What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-13 compared with 2021-05-14 · 125 added, 53 removed, 145 unchanged (55% of the section changed)

21 unchanged sentences

Recent Developments

Greenstar/Grotek Acquisition

On August 3, 2021, we closed the acquisition of Greenstar (see Note 3, Business Combinations under Greenstar/Grotek Acquisition , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Greenstar produces premium horticultural products and solutions for global, domestic and commercial use.

Greenstar’s owned brands include Grotek, Gaia Green, Supergreen, and EarthSafe.

Grotek has been producing since 1998 and is sold internationally.

Greenstar’s brands are utilized by commercial operators including growers, landscapers, greenhouses, nurseries, organic farms, as well as independent retailers.

Greenstar manufactures products for both the retail and commercial market.

Investor Warrant Redemption

On July 19, 2021, we completed the redemption of certain of our outstanding warrants to purchase shares of our common stock that were issued in connection with a private placement of units (see Note 10, Convertible Preferred Stock and Stockholders' Equity under Warrants , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Prior to the redemption date, 3,367,647 Investor Warrants were exercised, generating approximately $56.8 million of gross proceeds to the Company.

Pursuant to the Redemption, we redeemed 1,491 Investor Warrants for a redemption price of $0.00033712 per Investor Warrant.

Aurora Acquisition

On July 1, 2021, we completed the acquisition of 100% of the issued and outstanding membership interests of Aurora (see Note 3, Business Combinations under Aurora Acquisition , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Founded in 2000, Aurora is a family-owned business with a strong vertically integrated manufacturing base with three locations across North America.

The company is dedicated to ethical and sustainable practices and offers comprehensive plant fertility product lines free from harmful chemical residues and pesticides.

Aurora will add to our growing proprietary brand nutrient and grow media line-ups, including its first organic nutrient and premium soil brands.

We will also gain new domestic manufacturing and distribution capabilities on the east and west coasts along with a peat moss harvesting operation in Canada.

House and Garden Acquisition

On June 1, 2021, we acquired 100% of the issued and outstanding shares of capital stock of the H&G Entities (see Note 3, Business Combinations under House & Garden Acquisition , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

The H&G entities are located in Arcata, California, and produce and distribute premium grade plant nutrients and fertilizers across the globe.

The H&G entities offer a strong product line of plant nutrients that will strengthen our position in the nutrient sector and complement our rapidly expanding portfolio of premium products for controlled environment agriculture.

Follow-on Public Offering

On May 3, 2021, we closed our follow-on public offering, in which we issued and sold 5,526,861 shares of our common stock, including the full exercise by the underwriters of their option to purchase 720,894 additional shares of our common stock, at a public offering price of $59.00 per share, which resulted in net proceeds of approximately $309.8 million after deducting underwriting discounts and commissions and estimated offering expenses.

We expect to use the proceeds from the FPO for acquisitions, working capital and other general corporate purposes.

On May 3, 2021, we closed our follow-on offering, in which we issued and sold 5,526,861 shares of our common stock, including the full exercise by the underwriters of their option to purchase 720,894 additional shares of our common stock, at a public offering price of $59.00 per share, which resulted in net proceeds of approximately $309.8 million after deducting underwriting discounts and commissions and offering expenses.

We expect to use the proceeds from the follow-on offering for acquisitions, working capital and other general corporate purposes.

Heavy 16 Acquisition

On May 3, 2021, we closed an acquisition of 100% of the issued and outstanding membership interests of Field 16, LLC, a Delaware limited liability company ("HEAVY 16"), pursuant to the terms of a unit purchase and contribution agreement, dated April 26, 2021 (the "Purchase Agreement"), by and among us, HEAVY 16, F16 Holding LLC, a California limited liability company (the ‘‘Seller’’), and the members of the Seller, for a purchase price of up to $78.1 million, consisting of $63.1 million in cash and 255,945 shares of our common stock valued at approximately $15 million based on the market at the time the Purchase Agreement was executed (the “Acquisition”).

The purchase price includes a potential earn out payment of up to $2.5 million based on achievement of certain performance metrics.

In connection with the Acquisition, we intend to enter into employment agreements with certain key employees of HEAVY 16.

On May 3, 2021, we acquired 100% of the issued and outstanding membership interests of Heavy 16 (see Note 3, Business Combinations under Heavy 16 Acquisition , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Heavy 16 is a leading manufacturer and supplier of branded plant nutritional products, with nine core products that are currently sold to approximately 300 retail stores across the U.S.

2 unchanged sentences

In April 2021, we entered into leases for two new distribution centers aggregating approximately 322,000 square feet.

One is located in Fairfield, California and is the distribution center that we will relocate to from our Petaluma, California distribution facility in connection with the pending sale of that building.

One is located in Fairfield, California and is the distribution center that we will relocate to from our Petaluma, California distribution facility in connection with the sale of that building by our lessor.

The other distribution center is located in Fontana, California which we will relocate to from our Santa Fe Springs, California distribution facility.

Additionally, in July 2021, we executed a lease for approximately 246,000 square feet of warehouse space in Surrey, British Columbia, Canada to be available upon expiration of the lease for existing space, commencing January 1, 2023 (see Note 7:

Operating Leases , in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Effects of Coronavirus on Our Business

1 unchanged sentence

Public health responses have included national pandemic preparedness and response plans, travel restrictions, quarantines, curfews, event postponements and cancellations and closures of facilities including local schools and businesses.

While the rollout of vaccines has begun, the timing of vaccinations, herd immunity, and the lifting of shelter in place and similar restrictions and movement restrictions is unknown.

While the rollout of vaccines has begun, the efficacy and acceptance of vaccinations, herd immunity, and the lifting of preventative measures is unknown.

The global pandemic and actions taken to contain COVID-19 have adversely affected the global economy and financial markets.

In response to the COVID-19 pandemic, we implemented business continuity plans designed to address the impact of the COVID-19 pandemic on our business, such as restrictions on non-essential business travel, the institution of work-from-home practices and the implementation of strategies for workplace safety at our facilities.

In March 2020, the majority of the employees at our headquarters transitioned to working remotely.

For several weeks following the initial outbreak of COVID-19, we experienced a material impact to our supply chain that inhibited growth and results of operations.

While we are not currently experiencing material adverse impacts to our supply chain, we intend to continue to source many products from China.

It is difficult to predict the extent to which COVID-19 may continue to spread.

As of the date of this Quarterly Report on Form 10-Q manufacturers in China and in North America are generally back in operation;

As of the date of this Quarterly Report on Form 10-Q

manufacturers in China and in North America are generally back in operation;

however, new waves of the COVID-19 pandemic could result in the re-closure of factories in China and/or in North America.

6 unchanged sentences

Many of these customers have experienced shelter-in-place measures in attempts to contain the spread of COVID-19, including general lockdowns, closure of schools and non-essential businesses, bans on gatherings and travel restrictions.

Our sales growth for the three months ended March 31, 2021 was approximately $44.5 million or 66.5% higher than the same period in 2020.

Our sales growth for the six months ended June 30, 2021 was approximately $42.6 million or 46.7% higher than the same period in 2020.

A portion of our net sales during this period could be due to pull-through demand for our products due to higher consumption of CEA products from individuals spending more time at home due to shelter-in-place measures.

Our business has remained resilient during the COVID-19 pandemic.

As of March 31, 2021, our manufacturing and distribution operations are viewed as essential services and continue to operate.

As of June 30, 2021, our manufacturing and distribution operations are viewed as essential services and continue to operate.

Our key suppliers, retailers and resellers have been designated as essential services and remain open at this time;

14 unchanged sentences

and a Canadian Pledge and Security Agreement, dated March 29, 2021 and the other security documents.

The JPMorgan Credit Facility is more fully described in Note 7, Debt under Revolving asset-back credit facilities in the notes to our unaudited interim condensed consolidated financial statements.

The JPMorgan Credit Facility is more fully described in Note 9, Debt under Revolving asset-backed credit facilities in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on form 10-Q.

Initial Public Offering

2 unchanged sentences

through the U.S.

Small Business Administrative Paycheck Protection Program, and (iv) to pay $2.6 million to settle the Series A preferred stock dividend.

Small Business Administration Paycheck Protection Program, and (iv) to pay $2.6 million to settle the Series A preferred stock dividend.

Our common stock began trading on the Nasdaq Global Select Market on December 10, 2020.

2 unchanged sentences

The reverse split was effected on November 24, 2020 without any change in the par value per share.

Results of Operations—Comparison of three months ended March 31, 2021 and 2020

The following table sets forth our unaudited interim condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):

Three months ended March 31,

Results of Operations—Comparison of three and six months ended June 30, 2021 and 2020

The following table sets forth our unaudited interim condensed consolidated statements of operations for the three months ended June 30, 2021 and 2020, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):

Three months ended June 30,

2021 2020 Period change

5 unchanged sentences

Impairment, restructuring and other 1 0.0 % 83 0.1 % (82) -98.8 %

Income (loss) from operations 6,382 5.7 % (167) -0.2 % 6,549 -3,921.6 %

Income from operations 2,331 1.7 % 4,954 5.4 % (2,623) -52.9 %

Interest expense (54) 0.0 % (2,506) -2.7 % 2,452 -97.8 %

1 unchanged sentence

Other income, net 43 0.0 % 305 0.3 % (262) -85.9 %

Income before tax 2,320 1.7 % 2,753 3.0 % (433) -15.7 %

Income tax expense (63) 0.0 % (186) -0.2 % 123 -66.1 %

Net income 2,257 1.7 % 2,567 2.8 % (310) -12.1 %

Cumulative dividends allocated to Series A Convertible Preferred Stock — 0.0 % (674) -0.7 % 674 -100.0 %

Net income attributable to common stockholders $ 2,257 1.7 % $ 1,893 2.1 % $ 364 19.2 %

The following table sets forth our unaudited interim condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, including amounts and percentages of net sales for each period and the period-to-period change in dollars and percent (amounts in thousands):

Six months ended June 30,

2021 2020 Period change

Net sales $ 245,189 100.0 % $ 158,105 100.0 % $ 87,084 55.1 %

Cost of goods sold 192,376 78.5 % 128,666 81.4 % 63,710 49.5 %

Gross profit 52,813 21.5 % 29,439 18.6 % 23,374 79.4 %

Operating expenses:

Selling, general and administrative 44,084 18.0 % 24,560 15.5 % 19,524 79.5 %

Impairment, restructuring and other 16 0.0 % 92 0.1 % (76) -82.6 %

Income from operations 8,713 3.6 % 4,787 3.0 % 3,926 82.0 %

Interest expense (144) -0.1 % (5,309) -3.4 % 5,165 -97.3 %

Loss on debt extinguishment (680) -0.3 % — 0.0 % (680) n/a %

Other income, net 127 0.1 % 326 0.2 % (199) -61.0 %

Income (loss) before tax 8,016 3.3 % (196) -0.1 % 8,212 -4,189.8 %

3 unchanged sentences

Net income (loss) attributable to common stockholders $ 7,197 2.9 % $ (1,834) -1.2 % $ 9,031 -492.4 %

Net sales for the three months ended March 31, 2021 increased $44.5 million, or 66.5%, compared to the same period in 2020.

The increase in net sales was primarily due to a 59.6% increase in volume of products sold and a 6.9% increase in price of products sold.

The increase in volume of products sold was primarily related to (i) higher demand from the end-markets across numerous U.S.

states, including, but not limited to California, Oklahoma, Michigan and Canada, and (ii) higher demand for our proprietary branded products which grew at a faster pace than our preferred and distributed brands during the period.

The increase in price was primarily related to list price increases and more effective sales incentives.

Gross profit for the three months ended March 31, 2021 increased $11.7 million, or 100.8%, compared to the same period in 2020.

The increase in gross profit was primarily related to (i) the aforementioned increase in net sales and (ii) a significant increase in our gross profit margin percentage (gross profit as a percent of net sales).

Our gross profit margin percentage increased to 20.8% for the three months ended March 31, 2021 from 17.3% in the same period in 2020.

The higher gross profit margin percentage is primarily due to a more favorable sales mix of proprietary brand products, which typically carries a higher gross margin than our preferred and distributed branded products, improved labor efficiency, and lower freight cost as a percentage of net sales.

Net sales for the three months ended June 30, 2021 were $133.8 million, an increase of $42.6 million, or 46.7%, compared to the same period in 2020.

Net sales for the six months ended June 30, 2021 were $245.2 million, an increase of $87.1 million, or 55.1%, compared to the same period in 2020.

The 46.7% increase in net sales for the three months ended June 30, 2021 as compared to the same period in 2020 was due to a 40.5% increase in volume of products sold (inclusive of incremental sales from acquisitions closed within the second quarter of 2021 and preferred brands added in the year-to-date period), a 2.7% increase in price/mix of products sold, and 3.5% growth from favorable foreign exchange rates.

The increase in volume of products sold was primarily related to (i) higher demand from end-markets across numerous U.S.

states, including, but not limited, to California, Oklahoma, Michigan and Canada and (ii) higher demand for our proprietary and preferred branded products which was primarily due to recently acquired proprietary brands and added preferred brands.

The increase in price was primarily related to list price increases.

The 55.1% increase in net sales for the six months ended June 30, 2021 as compared to the same period in 2020 was due to a 48.5% increase in volume of products sold, a 3.9% increase in price/mix of products sold, and 2.7% growth from favorable foreign exchange rates.

The increase in volume of products sold was primarily related to (i) expansion of our proprietary and preferred brands, (ii) large expansion of our nutraceutical products, (iii) continued growth in our base business in California, coupled with rapid expansion in high-growth areas such as Oklahoma and Missouri, and (iv) inorganic growth from our acquisitions, which accounted for approximately one-tenth of our total growth.

The increase in price was primarily related to list price increases.

The increase in foreign exchange related to recent weakness in the U.S.

Dollar relative to the Canadian Dollar and to the Euro.

Gross profit for the three months ended June 30, 2021 was $29.6 million, an increase of $11.7 million, or 65.5%, compared to the same period in 2020.

Gross profit for the six months ended June 30, 2021 was $52.8 million, an increase of $23.4 million, or 79.4%, compared to the same period in 2020.

The increase in gross profit for the three months ended June 30, 2021 as compared to the same period in 2020 was primarily related to (i) the aforementioned increase in net sales and (ii) a significant increase in our gross profit margin percentage (gross profit as a percent of net sales).

Our gross profit margin percentage increased to 22.1% for the three months ended June 30, 2021 from 19.6% in the same period in 2020.

The higher gross profit margin percentage is primarily due to a more favorable sales mix of proprietary brand products (due in part to the aforementioned proprietary brands that were recently acquired and the preferred brand added in the year-to-date period), which typically carries a higher gross margin than our distributed branded products, as well as improved labor efficiency.

The increase in gross profit for the six months ended June 30, 2021 as compared to the same period in 2020 was primarily related to (i) the aforementioned increase in net sales and (ii) a significant increase in our gross profit margin percentage (gross profit as a percent of net sales).

Our gross profit margin percentage increased to 21.5% for the six months ended June 30, 2021 from 18.6% in the same period in 2020.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2021 increased by $5.1 million, or 43.5%, compared to the same period in 2020, but decreased as a percentage of sales to 15.1% from 17.5% due to economies of scale as our net sales grew faster than our selling, general and administrative expenses.

The $5.1 million increase in selling, general and administrative expenses is primarily related to higher compensation costs (an increase of $1.5 million), consulting fees (an increase of $1.8 million, which includes $0.7 million of acquisition-related costs), insurance costs (an increase of $0.6 million), and share-based compensation (an increase of $1.2 million, which includes $0.2 million of employer payroll taxes).

These increases were largely the result of the increased costs associated with running a public company and support of our long-term growth strategy.

Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2021 was $27.3 million, an increase of $14.4 million compared to the same period in 2020.

SG&A expenses for the six months ended June 30, 2021 was $44.1 million, an increase of $19.5 million compared to the same period in 2020.

For the three months ended June 30, 2021, the $14.4 million increase in selling, general and administrative expenses is primarily related to acquisition-related costs of $9.6 million, compensation costs (an increase of $1.3 million), insurance costs (an increase of $0.7 million), depreciation and amortization associated with the new acquisitions (an increase of $0.6 million), share-based compensation (an increase of $1.1 million) and $0.8 million of solicitation fees incurred in connection with the Redemption.

These increases were largely the result of (i) our accelerated M&A strategy and (ii) the increased costs associated with running a public company and support of our long-term growth strategy.

The $19.5 million increase in selling, general and administrative expenses for the six months ended June 30, 2021 is primarily related to acquisition-related costs of $10.2 million, compensation costs (an increase of $2.8 million), consulting fees (an increase of $1.8 million), insurance costs (an increase of $1.2 million), depreciation and amortization associated with the new acquisitions (an increase of $0.6 million), share-based compensation (an increase of $2.4 million) and $0.8 million of solicitation fees incurred in connection with the Redemption.

These increases were largely the result of increased costs associated with (i) our accelerated M&A strategy and (ii) running a public company and support of our long-term growth strategy.

Interest expense

Interest expense decreased by $2.7 million, or 96.8%, for the three months ended March 31, 2021 compared to the same period in the prior year, due to the payoff of the Term Loan and pay down of the Encina Credit Facility in connection with the IPO.

Interest expense for the three months ended June 30, 2021 was $0.1 million, a decrease of $2.5 million, or 97.8%, compared to the same period in the prior year.

Interest expense for the six months ended June 30, 2021 was $0.1 million, a decrease of $5.2 million, or 97.3%, compared to the same period in the prior year.

The decreases were due to the payoff of the Term Loan and pay down of the Encina Credit Facility in connection with the December 2020 IPO and the May 2021 follow-on offering which has helped fund recent acquisitions.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended March 31, 2021 was $0.7 million, which resulted primarily from the write-off of unamortized deferred financing costs associated with the payoff of the Encina Credit Facility.

Loss on debt extinguishment for the six months ended June 30, 2021 was $0.7 million, which resulted primarily from the write-off of unamortized deferred financing costs associated with the payoff of the Encina Credit Facility.

Income tax expense

Income tax expense increased by $0.6 million for the three months ended March 31, 2021 compared to the same period in the prior year, due to an increase in income before taxes.

Income tax expense for the six months ended June 30, 2021 increased by $0.5 million compared to the same period in the prior year, due to an increase in income before taxes.

Non-GAAP Financial Measures

14 unchanged sentences

We define Adjusted EBITDA as net income (loss) excluding interest expense, income taxes, depreciation and amortization, stock-based compensation, employer payroll taxes on stock-based compensation and other unusual and/or infrequent costs, which we do not consider in our evaluation of ongoing operating performance.

The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to Adjusted EBITDA for the three months ended March 31, 2021 and 2020 (In thousands):

Three months ended March 31,

The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to Adjusted EBITDA for the three months ended June 30, 2021 and 2020 (In thousands):

Three months ended June 30,

Net Income $ 2,257 $ 2,567

Interest expense 54 2,506

Income taxes 63 186

Depreciation and amortization 2,187 1,947

Impairment, restructuring and other 1 83

Acquisition and integration expenses*

Investor warrant solicitation fees 844 —

Other income, net (43) (305)

Stock-based compensation** 1,258 131

Adjusted EBITDA $ 16,187 $ 7,115

Adjusted EBITDA as a percent of net sales 12.1 % 7.8 %

The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to Adjusted EBITDA for the six months ended June 30, 2021 and 2020 (In thousands):

Six months ended June 30,

Net Income (Loss) $ 7,197 $ (526)

3 unchanged sentences

Impairment, restructuring and other 16 92

Acquisition expenses * 659 —

Acquisition and integration expenses*

Investor warrant solicitation fees 844 —

Other income, net (127) (326)

3 unchanged sentences

Adjusted EBITDA as a percent of net sales 10.6 % 5.5 %

(*) Includes consulting, transaction services and legal fees incurred for the completed HEAVY16 acquisition and certain potential acquisitions.

(**) Includes the amount of employer payroll taxes on stock-based compensation.

(*) Includes consulting, transaction services and legal fees incurred for the completed Heavy 16, House and Garden, Aurora, and Greenstar/Grotek acquisitions and certain potential acquisitions.

(**) Includes employer payroll taxes on stock-based compensation

Liquidity and Capital Resources

The following table summarizes our cash flows for the three months ended March 31, 2021 and 2020 (amounts in thousands):

Three months ended March 31,

The following table summarizes our cash flows for the six months ended June 30, 2021 and 2020 (amounts in thousands):

Six months ended June 30,

Net cash used in operating activities $ (501) $ (1,396)

Net cash (used in) provided by investing activities (196,607) 1,712

Net cash used in financing activities (11,827) (1,234)

Net cash provided by financing activities 315,447 343

Effect of exchange rate changes on cash, cash equivalents and restricted cash 73 (64)

Net decrease in cash, cash equivalents and restricted cash (14,914) (1,195)

Net increase in cash, cash equivalents and restricted cash 118,412 595

Cash, cash equivalents and restricted cash at beginning of period 76,955 32,857

1 unchanged sentence

Operating Activities

Net cash used in operating activities was $2.6 million for the three months ended March 31, 2021, primarily consisting of $4.2 million in non-cash expense addbacks, which were largely composed of depreciation and amortization, stock-based compensation expense, non-cash operating lease and other non-cash expense, to reconcile net income of $4.9 million to net cash used in operating activities, less a $11.7 million increase in working capital.

This change in working capital primarily reflects a $23.4 million increase in accounts receivable, inventories, prepaid expenses and other current assets, and other assets for the period offset by a $14.3 million increase in accounts payable, as well as a decrease in accrued expenses and other current liabilities of $1.8 million, and a decrease in lease liabilities of $0.8 million due to payments on lease obligations during the period.

Net cash used in operating activities was $1.7 million for the three months ended March 31, 2020, primarily consisting of $3.2 million in non-cash addbacks, which were largely composed of depreciation and amortization, non-cash operating lease and other non-cash expense, to reconcile net loss of $3.1 million to net cash used in operating activities, less a $1.8 million increase in working capital.

This change in working capital primarily reflects a $5.7 million net increase in accounts receivable and inventories for the period offset by a $4.8 million increase in accounts payable and accrued expenses and other current liabilities as well as a decrease in lease liabilities of $0.9 million due to payments on lease obligations during the period.

Net cash used in operating activities was $0.5 million for the six months ended June 30, 2021, primarily consisting of $9.2 million in non-cash expense addbacks, which were largely composed of depreciation and amortization, stock-based compensation expense, non-cash operating lease and other non-cash expense, to reconcile net income of $7.2 million to net cash used in operating activities, less a $16.9 million increase in working capital.

This change in working capital primarily reflects an aggregate increase of $33.7 million in accounts receivable, inventories, prepaid expenses and other current assets, and other assets for the period offset by an aggregate net increase of $16.8 million in accounts payable, accrued expenses and other current liabilities, and a decrease in lease liabilities due to payments on lease obligations during the period.

Investing Activities

We had minimal investing activities for the three months ended March 31, 2021.

For the three months ended March 31, 2020, we received proceeds from a $2.0 million note receivable from a third party.

Investing activities for the six months ended June 30, 2021 were $196.6 million, due mostly to the Heavy 16 and the H&G entities acquisitions we completed during the period.

The outflows associated with the Heavy 16 acquisition and the H&G entities acquisitions totaled $195.8 million.

In addition, for the six months ended June 30, 2020, we received proceeds from a $2.0 million note receivable from a third party.

Financing Activities

For the three months ended March 31, 2021, we paid $11.6 million related to employee's withholding tax in connection with the vesting of certain restricted stock units.

For the three months ended March 31, 2020, draws under the Encina Credit Facility were less than repayments by $4.9 million.

We also received proceeds of $3.8 million from the issuance of Series A preferred stock.

For the six months ended June 30, 2021, we received proceeds of $309.8 million from our follow-on offering, and received an additional $20.3 million from the Redemption.

We received the remaining balance of the $56.8 million of gross proceeds from the Redemption in July 2021.

We also paid $14.9 million related to employee's withholding tax in connection with the vesting of certain restricted stock units.

For the six months ended June 30, 2020, draws under the Encina Credit Facility were less than repayments by $6.4 million.

We also received net proceeds of $3.8 million from the issuance of Series A preferred stock, and received proceeds of $3.3 million under the promissory note to JPMorgan Chase, N.A.

through the U.S.

Small Business Administration Paycheck Protection Program, which was repaid in December 2020.

Credit Facilities

5 unchanged sentences

A fee of 0.25% per annum is charged for available but unused borrowings as defined.

The JPMorgan Obligors had approximately $50.0 million available to borrow under the JPMorgan Credit Facility as of March 31, 2021.

The JPMorgan Obligors had approximately $50.0 million available to borrow under the JPMorgan Credit Facility as of June 30, 2021.

The JPMorgan Credit Facility maintains certain reporting requirements, affirmative covenants, negative covenants and financial covenants ("debt covenants").

The financial covenants include that we must maintain a minimum fixed charge coverage ratio of 1.1x on a rolling twelve-month basis.

The JPMorgan Obligors were in compliance with all debt covenants as of March 31, 2021.

The JPMorgan Obligors were in compliance with all debt covenants as of June 30, 2021.

As of June 30, 2021, we had no borrowings outstanding under the JPMorgan Credit Facility.

As of August 9, 2021, we had borrowings outstanding under the JPMorgan Credit Facility of $16.0 million.

The JPMorgan Credit Facility is secured by our assets and the assets of certain of our subsidiaries obligated under the JPMorgan Credit Facility.

11 unchanged sentences

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