914,000) $ (7,462,000) 34.1 % Revenue Total revenue decreased by $2.8 million, or 38.5%, to $4.5 million for the nine months ended September 30, 2020 compared to $7.3 million for the same period in 2019. The decrease impacted all regions, largely driven by customers temporarily shutting down their lab operations in response to COVID-19 shelter-at-home orders and related restrictions to address the pandemic. Below is a summary of changes for the nine months ended September 30, 2020 as compared to the same period in 2019: • North America revenue decreased by $1.7 million, or 41%; • EMEIA revenue decreased by $0.5 million, or 19%; and • Asia Pacific revenue decreased by $0.7 million, or 76%. Revenue for the nine months ended September 30, 2020 includes service revenue of $0.4 million from our recently acquired subsidiary, Lineagen, from the date of the acquisition of August 21, 2020 to September 30, 2020. 22 Table of Contents Cost of Revenue Total cost of revenue decreased by $2.2 million, or 42.5%, to $2.9 million for the nine months ended September 30, 2020 compared to $5.1 million for the same period in 2019. The decrease was driven by a change in the mix of revenue between instrument sales and our reagent rental program. This was partially offset by an increase in consumable units sold of 70% and cost of service revenue of $0.2 million from our recently acquired subsidiary, Lineagen, from the date of the acquisition of August 21, 2020 to September 30, 2020. Research and Development Expenses Research and development expenses increased $0.7 million, or 10.4%, to $7.4 million for the nine months ended September 30, 2020 compared to $6.7 million for the same period in 2019. This is due to headcount additions to our development teams, but slightly offset by the salary reductions implemented in April 2020. In addition, our materials and supply expense increased during the nine months ended September 30, 2020 due to continued efforts to innovate our product. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $7.3 million, or 51.4%, to $21.6 million for the nine months ended September 30, 2020 compared to $14.3 million for the same period in 2019. This is primarily due to headcount additions to our global sales and marketing teams as well as back-office support teams to assist with the growth of our world-wide product distribution. Also, we incurred increased legal and accounting fees to support business operations and our international presence. A total of $1.5 million in transaction-related expenses were recorded for the Lineagen acquisition. Lastly, we recognized bad debt expense of $1.3 million during the nine months ended September 30, 2020. Interest Expense Interest expense increased $0.3 million, or 18.5%, to $1.9 million for the nine months ended September 30, 2020 compared to $1.6 million for the same period in 2019, driven by changes in our term-loan debt. In March 2019, the Company retired its $10 million Credit and Security Agreement with MidCap Financial (the “CSA”) and replaced it with a $20 million facility under our Loan and Security Agreement with Innovatus Life Sciences Lending Fund I, LP, as further discussed below. Loss on Debt Extinguishment A loss on debt extinguishment of $1.3 million was recognized during the nine months ended September 30, 2019 in association with retiring the MidCap Financial CSA prior to maturity. Liquidity and Capital Resources Since our inception, we have incurred net losses and negative cash flows from operations. We incurred net losses of $10.8 million and $6.4 million for the three months ended September 30, 2020 and 2019, respectively, and $29.4 million and $21.9 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $132.0 million and cash and cash equivalents of $18.9 million. Sources of Liquidity Prior to our initial public offering ("IPO") in August 2018, we financed our operations principally through private placements of convertible preferred stock, convertible notes, borrowings from credit facilities, and revenue from our commercial operations. Since our IPO, we have generated cash flows from sales of common stock and other equity instruments instead of convertible preferred stock. We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations. See Note 6 to our condensed consolidated financial statements for a discussion of our recent equity activity and Note 5 to our condensed consolidated financial statements for a discussion of terms and provisions of our debt included elsewhere in this Quarterly Report on Form 10-Q for more information. Follow-On Offering In April 2020, we completed an underwritten public offering of 16,896,000 shares of its common stock and, to certain investors, pre-funded warrants to purchase 37,650,000 shares of its common stock, and accompanying common warrants to purchase up to an aggregate of 54,546,000 shares of its common stock. Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The 23 Table of Contents public offering price of each share of common stock and accompanying common warrant was $0.33 and $0.329 for each pre-funded warrant. The pre-funded warrants are immediately exercisable at a price of $0.001 per share of common stock. The common warrants are immediately exercisable at a price of $0.33 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The gross proceeds to us were approximately $18.0 million, before deducting underwriting discounts and commissions and other offering expenses of $1.6 million. Shelf Registration Statement and At-the-Market Facility In August 2020, we filed a shelf registration statement on Form S-3 with the SEC covering the offering, issuance and sale of up to $125.0 million of our securities, including up to $40.0 million of common stock pursuant to an at-the-market facility (“ATM”) with Ladenburg Thalmann & Co. Inc. acting as sales agent. As of September 30, 2020, we had not sold any shares of common stock under the ATM. Cash Flows The following table sets forth the cash flow from operating, investing and financing activities for the periods presented: Net cash provided by (used in): Nine Months Ended September 30, 2020 2019 Operating activities $ (26,210,000) $ (20,148,000) Investing activities (2,450,000) (38,000) Financing activities 30,216,000 11,888,000 Operating Activities We derive cash flows from operations primarily from the sale of our products and services. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure and this may continue in the future. Net cash used in operating activities was $26.2 million during the nine months ended September 30, 2020 as compared to $20.1 million during the same period in 2019. The increase in cash used in operating activities of $6.1 million is attributed to increased headcount across the business, increased professional fees to support ongoing business operations and increase our international presence, increased spending on materials and supplies, as well as $1.5 million in acquisition-related costs. Investing Activities Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods. During the nine months ended September 30, 2020, cash used in investing activities related to the acquisition of Lineagen, our new wholly owned subsidiary. Financing Activities Net cash provided by financing activities was $30.2 million during the nine months ended September 30, 2020 as compared to the same period in 2019 where we had net proceeds from financing activities of $11.9 million, an increase of $18.3 million. During the nine months ended September 30, 2020, we raised approximately $16.4 million in net proceeds from a follow-on offering, and $18.6 million from warrant exercises. In addition, we received approximately $1.8 million pursuant to the PPP Loan (as defined below). Offsets included payments of $2.3 million on our revolving line of credit and $5.0 million in term-loan principal prepayments in accordance with the Second Amendment. During the nine months ended September 30, 2019, we had net proceeds from the issuance of the Innovatus LSA of $8.3 million as well as aggregate proceeds from Innovatus and Aspire Purchase Agreements of approximately $2.4 million. Paycheck Protection Program In April 2020, we received loan proceeds of approximately $1.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the 24 Table of Contents U.S. Small Business Administration (the “SBA”). The PPP Loan is scheduled to mature in April 2022 (the “Maturity Date”), bears interest at a rate of 1.00% per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act. The PPP Loan is evidenced by a promissory note issued by East West Bank (the “Lender”). The PPP note contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs (the “Eligible Costs”). Pursuant to the Paycheck Protection Program Flexibility Act (the “PPPFA”), enacted on June 5, 2020, we were permitted to use loan proceeds on Eligible Costs through October 2, 2020, or the date that is 24 weeks from the PPP Loan origination date (the “Covered Period”). However, no assurance is provided that forgiveness for any portion of the PPP Loan will be obtained. Pursuant to the PPPFA, payments of principal and interest due under the PPP Loan are deferred until the date on which the SBA remits the forgiveness amount, if any, back to the PPP Lender, or if forgiveness isn't sought within 10 months after the last day of the Covered Period, until the date that is 10 months from the last day of the Covered Period. The amounts outstanding under the PPP Loan may be prepaid by us at any time prior to maturity without penalty. The PPP Loan is also described in Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Capital Resources We performed an analysis of our ability to continue as a going concern. We believe, based on our current business plan, that our existing cash and cash equivalents as of September 30, 2020, plus proceeds from the recent warrant exercises described above, will be sufficient to fund our operations and obligations into the first quarter of 2021. We plan to continue to fund our operations through cash and cash equivalents on hand, as well as through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, or other arrangements. Additional funds may not be available when needed from any source or, if available, may not be available on terms that are acceptable to us. In addition, as a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. It is possible that further deterioration in credit and financial markets and confidence in economic conditions will occur. If equity and credit markets deteriorate, it may affect our ability to raise equity capital, borrow on our existing facilities or make any additional necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. In addition, the COVID-19 pandemic may compromise our ability to comply with the terms of our loan agreement and could result in an event of default. If an event of default were to occur, our lender could accelerate our repayment obligations or enforce other rights under our loan agreements. Any such default may also require us to seek additional or alternative financing, which may not be available on commercially reasonable terms or at all. For example, for the three months ended September 30, 2020, we were not in compliance with our revenue covenant under the Innovatus LSA. As a result, our lender could accelerate our repayment obligations, enforce other rights under the Innovatus LSA or require the payment of cash fees or penalties in order for us to obtain a waiver, and any of these actions could have a material adverse impact on our current business plan and our anticipated cash runway. Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability to achieve our intended business objectives. Any of these actions could materially harm our business, results of operations and future prospects. See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, and similarly did not and do not have any holdings in variable interest entities. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that materially 25 Table of Contents affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on 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 materially differ from these estimates under different assumptions or conditions. There were no material changes in our critical accounting policies and estimates during the nine months ended September 30, 2020, except for the changes discussed in Note 1 to the condensed consolidated financial statements. Recent Accounting Pronouncements See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information concerning recent accounting pronouncements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item.