What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-01 compared with 2024-08-02 · 80 added, 78 removed, 188 unchanged (46% of the section changed)

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Barostim is currently indicated by the U.S.

Food and Drug Administration (“FDA”) for patients who are NYHA Class III or II (who had a recent history of Class III) despite treatment with guideline-directed medical therapies (medications and devices), have a LVEF ≤ 35% and a NT-proBNP < 1600 pg/m and is CE Marked for HFrEF and resistant hypertension.

Food and Drug Administration (“FDA”) for patients who are NYHA Class III or II (who had a recent history of Class III) despite treatment with guideline-directed medical therapies (medications and devices), have a LVEF ≤ 35% and a NT-proBNP < 1600 pg/ml and is CE Marked for HFrEF and resistant hypertension.

Since our inception, our activities have consisted primarily of developing Barostim Therapy, conducting our BeAT-HF pre-market and post-market pivotal studies in the U.S., and filing for regulatory approvals.

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All Medicare Administrative Contractors have retired their official automatic coverage denial policies for our Current Procedural Terminology codes, thereby allowing hospitals to submit payment requests for the Barostim procedure to be adjudicated on a claim-by-claim basis.

Our reimbursement strategy involves continuing to broaden our current coverage and

build our in-house market access team to obtain appropriate prior authorization approvals in advance of treatment on a case-by-case basis where positive coverage policies currently do not exist.

Our reimbursement strategy involves continuing to broaden our current coverage and build our in-house market access team to obtain appropriate prior authorization approvals in advance of treatment on a case-by-case basis where positive coverage policies currently do not exist.

Outside the U.S., reimbursement levels vary by country and within some countries by region.

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On December 15, 2023, we borrowed $15.0 million under the second tranche of the Loan Agreement.

W e had $30.0 million in outstanding Term Loans under the Loan Agreement as of June 30, 2024.

The Loan Agreement provides for an additional tranche of up to $20.0 million, based on the timing and other conditions set forth in the Loan Agreement.

On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement.

W e had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 2024.

As a result of these investments and our commercialization efforts, we expect to continue to incur net losses for the next several years, which may require additional funding and could include future equity and debt financing.

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In July 2024, the Centers for Medicare and Medicaid Services (“CMS”) proposed OPPS rules for 2025, including moving Barostim procedures back to APC 5465, which would reduce the average payment amount for Barostim to $31,000.

We believe the data supports creation of a Level 6 Neurostimulator APC and will work with CMS with the goal of achieving this, or alternatively, leaving Barostim in New Technology APC 1580 for another year.

In April 2024, we announced the termination of the employment of our Senior Vice President of U.S.

Sales, effective April 29, 2024.

Pursuant to his employment agreements, he was eligible for severance benefits provided that he signed a release of claims in favor of the Company and complies with certain covenants, including non-competition and non-solicitation restrictions.

He signed the release, and we began making severance payments to him in July 2024.

In April 2024, we announced that we were suspending enrollment in the BATwire clinical trial due to slow enrollment, given that many patient candidates elected the commercially approved procedure, as opposed to participating in the trial.

We intend to continue following the patients enrolled in the BATwire trial until the study is completed.

Since the beginning of the second quarter of fiscal 2024, we have hired new leaders for sales, medical affairs, clinical, reimbursement and human resources, completing the expansion of the executive team.

We believe the data supports creation of a Level 6 Neurostimulator

APC and will work with CMS with the goal of achieving this, or alternatively, leaving Barostim in New Technology APC 1580 for another year.

In August 2024, we announced that CMS has reassigned the Barostim implant procedure for the inpatient setting as part of the Medicare Hospital Inpatient Prospective Payment System (“IPPS”) final rule for CMS’ Fiscal Year 2025, which began on October 1, 2024.

On that date, Barostim was reassigned to MS-DRG 276, which carries a national average payment of approximately $43,000, a significant increase from the previous payment range of $17,000-$23,000, which is expected to facilitate increased access to the therapy for patients with heart failure.

The American Medical Association's CPT Editorial Panel approved new Category I codes for Barostim therapy, effective January 1, 2026.

Led by the Society for Vascular Surgery with support from the American College of Cardiology, this advancement from Category III to Category I status reflects Barostim's growing adoption and established clinical evidence in treating heart failure symptoms.

The new designation is expected to streamline reimbursement processes and expand access to this important therapy for heart failure patients.

Factors affecting our performance

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Cost of goods sold consists primarily of acquisition costs of the components and subassemblies of Barostim, allocated manufacturing overhead and scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs.

We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows.

We expect cost of goods sold to increase in absolute dollars

primarily as, and to the extent, our revenue grows.

Gross margin may also vary based on regional differences in rebates and incentives negotiated with certain customers.

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Our gross margin has been and will continue to be affected by a variety of factors, but is primarily driven by the average sale price of our product, the percentage of products sold that include a full system (i.e., an IPG and a stimulation lead), as compared to individual IPG sales, and the allocated manufacturing overhead.

Although we sell the majority of our devices directly to hospitals, the impact of the average selling price on gross margin is driven by

the percentage of products we sold to distributors as compared to those sold directly to hospitals, as our average selling price is typically higher on products we sell directly.

Although we sell the majority of our devices directly to hospitals, the impact of the average selling price on gross margin is driven by the percentage of products we sold to distributors as compared to those sold directly to hospitals, as our average selling price is typically higher on products we sell directly.

The full system sales typically have a lower gross margin as they include the cost of an IPG and a stimulation lead whereas individual IPG sales only include the cost of an IPG.

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Results of operations

Consolidated results of operations for the three months ended June 30, 2024, compared to the three months ended June 30, 2023

Consolidated results of operations for the three months ended September 30, 2024, compared to the three months ended September 30, 2023

Three months ended

September 30,

(unaudited and in thousands)

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Three months ended

September 30,

(unaudited and in thousands)

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Total Revenue

Revenue was $11.8 million for the three months ended June 30, 2024, an increase of $2.3 million, or 24%, over the three months ended June 30, 2023.

Revenue was $13.4 million for the three months ended September 30, 2024, an increase of $2.9 million, or 27%, over the three months ended September 30, 2023.

Revenue generated in the U.S.

was $10.7 million for the three months ended June 30, 2024, an increase of $2.4 million, or 29%, over the three months ended June 30, 2023.

was $12.3 million for the three months ended September 30, 2024, an increase of $2.7 million, or 28%, over the three months ended September 30, 2023.

HF revenue units in the U.S.

totaled 339 and 265 for the three months ended June 30, 2024 and 2023, respectively.

totaled 391 and 303 for the three months ended September 30, 2024 and 2023, respectively.

HF revenue in the U.S.

totaled $10.5 million and $8.3 million for the three months ended June 30, 2024 and 2023, respectively.

totaled $12.2 million and $9.4 million for the three months ended September 30, 2024 and 2023, respectively.

The increases were primarily driven by continued growth in the U.S.

HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

As of June 30, 2024, we had a total of 189 active implanting centers in the U.S., as compared to 140 as of June 30, 2023.

As of September 30, 2024, we had a total of 208 active implanting centers in the U.S., as compared to 159 as of September 30, 2023.

Active implanting centers are customers that have completed at least one commercial HF implant in the last 12 months.

As of June 30, 2024, we had a total of 42 sales territories in the U.S.

as compared to 32 sales territories as of June 30, 2023.

Revenue generated in Europe was $1.1 million for the three months ended June 30, 2024, a decrease of $0.1 million, or 6%, over the three months ended June 30, 2023.

Total revenue units in Europe increased to 63 for the three months ended June 30, 2024, as compared to 56 in the prior year period.

As of both June 30, 2024 and 2023, we had six sales territories in Europe.

As of September 30, 2024, we had a total of 45 sales territories in the U.S.

as compared to 35 sales territories as of September 30, 2023.

Revenue generated in Europe was $1.1 million for the three months ended September 30, 2024, a nominal increase compared to the three months ended September 30, 2023.

Total revenue units in Europe increased to 56 for the three months ended September 30, 2024, as compared to 47 in the prior year period.

As of both September 30, 2024 and 2023, we had six sales territories in Europe.

Cost of goods sold and gross margin

Cost of goods sold increased $0.4 million, or 25%, to $1.9 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Cost of goods sold increased $0.6 million, or 33%, to $2.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This increase was driven by higher sales of Barostim.

Gross profit was $9.9 million for the three months ended June 30, 2024, an increase of $1.9 million, or 24%, over the three months ended June 30, 2023.

Gross margin was 84% for each of the three months ended June 30, 2024 and June 30, 2023.

Gross profit was $11.1 million for the three months ended September 30, 2024, an increase of $2.3 million, or 26%, over the three months ended September 30, 2023.

Gross margin was 83% and 84% for the three months ended September 30, 2024 and September 30, 2023, respectively.

Research and development expenses

R&D expenses decreased $0.5 million, or 16%, to $2.8 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

This change was driven by a $0.4 million decrease in consulting expenses and a $0.1 million decrease in compensation expenses.

R&D expenses decreased $0.2 million, or 7%, to $2.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This change was driven by a $0.2 million decrease in consulting expenses.

Selling, general and administrative expenses

SG&A expenses increased $4.7 million, or 28%, to $21.1 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

This change was primarily driven by a $2.6 million increase in compensation expenses, mainly as a result of increased headcount, a $1.0 million increase in non-cash stock-based compensation expense, a $0.4 million increase in advertising expenses, a $0.2 million increase in travel expenses, and a $0.2 million increase in consulting expenses.

SG&A expenses increased $6.0 million, or 38%, to $21.6 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This change was primarily driven by a $3.7 million increase in compensation expenses, mainly as a result of increased headcount, a $1.1 million increase in non-cash stock-based compensation expense, a $0.5 million increase in travel expenses, and a $0.4 million increase in advertising expenses.

Interest expense

Interest expense increased $0.5 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Interest expense increased $0.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement entered into on October 31, 2022.

Other income, net

Other income, net increased $0.3 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

This increase was primarily driven by greater interest income on our interest-bearing accounts.

Other income, net decreased $0.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

This decrease was primarily driven by less interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the three months ended June 30, 2024 and June 30, 2023.

Consolidated results of operations for the six months ended June 30, 2024, compared to the six months ended June 30, 2023

Six months ended

Provision for income taxes was nominal for each of the three months ended September 30, 2024 and September 30, 2023.

Consolidated results of operations for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023

Nine months ended

September 30,

(unaudited and in thousands)

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The following table provides revenue by geography:

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Nine months ended

September 30,

(unaudited and in thousands)

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Total Revenue

Revenue was $22.6 million for the six months ended June 30, 2024, an increase of $5.1 million, or 29%, over the six months ended June 30, 2023.

Revenue was $36.0 million for the nine months ended September 30, 2024, an increase of $8.0 million, or 28%, over the nine months ended September 30, 2023.

Revenue generated in the U.S.

was $20.5 million for the six months ended June 30, 2024, an increase of $5.3 million, or 35%, over the six months ended June 30, 2023.

was $32.8 million for the nine months ended September 30, 2024, an increase of $8.0 million, or 32%, over the nine months ended September 30, 2023.

HF revenue units in the U.S.

totaled 658 and 490 for the six months ended June 30, 2024 and 2023, respectively.

totaled 1,049 and 793 for the nine months ended September 30, 2024 and 2023, respectively.

HF revenue in the U.S.

totaled $20.3 million and $15.1 million for the six months ended June 30, 2024 and 2023, respectively.

totaled $32.5 million and $24.5 million for the nine months ended September 30, 2024 and 2023, respectively.

The increases were primarily driven by continued growth in the U.S.

HF business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of Barostim.

Revenue generated in Europe was $2.1 million for the six months ended June 30, 2024, a decrease of $0.2 million, or 8%, over the six months ended June 30, 2023.

Total revenue units in Europe decreased to 107 for the six months ended June 30, 2024, as compared to 108 in the prior year period.

Revenue generated in Europe was $3.1 million for the nine months ended September 30, 2024, a nominal decrease compared to the nine months ended September 30, 2023.

Total revenue units in Europe increased to 163 for the nine months ended September 30, 2024, as compared to 155 in the prior year period.

Cost of goods sold and gross margin

Cost of goods sold increased $0.7 million, or 24%, to $3.5 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Cost of goods sold increased $1.2 million, or 27%, to $5.8 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This increase was driven by higher sales of Barostim.

Gross profit was $19.1 million for the six months ended June 30, 2024, an increase of $4.4 million, or 30%, over the six months ended June 30, 2023.

Gross margin was 84% for each of the six months ended June 30, 2024 and June 30, 2023.

Gross profit was $30.2 million for the nine months ended September 30, 2024, an increase of $6.7 million, or 29%, over the nine months ended September 30, 2023.

Gross margin was 84% for each of the nine months ended September 30, 2024 and September 30, 2023.

Research and development expenses

R&D expenses decreased $0.9 million, or 13%, to $5.8 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

This change was driven by a $0.5 million decrease in consulting expenses, a $0.1 million decrease in non-cash stock-based compensation expense, and a $0.1 million decrease in travel expenses.

R&D expenses decreased $1.1 million, or 11%, to $8.3 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This change was driven by a $0.7 million decrease in consulting expenses, a $0.1 million decrease in travel expenses, a $0.1 million decrease in non-cash stock-based compensation expense, and a $0.1 million decrease in compensation expenses.

Selling, general and administrative expenses

SG&A expenses increased $17.6 million, or 55%, to $49.4 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

This change was primarily driven by a $10.6 million increase in non-cash stock-based compensation expense, a $4.6 million increase in compensation expenses, mainly as a result of increased headcount, a $0.6 million increase in advertising expenses, a $0.5 million increase in travel expenses, and a $0.5 million increase in consulting expenses.

SG&A expenses increased $23.6 million, or 50%, to $71.1 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This change was primarily driven by an $11.7 million increase in non-cash stock-based compensation expense, an $8.2 million increase in compensation expenses, mainly as a result of increased headcount, a $1.2 million increase in travel expenses, a $0.9 million increase in advertising expenses, and a $0.5 million increase in consulting expenses.

Approximately $8.4 million of the increase in non-cash stock-based compensation expense is related to the modification of stock options held by the former CEO in connection with his retirement in the first quarter of 2024 described in Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense

Interest expense increased $1.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

This increase was driven by the interest expense on borrowings under the Loan Agreement entered into on October 31, 2022.

Interest expense increased $1.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This increase was driven by the interest expense on higher levels of borrowings under the Loan Agreement entered into on October 31, 2022.

Other income, net

Other income, net increased $0.3 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Other income, net increased $0.2 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

This increase was primarily driven by greater interest income on our interest-bearing accounts.

Provision for income taxes

Provision for income taxes was nominal for each of the six months ended June 30, 2024 and June 30, 2023.

Provision for income taxes was nominal for each of the nine months ended September 30, 2024 and September 30, 2023.

Liquidity, capital resources and plan of operations

We have incurred significant operating losses and negative cash flows from operations since our inception, and we anticipate that we will incur significant losses for at least the next several years.

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $70.4 million and $90.6 million, respectively.

For the three months ended June 30, 2024 and 2023, our net losses were $14.0 million and $11.7 million, respectively.

For the six months ended June 30, 2024 and 2023, our net losses were $36.2 million and $23.0 million, respectively.

Our net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $20.7 million and $23.1 million, respectively.

As of September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $100.2 million and $90.6 million, respectively.

For the three months ended September 30, 2024 and 2023, our net losses were $13.1 million and $9.0 million, respectively.

For the nine months ended September 30, 2024 and 2023, our net losses were $49.3 million and $32.0 million, respectively.

Our net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $31.1 million and $31.2 million, respectively.

On October 31, 2022, we entered into the Loan Agreement under which we may borrow, subject to our achievement of certain milestones, up to a total of $50.0 million in a series of Term Loans described in Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and we borrowed $7.5 million of such total on that date to fund our commercial and investment efforts.

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On December 15, 2023, we borrowed $15.0 million under the second tranche of the Loan Agreement.

We had $30.0 million in outstanding Term Loans under the Loan Agreement as of June 30, 2024.

The Loan Agreement provides for an additional tranche of up to $20.0 million, based on the timing and other conditions set forth in the Loan Agreement.

On September 30, 2024, we borrowed the remaining $20.0 million under the third and final tranche of the Loan Agreement.

We had $50.0 million in outstanding Term Loans under the Loan Agreement as of September 30, 2024.

On November 4, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co., as agent, under 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 $50.0 million in an “at-the-market” or ATM offering, to or through the agent.

In January 2024, we commenced this ATM offering and issued 23,364 shares of common stock for gross proceeds of $0.6 million under the ATM offering during the six months ended June 30, 2024.

We have remaining capacity to issue and sell up to approximately $49.4 million of additional shares of common stock under this ATM offering.

In January 2024, we commenced this ATM offering and issued 2,382,139 shares of common stock for gross proceeds of $21.0 million under the ATM offering during the nine months ended September 30, 2024.

We have remaining capacity to issue and sell up to $29.0 million of additional shares of common stock under this ATM offering.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

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● the emergence of competing technologies or other adverse market developments.

We believe that our existing cash resources and Loan Agreement for Term Loans together with revenue will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years.

We believe that our existing cash resources together with cash from operations will be sufficient to meet our forecasted requirements for operating liquidity, capital expenditures and debt services for at least the next three years.

If these sources are insufficient to satisfy our liquidity requirements, or provide funding to execute or accelerate our growth strategies, however, we may seek to sell additional equity or enter into an additional loan agreement.

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The following table sets forth the primary sources and uses of cash for each of the periods presented below:

Six months ended

Nine months ended

September 30,

(in thousands)

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Cash used in operating activities

Net cash used in operating activities for the six months ended June 30, 2024 was $20.7 million and consisted primarily of a net loss of $36.2 million, partially offset by a non-cash charge of $13.7 million related to stock-based compensation expense and an increase in net operating assets of $1.4 million.

Net cash used in operating activities for the nine months ended September 30, 2024 was $31.1 million and consisted primarily of a net loss of $49.3 million, partially offset by a non-cash charge of $16.4 million related to stock-based compensation expense and a change in net operating assets of $1.2 million.

Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Net cash used in operating activities for the six months ended June 30, 2023 was $23.1 million and consisted primarily of a net loss of $23.0 million and a decrease in net operating assets of $3.5 million, partially offset by a non-cash charge of $3.2 million related to stock-based compensation expense.

Net cash used in operating activities for the nine months ended September 30, 2023 was $31.2 million and consisted primarily of a net loss of $32.0 million and a change in net operating assets of $4.4 million, partially offset by a non-cash charge of $4.7 million related to stock-based compensation expense.

Net operating assets consisted primarily of accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses to support the growth of our operations.

Cash used in investing activities:

Cash used in investing activities was $1.3 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively, and consisted of purchases of property and equipment.

Cash used in investing activities was $1.3 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively, and consisted of purchases of property and equipment.

Cash provided by financing activities:

Net cash provided by financing activities for the six months ended June 30, 2024 was $1.8 million and consisted of $0.9 million related to proceeds from the exercise of common stock options, $0.5 million related to proceeds from the issuance of common stock through the ATM offering, and $0.4 million related to proceeds from the ESPP.

Net cash provided by financing activities for the six months ended June 30, 2023 was $8.0 million and consisted of $7.5 million related to the proceeds under the Loan Agreement, $0.5 million related to proceeds from the ESPP, and $0.2 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $42.0 million and consisted of $20.2 million related to proceeds from the issuance of common stock through the ATM offering, $20.0 million related to proceeds under the Loan Agreement, $1.6 million related to proceeds from the exercise of common stock options, and $0.4 million related to proceeds from the ESPP, partially offset by $0.2 million related to debt financing costs.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $8.4 million and consisted of $7.5 million related to proceeds under the Loan Agreement, $0.5 million related to proceeds from the ESPP, and $0.5 million related to proceeds from the exercise of common stock options, partially offset by $0.1 million related to debt financing costs.

Contractual obligations and commitments

There have been no material changes to our contractual obligations as of June 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes to our contractual obligations as of September 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Critical accounting policies and estimates

For a discussion of our potential risks and uncertainties, see the information in Part II, Item 7.

“Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies and

estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the six months ended June 30, 2024.

“Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies and estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

We have reviewed and determined that those critical accounting policies and estimates remain our critical accounting policies and estimates as of and for the nine months ended September 30, 2024.

JOBS Act accounting election

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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