What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 141 added, 58 removed, 174 unchanged (53% of the section changed)

17 unchanged sentences

We have incurred losses in each year since our inception.

Our net loss was $30.0 million and $9.9 million for the three months ended March 31, 2022, and 2021 respectively.

As of March 31, 2022, we had an accumulated deficit of $246.1 million.

Our net loss was $32.2 million and $62.1 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, we had an accumulated deficit of $278.2 million.

We expect to continue to incur significant expenses and operating losses as we:

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In executing on our commercialization strategy, we expanded the utilization of our Saphyr ® system and:

• Grew our installed base to 176 as of March 31, 2022, an increase of approximately 64% from a total installed base of 107 as of March 31, 2021.

• Grew our installed base to 196 as of June 30, 2022, an increase of approximately 62% from a total installed base of 121 as of June 30, 2021.

Installed base represents the global number of Saphyr instruments installed at end-customer locations and therefore having the technology to process OGM.

• Sold 3,225 flowcells in the three-month period ended March 31, 2022, an increase of approximately 24% over the 2,603 flowcells sold during the same quarter of 2021.

• Sold 3,394 flowcells in the three-month period ended June 30, 2022, an increase of approximately 24% over the 2,742 flowcells sold during the same quarter of 2021.

The Saphyr cartridge is the consumable that packages nanochannel arrays for DNA linearization.

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Flowcells sold refers to the units of genome mapping consumables used for analyzing one genome, purchased by customers to process optical genome mapping.

• We analyzed 329 samples in our Saphyr service lab during the quarter ended March 31, 2022, compared to 227 samples analyzed in the same quarter in 2021.

COVID-19 Overview

We are subject to additional risks and uncertainties as a result of the continued spread of COVID-19 and uncertain market conditions, which could continue to have a material impact on our business and financial results.

• We analyzed 373 samples in our Saphyr service lab during the quarter ended June 30, 2022, compared to 190 samples analyzed in the same quarter in 2021.

COVID-19 and Other Geopolitical Events

We are subject to additional risks and uncertainties as a result of the continued spread of COVID-19, adverse geopolitical and macroeconomic events, such as the ongoing conflict between Ukraine and Russia and related sanctions, and uncertain market conditions, including higher inflation and supply chain disruptions, which could continue to have a material impact on our business and financial results.

We closely monitor and comply with various applicable guidelines and legal requirements in the jurisdictions in which we operate, which may continue to result in reduced business operations in response to new or existing stay-at-home orders, travel restrictions and other social distancing measures.

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Our manufacturing partners, suppliers, and customers, have implemented similar operational reductions.

This overall reduction in activity has contributed to a decrease in sales which negatively impacted the Company’s financial results in the first quarter of 2022.

We expect these challenges to persist while the COVID-19 pandemic continues.

The future effects of COVID-19 are unknown and our financial results may continue to be negatively affected in the future.

During the three months ended March 31, 2022, we experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic.

While the COVID-19 pandemic did not prevent us from operating our business during the three months ended March 31, 2022, we experienced increased cost to secure certain component parts in our products and to produce our products at our contract manufacturers.

There may be long-term negative effects of the COVID-19 pandemic, even after it has subsided.

Specifically, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, reduction in consumer confidence, or any similar negative economic condition.

This overall reduction in activity has contributed to a decrease in sales which negatively impacted the Company’s financial results in the first and second quarters of 2021 and 2022.

Given the continued evolution of the COVID-19 pandemic and the related complexities and uncertainties associated with the additional variants, the future effects of COVID-19 are unknown and our financial results may continue to be negatively affected in the future.

The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may present strategy, operational, talent recruiting and retention and workplace culture challenges that may adversely affect our business.

Following the recent invasion of Ukraine by Russia, the U.S.

and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity globally.

In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.

The full economic and social impact of the sanctions imposed on Russia and possible future punitive measures that may be implemented, as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain;

however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity on acceptable terms, in both Europe and globally, and has introduced significant uncertainty into global markets.

As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

During the three and six months ended June 30, 2022, we experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic and the general disruptions resulting from the ongoing conflict between Ukraine and Russia and related sanctions.

While neither the COVID-19 pandemic nor the Ukraine-Russia conflict prevented us from operating our business during the three and six months ended June 30, 2022, we experienced increased cost to secure certain component parts in our products and to produce our products at our contract manufacturers.

We expect these increased costs to remain high as the COVID-19 pandemic, the Ukraine-Russia conflict and their respective effects persist.

As global economic conditions recover from the COVID-19 pandemic, the Ukraine-Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that these and related events could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic events, or any similar negative economic condition.

Further, the travel restrictions on our business have limited our ability to support our global and domestic operations, including providing installation and training and customer service, which has and may continue to slow the pace of our commercial strategy, sales and marketing efforts.

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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.

We currently sell our products for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, academic and commercial clinical laboratories, as well as pharmaceutical, biotechnology and contract research companies.

In addition, we provide instruments to certain customers under our reagent rental program, under which we provide an instrument to customers at no cost and the customers agree to purchase minimum quantities of consumables.

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.

Consumable revenue consists of sales of reagents and chips necessary to process a sample.

We 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.

We also generate service and product revenue through BioDiscovery’s NxClincial™ software, which provides customers with solutions for analysis, interpretation and reporting of genomics data.

Other revenue consists of warranty and other service-based revenue.

We also generate service and product revenue through BioDiscovery’s NxClinical™ software, which provides customers with solutions for analysis, interpretation and reporting of genomics data.

Other revenue consists of warranty and other service-based revenue, including services performed related to customer sample evaluations using the Saphyr system, license maintenance agreements, and support, repair and maintenance services.

The following table presents our revenue for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Product revenue $ 3,913,000 $ 2,496,000 $ 7,029,000 $ 4,545,000

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Total $ 6,670,000 $ 3,856,000 $ 12,366,000 $ 7,024,000

1 Includes $1.2 million of revenue generated from BioDiscovery during the three months ended March 31, 2022.

1 Includes $1.0 million and $2.2 million of revenue generated from BioDiscovery during the three and six months ended June 30, 2022, respectively.

The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers.

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Asia Pacific includes China, Japan, South Korea, Singapore and Australia.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

$ % $ % $ % $ %

Americas $ 2,611,000 39 % $ 2,365,000 61 % $ 5,940,000 48 % $ 3,872,000 55 %

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table sets forth our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, Period-to-Period Change

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table sets forth our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30, Period-to-Period Change

Product revenue $ 3,913,000 $ 2,496,000 $ 1,417,000 57 %

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Interest expense (74,000) (268,000) 194,000 (72) %

Loss on debt extinguishment — (2,076,000) 2,076,000 (100) %

Other income (expenses) (156,000) (15,000) (141,000) 940 %

Total other income (expenses) (38,000) (2,301,000) 2,263,000 (98) %

Loss before income taxes (32,117,000) (18,777,000) (13,340,000) 71 %

Provision for income taxes (41,000) (9,000) (32,000) 356 %

Net loss $ (32,158,000) $ (18,786,000) $ (13,372,000) 71 %

Total revenue increased by $2.8 million, or 73%, to $6.7 million for the three months ended June 30, 2022 compared to $3.9 million for the same period in 2021.

The increase in product sales was driven by increased demand for our Saphyr OGM solutions, including an increase in instrument installed base (62%) and flowcell units sold (24%), when compared to the same period last year.

The increased demand for our reagent rental program continues to drive a significant portion of the increase in consumable sales.

We believe increased demand for our OGM systems was primarily driven by increased market awareness and additional published data demonstrating the utility of OGM.

While not immune to the negative effects caused by COVID-19 and other geopolitical events, we expect revenue to increase as market awareness and published data of OGM utility increases.

The increase in service and other revenue was primarily driven by $1.0 million in revenues generated by our BioDiscovery subsidiary, which was acquired in October 2021.

Cost of Revenue

Cost of revenue increased by $2.8 million, or 115%, to $5.2 million for the three months ended June 30, 2022 compared to $2.4 million for the same period in 2021.

During the three months ended June 30, 2022, gross margin was 22%, compared to 37% during the same period in 2021.

Gross margin for the three months ended June 30, 2022 improved compared to gross margin for the first quarter of 2022, which was 15%.

The improvement in gross margin was primarily due to improvements in chip yield during the second quarter of 2022.

Cost of product revenue increased primarily due to increased instrument and flowcell sales volume, but was also negatively impacted by unfavorable flowcell yields in the production cycle, which is in part attributable to COVID-19.

Our gross margins for the three months ended June 30, 2022 were affected by the unfavorable flowcell yields in the production cycle which led to increased scrap and quality control costs during the second quarter of 2022.

If we are unable to solve the unfavorable flowcell yield issue, it could lead to lower gross margins in future periods.

Cost of service and other revenue increased primarily due to increased maintenance and service costs on our increased installed base, as

well as increased service expenses related to our laboratory services.

We expect cost of product and service and other revenue to continue to increase as we continue to increase our installed base and the number of customers purchasing laboratory services

Research and Development Expenses

Research and development, or R&D, expenses increased by $7.7 million, or 188%, to $11.8 million for the three months ended June 30, 2022 compared to $4.1 million for the same period in 2021.

The increase is primarily due to a $5.5 million increase in compensation expenses, of which $3.1 million relates to stock-based compensation expense, and an increase of $1.8 million in product development costs.

The increase in compensation expense is primarily driven by increased headcount.

We anticipate future additions to our development teams as well as continued increases to our product development costs and, thus, future increases to R&D expenses.

We expect R&D expenses to increase in the remainder of 2022 relative to 2021 as we have added headcount in order to support our efforts to develop more scalable and efficient manufacturing workflows, expand the utility of Saphyr, and develop the next versions of OGM products – including integration of OGM data into our NxClinical software.

We expect that stock based compensation will continue to drive a significant portion of the increase in expense in the remainder of 2022 as a result of the stock issued as consideration in the BioDiscovery acquisition, which primarily rolls up into R&D expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $8.0 million, or 58%, to $21.8 million for the three months ended June 30, 2022 compared to $13.8 million for the same period in 2021.

The increase is primarily due to a $4.1 million increase in compensation expenses, of which $0.9 million relates to stock-based compensation, a $1.3 million increase in amortization of intangibles related to the acquisition of BioDiscovery, a $0.6 million increase in marketing expenses, and a $0.4 million increase in other headcount-related expenses.

The increase in compensation expense is driven primarily by increased headcount.

This is due to growth in our global sales, service, and back-office teams to facilitate the expanding customer base, as well as headcount additions attributed to the acquisition of BioDiscovery.

We anticipate headcount additions to our global sales and back-office teams in the coming 12 months.

Other headcount-related expenses included the cost of recruiting, temporary employment, and facilities expenses incurred in order to support increased product demand.

We expect selling, general, and administrative expenses to increase in the remainder of 2022 due to our continuing investment in growing and supporting our customer base.

We expect stock based compensation to continue to drive a significant portion of the increase in expense in the remainder of 2022 due to stock option awards issued to senior-level fourth quarter 2021 hires as well as annual refresher grants issued to executives and non-executives in February 2022.

Interest Expense

Interest expense decreased by $0.2 million, or 72%, to $0.07 million for the three months ended June 30, 2022 compared to $0.3 million for the same period in 2021, driven by us paying off the outstanding principal balance of our outstanding term loan with Innovatus, or the Innovatus LSA, during the three months ended June 30, 2021.

Interest Income

Interest income was $0.2 million for the three months ended June 30, 2022, as compared to $58,000 for the same period in 2021 resulting from positive returns on investments.

Our total available for sale securities balance was $160.2 million as of June 30, 2022.

Loss on debt extinguishment

A loss on debt extinguishment of $2.1 million was recognized during the three months ended June 30, 2021 in connection with our payment in full of the term loan under the Innovatus LSA, including all accrued interest, an end of term fee, a prepayment fee, and write-off of unamortized debt issuance costs.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table sets forth our results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30, Period-to-Period Change

Product revenue $ 7,029,000 $ 4,545,000 $ 2,484,000 55 %

Service and other revenue 5,337,000 2,479,000 2,858,000 115 %

Total revenue 12,366,000 7,024,000 5,342,000 76 %

Cost of revenue:

Cost of product revenue 7,549,000 3,383,000 4,166,000 123 %

Cost of other revenue 2,485,000 1,159,000 1,326,000 114 %

Total cost of revenue 10,034,000 4,542,000 5,492,000 121 %

Operating expenses:

Research and development 22,296,000 6,765,000 15,531,000 230 %

Selling, general and administrative 42,060,000 23,357,000 18,703,000 80 %

Total operating expenses 64,356,000 30,122,000 34,234,000 114 %

Loss from operations (62,024,000) (27,640,000) (34,384,000) 124 %

Other income (expenses):

Interest income 301,000 123,000 178,000 145 %

Interest expense (151,000) (871,000) 720,000 (83) %

Loss on debt extinguishment — (2,076,000) 2,076,000 — %

Gain on forgiveness of Paycheck Protection Program Loan — 1,775,000 (1,775,000) (100) %

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Net loss $ (62,112,000) $ (28,733,000) $ (33,379,000) 116 %

Total revenue increased by $2.5 million, or 80%, to $5.7 million for the three months ended March 31, 2022 compared to $3.2 million for the same period in 2021.

The increase in product sales was driven by increased demand for our Saphyr OGM solutions, including increased instrument (64%) and flowcell units sold (24%) when compared to the same period last year, despite the supply chain challenges posed by COVID-19.

Total revenue increased by $5.3 million, or 76%, to $12.4 million for the six months ended June 30, 2022 compared to $7.0 million for the same period in 2021.

The increased demand for our reagent rental program continues to drive a significant portion of the increase in consumable sales.

We believe increased demand for our OGM systems was primarily driven by increased market awareness and additional published data demonstrating the utility of OGM, which we expect to continue as market awareness and published data, while not immune, can be influenced despite the negative effects of COVID-19.

We believe increased demand for our OGM systems was primarily driven by increased market awareness and additional published data demonstrating the utility of OGM.

While not immune to the negative effects caused by COVID-19 and other geopolitical events, we expect revenue to increase as market awareness and published data of OGM utility increases.

The increase in service and other revenue was primarily driven by $2.2 million in revenues generated by our BioDiscovery subsidiary, which was acquired in October 2021.

Cost of Revenue

Total cost of revenue increased by $2.7 million, or 128%, to $4.8 million for the three months ended March 31, 2022 compared to $2.1 million for the same period in 2021.

Cost of revenue increased by $5.5 million, or 121%, to $10.0 million for the six months ended June 30, 2022 compared to $4.5 million for the same period in 2021.

Our gross margins for the three months ended March 31, 2022 were affected by the unfavorable flowcell yields in the production cycle which led to increased scrap and quality control costs during the first quarter of 2022.

Our gross margins for the six months ended June 30, 2022 were affected by the unfavorable flowcell yields in the production cycle which led to increased scrap and quality control costs during the first half of 2022.

If we are unable to solve the unfavorable flowcell yield issue, it could lead to lower gross margins in future periods.

Cost of service and other revenue increased primarily due to increased maintenance and service costs on our increased installed base, as well as increased service expenses related to our laboratory services.

We expect cost of product and service and other revenue to continue to increase as we continue to increase our installed base and the number of customers purchasing laboratory services.

Research and Development Expenses

Research and development, or R&D, expenses increased by $7.8 million, or 293%, to $10.5 million for the three months ended March 31, 2022 compared to $2.7 million for the same period in 2021.

R&D expenses increased by $15.5 million, or 230%, to $22.3 million for the six months ended June 30, 2022 compared to $6.8 million for the same period in 2021.

The increase is primarily due to a $11.6 million increase in compensation expenses, of which $6.3 million relates to stock-based compensation expense, and an increase of $3.1 million in product development costs.

The increase in compensation expense is primarily driven by a 178% increase in R&D headcount.

The increase in compensation expense is primarily driven by increased headcount.

We anticipate future additions to our development teams as well as continued increases to our product development costs and, thus, future increases to R&D expenses.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $10.7 million, or 113%, to $20.3 million for the three months ended March 31, 2022 compared to $9.5 million for the same period in 2021.

The increase is primarily due to a $5.8 million increase in compensation expenses, of which $1.5 million relates to stock-based compensation, a $1.3 million increase in amortization of intangibles related to the acquisition of BioDiscovery, a $1.2 million increase in marketing expenses, a $0.8 million increase in software and information technology costs, and a $0.6 million increase in other headcount-related expenses.

The increase in compensation expense is driven primarily by a 173% increase in selling, general and administrative headcount.

This is due to organic headcount additions to our global sales and back-office teams to support world-wide product distribution, as well as headcount additions attributed to the acquisition of BioDiscovery.

Selling, general and administrative expenses increased by $18.7 million, or 80%, to $42.1 million for the six months ended June 30, 2022 compared to $23.4 million for the same period in 2021.

The increase is primarily due to a $9.9 million increase in compensation expenses, of which $2.4 million relates to stock-based compensation, a $2.7 million increase in amortization of intangibles related to the acquisition of BioDiscovery, a $1.8 million increase in marketing expenses, and a $1.0 million increase in other headcount-related expenses.

The increase in compensation expense is driven primarily by increased headcount.

This is due to growth in our global sales, service, and back-office teams to facilitate the expanding customer base, as well as headcount additions attributed to the acquisition of BioDiscovery.

We anticipate headcount additions to our global sales and back-office teams in the coming 12 months.

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Interest Expense

Interest expense decreased by $0.5 million, or 87%, to $0.08 million for the three months ended March 31, 2022 compared to $0.6 million for the same period in 2021, driven by us paying off the outstanding principal balance of our outstanding term loan with Innovatus (“Innovatus LSA”).

The Innovatus LSA was outstanding for all of the three month period ended March 31, 2021.

Interest expense decreased by $0.7 million, or 83%, to $0.2 million for the six months ended June 30, 2022 compared to $0.9 million for the same period in 2021, driven by us paying off the outstanding principal balance of our outstanding term loan under the Innovatus LSA during the six months ended June 30, 2021.

Interest Income

Interest income was $0.1 million for the three months ended March 31, 2022, as compared to $65,000 for the same period in 2021 resulting from positive returns on investments.

Our total available for sale securities balance was $192.4 million as of March 31, 2022.

Interest income was $0.3 million for the six months ended June 30, 2022, as compared to $0.1 million for the same period in 2021 resulting from positive returns on investments.

Our total available for sale securities balance was $160.2 million as of June 30, 2022.

Loss on debt extinguishment

A loss on debt extinguishment of $2.1 million was recognized during the six months ended June 30, 2021 in connection with our payment in full of the term loan under the Innovatus LSA, including all accrued interest, an end of term fee, a prepayment fee, and write-off of unamortized debt issuance costs.

Gain on forgiveness of Paycheck Protection Program loan

A gain on forgiveness of our Paycheck Protection Program loan, or PPP Loan, of $1.8 million was recognized during the three months ended March 31, 2021 in connection with the forgiveness of the PPP Loan, including all accrued interest in full.

A gain on forgiveness of our Paycheck Protection Program loan, or PPP Loan, of $1.8 million was recognized during the six months ended June 30, 2021 in connection with the forgiveness of the PPP Loan in full, including all accrued interest.

Liquidity and Capital Resources

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See Note 6 to our condensed consolidated financial statements for a discussion of our recent equity activity included elsewhere in this Quarterly Report on Form 10-Q for more information.

We incurred net losses of $30.0 million and $9.9 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $246.1 million, cash and cash equivalents of $24.0 million, and available for sale investment securities of $192.4 million.

We incurred net losses of $62.1 million and $28.7 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $278.2 million, cash and cash equivalents of $27.2 million, and available for sale investment

securities of $160.2 million.

As of December 31, 2021, we had an accumulated deficit of $216.1 million, cash and cash equivalents of $24.6 million, and available for sale investment securities of $226.0 million.

Future Capital Requirements

We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, additional research and development expenses associated with expanding our offerings, expenses associated with continuing to build out our corporate infrastructure and expenses associated with being a public company.

Our short-term capital expenditure needs relate primarily to the ongoing build out of our manufacturing and research facilities, service lab and service-related capabilities, research and development expenses related to current and future product offerings, and enhancements to information technology.

Our short-term capital expenditure needs relate primarily to the ongoing build out of our facilities, service lab and service-related capabilities, research and development expenses related to current and future product offerings, and enhancements to information technology.

We expect such expenditures to continue throughout 2022.

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Net cash provided by (used in):

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities $ (60,826,000) $ (26,323,000)

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As discussed below, we anticipate our available cash balance will be sufficient to fund those increases in cash used in operating activities for at least the next 12 months, but we may consider funding those increases or increases beyond the next 12 months with the methods discussed in the section below entitled “Capital Resources.”

Net cash used in operating activities was $32.5 million during the three months ended March 31, 2022 as compared to $13.9 million during the same period in 2021.

The increase in cash used in operating activities of $18.6 million was primarily attributed to an incremental headcount growth of 174% compared to our headcount as of March 31, 2021.

Net cash used in operating activities was $60.8 million during the six months ended June 30, 2022 as compared to $26.3 million during the same period in 2021.

The increase in cash used in operating activities of $34.5 million was primarily attributed to an incremental headcount growth compared to our headcount as of June 30, 2021.

Investing Activities

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We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.

During the three months ended March 31, 2022, cash provided by investing activities was $32.0 million for the three months ended March 31, 2022, cash compared to the same period in 2021 where we had a cash outflow of $0.02 million, a net increase of $32.0 million.

This increase is primarily attributed to the sale of $47.2 million in available for sale securities.

During the six months ended June 30, 2022, cash provided by investing activities was $63.2 million, as compared to $0.05 million during the same period in 2021.

The increase in cash provided by investing activities of $63.2 million was primarily attributed to the sale of $93.5 million in available for sale securities, offset by a purchase of $29.5 million in available for sale securities.

Financing Activities

Net cash provided by financing activities was $7,000 during the three months ended March 31, 2022 as compared to the same period in 2021 where we had net cash provided by financing activities of $337.5 million, a decrease of $337.5 million.

During the three months ended March 31, 2021, we raised approximately $328.6 million in gross proceeds from executing two follow-on offerings and sales under our at-the-market facilities with Landenburg and Cowen.

We did not have similar fundraising activity in the three months ended March 31, 2022.

Net cash provided by financing activities was $0.2 million during the six months ended June 30, 2022 as compared to the same period in 2021 where we had net cash provided by financing activities of $320.4 million, a decrease of $320.2 million.

During the six months ended June 30, 2021, we raised approximately $328.6 million in gross proceeds from executing two follow-on offerings and sales under our at-the-market facilities with Ladenburg Thalmann & Co.

Inc., or Ladenburg, and Cowen and Company, LLC, or Cowen.

We did not have similar fundraising activity in the six months ended June 30, 2022.

Paycheck Protection Program

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Capital Resources

As of March 31, 2022, we had approximately $24.0 million in cash and cash equivalents, available for sale securities of $192.4 million, and working capital of $223.7 million.

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 Market Issuance Sales Agreement, with Ladenburg Thalmann & Co.

acting as sales agent (the “Ladenburg ATM”).

As of June 30, 2022, we had approximately $27.2 million in cash and cash equivalents, available for sale securities of $160.2 million, and working capital of $188.4 million.

During October 2020 through January 2021, we sold 27.0 million shares of common stock under the Ladenburg ATM and received net proceeds of $38.0 million after deducting aggregate offering costs.

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Any future offerings under this registration statement will be dependent upon, among other factors, market conditions, available pricing, our financial condition, investor perception of our prospects, our capital needs and our ability to maintain status as a well-known seasoned issuer.

Further, as of June 30, 2022, as a consequence of our re-qualification as a “smaller reporting company,” we may lose “well-known seasoned issuer” status at the time we file our Annual Report on Form 10-K for the fiscal year ending December 31, 2022 if the worldwide market value of our voting and non-voting common equity held by our non-affiliates does not equal $700.0 million or more, calculated as of a date within 60 days prior to filing such report.

If that were to occur and we were no longer considered a well-known seasoned issuer, we anticipate needing to amend our automatically effective shelf registration statement on Form S-3 prior to our filing of such annual report (or earlier if required by the Securities Act or the rules and regulations of the SEC) in order to sell securities under that Form S-3 on an ongoing basis.

On January 25, 2021, we completed an underwritten public offering pursuant to our shelf registration statement of 38.3 million shares of our common stock, including 5.0 million shares of our common stock sold pursuant to the underwriters’ exercise in full of their option to purchase additional shares.

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The gross proceeds to us were approximately $230.0 million before deducting underwriting discounts and commissions and other offering expenses.

On March 23, 2021, we entered into a Sales Agreement with Cowen and Company, LLC, or Cowen, pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $350.0 million, through or to Cowen, acting as sales agent or principal, or the Cowen ATM.

On March 23, 2021, we entered into a Sales Agreement with Cowen pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $350.0 million, through or to Cowen, acting as sales agent or principal, or the Cowen ATM.

In August and September 2021, the Company sold 2.3 million shares of common stock under the Cowen ATM at an average share price of $6.15 per share, and received gross proceeds of approximately $13.9 million before deducting offering costs of $0.6 million.

There were no sales of common stock under the Cowen ATM from January 1, 2022 to March 31, 2022.

There were no sales of common stock under the Cowen ATM from January 1, 2022 to June 30, 2022.

We believe that our cash, cash equivalents, and available for sale securities will be sufficient to fund our planned operations, obligations as they become due and capital investments for at least the next twelve months.

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The Company determined it is highly likely that the milestone will be achieved and therefore used a 95% probability factor which is applied to the $10.0 million milestone consideration.

Based on these valuation assumptions, the fair value of the milestone consideration was determined to be $9.1 million as of March 31, 2022.

Based on these valuation assumptions, the fair value of the milestone consideration was determined to be $9.2 million as of June 30, 2022.

During the three months ended June 30, 2022, the milestone consideration liability was reclassified from non-current liabilities to current liabilities.

Contractual Obligations

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Historically, revisions to our estimates have not resulted in a material change to our financial statements.

During the three months ended March 31, 2022, there have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

During the three and six months ended June 30, 2022, there have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis