Niagen Bioscience, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in this Management's Discussion and Analysis (MD&A), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "expects," "anticipates," "intends," "estimates," "plans," "potential," "possible," "probable," "believes," "seeks," "may," "will," "should," "could," "predicts," "projects," "continue," "would" or the negative of such terms or other similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors and related notes set forth below in Part II, Item 1A, “Risk Factors” and included under Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 12, 2021 (Annual Report). The following MD&A is intended to help readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item 1 of this Quarterly Report on Form 10-Q. Growth and percentage comparisons made herein generally refer to the three and nine months ended September 30, 2021 compared with the three and nine months ended September 30, 2020 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to “we,” “us,” “our,” the “Company,” “ChromaDex” and similar expressions refer to ChromaDex Corporation, and depending on the context, its subsidiaries. Company Overview We are a global bioscience company dedicated to healthy aging. Our team, which includes world-renowned scientists, is pioneering research on nicotinamide adenine dinucleotide (NAD+), levels of which decline with age. NAD+ is an essential coenzyme and a key regulator of cellular metabolism. Best known for its role in cellular energy production, NAD+ is now thought to play an important role in healthy aging. Many cellular functions related to health and healthy aging are sensitive to levels of locally available NAD+ and this represents an active area of research in the field of NAD+. NAD+ levels are not constant, and in humans, NAD+ levels have been shown to decline by more than 50% from young adulthood to middle age. There are other factors linked to NAD+ depletion, including poor diet, excess alcohol consumption and a number of disease states. NAD+ levels may also be increased, including through calorie restriction, moderate exercise and supplementation with NAD+ precursors, such as nicotinamide riboside (NR). Healthy aging, mitochondrial health and NAD+ continue to be areas of focus in the research community. To date, there are over 400 published human clinical studies related to NAD+ and its impact on health. Areas of study include understanding NAD+’s role in Alzheimer’s disease, Parkinson’s disease, neuropathy, sarcopenia, liver disease and heart failure. 23 Table of Contents In 2013, we commercialized NIAGEN®, a proprietary form of NR, a novel form of vitamin B3. Data from numerous preclinical studies, and confirmed in human clinical trials, show that NR is a highly efficient NAD+ precursor that significantly raises blood and tissue NAD+ levels. NIAGEN® is safe for human consumption. NIAGEN® has twice been successfully reviewed under the U.S. Food and Drug Administration’s (FDA) new dietary ingredient (NDI) notification program, it has been successfully notified to the FDA as generally recognized as safe (GRAS), and has been approved by Health Canada, the European Commission and the Therapeutic Goods Administration of Australia. Clinical studies of NIAGEN® have demonstrated a variety of outcomes including increased NAD+ levels, altered body composition, increased cellular metabolism and increased energy production. NIAGEN® is protected by patents to which we are the owner or have exclusive rights. ChromaDex is among the world leaders in the emerging NAD+ space. We have amassed more than 225 research partnerships with leading universities and research institutions around the world including the National Institutes of Health, Cornell, Dartmouth, Harvard, Massachusetts Institute of Technology, University of Cambridge and the Mayo Clinic. Additional relationships are currently being developed. Our scientific advisory board is led by Chairman Dr. Roger Kornberg, Nobel Laureate Stanford Professor, Dr. Charles Brenner, one of the world’s recognized experts in NAD+ and discoverer of NR as a NAD+ precursor, Dr. Rudy Tanzi, the co-chair of the department of neurology at Harvard Medical School, Sir John Walker, Nobel Laureate and Emeritus Director, MRC Mitochondrial Biology Unit in the University of Cambridge, England, Dr. Bruce German, Chairman of food, nutrition and health at the University of California, Davis, Dr. Brunie Felding, Associate Professor, Department of Molecular Medicine at Scripps Research Institute, California Campus, and Dr. David Katz, the Founder and former director of Yale University’s Yale-Griffin Prevention Research Center; President and Founder of the non-profit True Health Initiative; and Founder and Chief Executive Officer of Diet ID, Inc. Impact of COVID-19 The worldwide outbreak of the 2019 coronavirus disease (COVID-19) continues to drive global uncertainty and disruption, which has created headwinds for our business. Our e-commerce business continues to perform relatively well in this challenging environment. Our international retail business, including sales to A.S. Watson group and other partners in international markets, has been impacted by the effects of COVID-19, including the delta variant. While certain countries continue to be impacted by strict government lockdowns, store closures and reduced operating hours, others are seeing signs of recovery. Our United States (U.S.) retail operations are not a significant portion of our business today; however, we began distributing Tru Niagen® in 3,800+ U.S. Walmart™ stores beginning in June 2021. In general, the U.S. retail industry has recovered fairly well as the COVID-19 vaccine has been widely accessible and businesses continue to reopen and remain open. Global supply chains have increasingly been impacted by COVID-19, including challenges with transportation, logistics and production lead-times, as well as labor shortages and cost inflation. In the first quarter of 2021, we experienced delays due to global components and packaging shortages for our consumer products across our supply chain. These challenges were addressed in the second quarter and we have otherwise not encountered any major disruptions in our supply chain. It is our intention to maintain adequate safety stocks to support our growth and we currently have adequate inventory on hand to meet our current demands. Overall, we believe the supply chain disruptions due to the COVID-19 pandemic will not have a material impact to our business operations, however we cannot predict how the current economic environment may evolve over the coming months. We will continue to monitor the situation closely as conditions may become more challenging due to these ongoing economic factors. Our primary focus throughout the COVID-19 pandemic has remained ensuring the health and safety of our employees by closing our offices or enhancing safety protocols in place to ensure the well-being of our employees. We have adapted to the new environment and been able to successfully conduct business virtually. 24 Table of Contents Financial Condition and Results of Operations The discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues, if any, and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On February 20, 2021, we entered into a Securities Purchase Agreement with EverFund pursuant to which we agreed to sell and issue approximately 3.8 million shares of common stock at a purchase price of $6.50 per share (the Financing). On February 23, 2021, we closed the Financing and received proceeds of $24.9 million, net of offering costs. In June 2020, we entered into an At Market Issuance Sales Agreement (the Sales Agreement) with B. Riley FBR, Inc. (B. Riley FBR) and Raymond James & Associates, Inc. (“Raymond James” and together with B. Riley FBR, the “Sales Agents”) under which ChromaDex may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through the Sales Agents (ATM Facility). During the second quarter of 2021, we sold an aggregate of 0.2 million shares of our common stock under the ATM Facility resulting in proceeds of $1.9 million, net of offering costs and commissions. The shares sold at an average price of $10.56 per share. As of September 30, 2021, approximately $47.8 million remains available under the ATM Facility. As of September 30, 2021, our cash and cash equivalents on hand totaled approximately $33.1 million. We anticipate that our current cash, cash equivalents, and available line of credit up to $7.0 million from Western Alliance Bank will be sufficient to meet our projected operating plans for at least the next twelve months. Our line of credit currently expires on November 12, 2021. We are actively working with Western Alliance Bank to extend this line of credit prior to its expiration. The line of credit is an additional source of liquidity available to us, however any inability to access any portion of the amount available under this line will not have an adverse effect on our ability to satisfy our obligations or support operations. We do not believe any delays in or inability to obtain an extension of this line of credit will impact our ability to meet our operating objectives. We may, however, seek additional capital in the next twelve months, both to meet our projected operating plans after the next twelve months and/or to fund our longer-term strategic objectives. Additional capital may come from other public and/or private stock or debt offerings, borrowings under lines of credit or other sources. These additional funds may not be available on favorable terms, or at all. Further, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution and the new equity or debt securities we issue may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our products or proprietary technologies, or to grant licenses on terms that are not favorable to us. If we cannot raise funds on acceptable terms, we may not be able to develop or enhance our products, obtain the required regulatory clearances or approvals, achieve long term strategic objectives, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition. Further, as a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Effective as of August 2, 2021, we entered into a Seventh Amendment (Seventh Amendment) to the Manufacturing and Supply Agreement (such agreement as amended, the “Grace Manufacturing Agreement” or “Agreement”), originally effective in January 2016 with W.R. Grace & Co. –Conn. (Grace). In January 2019, Grace was issued patents related to the manufacturing of the crystalline form of NR (Grace Patents). Pursuant to the Seventh Amendment, we are committed to purchase approximately $18.0 million of total inventory between January 1, 2022 and December 31, 2022 and $3.5 million of inventory from January 1, 2023 through June 30, 2023. The Grace Manufacturing Agreement will expire on June 30, 2023, subject to further renewal of the Agreement to be negotiated by the parties. 25 Table of Contents Our net sales and net loss for the three and nine months ended on September 30, 2021 and 2020 are as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Net sales $ 17,308 $ 14,180 $ 49,690 $ 43,812 Net loss (8,856) (4,215) (21,803) (13,828) Basic and diluted loss per common share $ (0.13) $ (0.07) $ (0.33) $ (0.23) Net Sales Net sales consist of gross sales less discounts and returns. The following table sets forth our total net sales by reportable segment: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 % Change 2021 2020 % Change Net sales: Consumer Products $ 14,772 $ 11,904 24 % $ 42,605 $ 34,768 23 % Ingredients 1,789 1,510 18 4,608 6,835 (33) Analytical reference standards and services 747 766 (2) 2,477 2,209 12 Total net sales $ 17,308 $ 14,180 22 % $ 49,690 $ 43,812 13 % Total net sales increased by approximately 22% and 13% for the three and nine months ended September 30, 2021, compared to the same period in 2020, respectively. Changes in sales for the periods indicated were primarily driven by the following: • TRU NIAGEN® sales for the consumer products segment continues to increase after the Company's strategic shift towards consumer products in 2017. Our e-commerce sales for TRU NIAGEN® increased approximately $1.9 million, or 21%, for the three months ended September 30, 2021 compared to same period in 2020 and $5.7 million, or 23%, for the nine months ended September 30, 2021 compared to the same period in 2020. Additionally, we began distributing TRU NIAGEN® at Walmart™ stores across the United States beginning in June 2021. • Our ingredients segment experienced decreased demand during the first half of 2021 compared to the same period in 2020. The increase during the third quarter in 2021 is primarily related to increased demand from existing customers. In 2021, the Company did not ship NIAGEN® to Thorne Research Inc., a former customer who filed a petition on December 1, 2020 for IPR of the ‘086 Patent which ChromaDex Inc. exclusively licenses from Dartmouth College. For more information, see Note 12, Commitments and Contingencies, Legal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. • The analytical reference standards and services segment experienced lower demand during the nine months ended September 30, 2020 due to the effects of COVID-19. During the first half of 2021, demand from existing customers increased with a slight decline during the third quarter of 2021. 26 Table of Contents Cost of Sales Cost of sales include raw materials, labor, overhead, and delivery costs. The following table sets forth our total cost of sales by reportable segment: Three Months Ended September 30, Nine Months Ended September 30, Amount % of net sales Amount % of net sales (In thousands) 2021 2020 2021 2020 2021 2020 2021 2020 Cost of sales: Consumer Products $ 5,253 $ 4,404 36 % 37 % $ 15,003 $ 13,045 35 % 38 % Ingredients 732 599 41 40 1,970 2,790 43 41 Analytical reference standards and services 745 723 100 94 2,095 2,124 85 96 Total cost of sales $ 6,730 $ 5,726 39 % 40 % $ 19,068 $ 17,959 38 % 41 % Overall, cost of sales, as a percentage of net sales, remained relatively stable for the three and nine months ended September 30, 2021 compared to the same period in 2020. Changes in cost of sales were primarily driven by the following: • Cost of sales, as a percentage of net sales, for the consumer products segment decreased by 1% and 3% for the three and nine months ended September 30, 2021, respectively, compared to the same period in 2020. The decreases were driven by our product mix, continued cost saving initiatives and overall efficiencies of our supply chain. • Cost of sales, as a percentage of net sales, for the ingredients segment increased by 1% and 2% for the three and nine months ended September 30, 2021, compared to the comparable period in 2020, respectively. Cost of sales, as a percentage of net sales, were slightly lower for the nine months ended September 30, 2020 due to a rebate from a supplier for efficiency initiatives, which was recorded in the second quarter of 2020. • Cost of sales, as a percentage of net sales, for the analytical reference standards and services segment increased 6% for the three months ended September 30, 2021 and decreased 11% for the nine months ended September 30, 2021, compared to the comparable period in 2020. The fluctuation in cost of sales, as a percentage of net sales, is largely driven by our fixed supply chain labor and overhead costs which do not increase in proportion to sales. Accordingly, as sales decreased for the three months ended September 30, 2021, we experienced lower labor and overhead utilization rates resulting in increased cost of sales, as a percentage of net sales, compared to the same period in 2020. Conversely, as sales increased during the nine months ended September 30, 2021, we experienced increased utilization rates and decreased cost of sales, as a percentage of net sales compared to the same period in 2020. 27 Table of Contents Gross Profit Gross profit is net sales less the cost of sales and is affected by a number of factors including business and product mix, competitive pricing and costs of products, labor, overhead, services and delivery. The following table sets forth our total gross profit by reportable segment: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 % Change 2021 2020 % Change Gross profit: Consumer Products $ 9,519 $ 7,500 27 % $ 27,602 $ 21,723 27 % Ingredients 1,057 911 16 2,638 4,045 (35) Analytical reference standards and services 2 43 (95) 382 85 349 Total gross profit $ 10,578 $ 8,454 25 % $ 30,622 $ 25,853 18 % For details supporting the changes in gross margin, refer to the discussions above regarding changes in our net sales and cost of sales for each segment. • The consumer products segment posted gross profit of $9.5 million and $27.6 million for the three and nine months ended September 30, 2021, respectively, an increase of 27% for both periods compared to the comparable periods in 2020. • The ingredients segment posted gross profit of $1.1 million for the three months ended September 30, 2021, an increase of 16% compared to the same period in 2020 and a gross profit of $2.6 million for the nine months ended September 30, 2021, a decrease of 35% compared to the same period in 2020. • The analytical reference standards and services segment saw a 95% decrease in gross profit for the three months ended September 30, 2021, compared to the same period in 2020 and 349% increase in gross profit for the nine months ended September 30, 2021, compared to the same period in 2020. Operating Expenses-Sales and Marketing Sales and marketing expenses consist of salaries, advertising, public relations and marketing expenses. Sales and marketing expenses by reportable segment were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 % Change 2021 2020 % Change Sales and marketing expenses: Consumer Products $ 7,067 $ 5,018 41 % $ 19,368 $ 14,170 37 % Ingredients 10 47 (79) 21 39 (46) Analytical reference standards and services 144 158 (9) 322 420 (23) Total sales and marketing expenses $ 7,221 $ 5,223 38 % $ 19,711 $ 14,629 35 % • For the consumer products segment, the increase during the three and nine months ended September 30, 2021 is largely due to direct marketing expenses associated with social media, public relations and other customer awareness and acquisition programs, as well as increased staffing. • For the ingredients segment, selling and marketing expenses were approximately $10,000 and $21,000 during the three and nine months ended September 30, 2021. Throughout 2021, we continued to decrease our sales and marketing efforts within our ingredients segment to continue our strategic focus on our consumer products segment. The decreased expense for the nine months ended September 30, 2020 compared to the three months ended for September 30, 2020 relates to a reversal of approximately $114k of certain accrued commission expense during the first quarter of 2020, as we were no longer obligated to pay the commission. • For the analytical reference standards and services segment, the selling and marketing expenses decreased by 9% and 23% during the three and nine months ended September 30, 2021, respectively. During 2021, we continued to decrease our sales and marketing efforts within our analytical reference standards and services segment to continue our strategic focus on our consumer products segment. 28 Table of Contents Operating Expenses-Research and Development Research and development (R&D) expenses consist primarily of clinical trials, regulatory approvals, product development and process development expenses. Research and development expenses by reportable segment were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 % Change 2021 2020 % Change R&D expenses: Consumer Products $ 895 $ 783 14 % $ 2,539 $ 2,236 14 % Ingredients 101 58 74 248 309 (20) Total R&D expenses $ 996 $ 841 18 % $ 2,787 $ 2,545 10 % We allocate R&D expenses related to our NIAGEN® branded ingredient to the consumer products and ingredients segment, based on revenues recorded. Overall, our R&D expenses remained substantially similar with a slight increase for the three and nine months ended September 30, 2021 compared to the comparable periods in 2020 due to increased investments and acceleration of our R&D pipeline and timing of projects. Operating Expenses-General and Administrative General and administrative expenses consist of general company administration, legal, royalties, IT, accounting and executive management expenses. General and administrative expenses are not allocated by segment and instead are classified under our Corporate and Other category. General and administrative expenses for the periods indicated were as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 % Change 2021 2020 % Change General and administrative 11,202 6,586 70 % 29,881 22,452 33 % • The increase in general and administrative expenses for the three and nine months ended September 30, 2021, compared to the comparable periods in 2020 was largely due to an increase in legal expenses. Our legal expenses increased to approximately $5.6 million and $14.8 million in the three and nine months ended September 30, 2021, respectively, compared to approximately $1.9 million and $6.1 million in the comparable periods in 2020 due to increased activity in our ongoing litigation. For additional details see Note 12, Commitments and Contingencies, Legal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. • For both the three and nine months ended September 30, 2021, we incurred approximately $0.3 million in severance and restructuring expenses compared to $0.3 million and $1.2 million, respectively, in the comparable periods in 2020. These expenses relate to realignment of the business operations to reduce redundancies and improve efficiencies as we scale the business. Income Taxes Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At September 30, 2021 and September 30, 2020, we maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of approximately 0% for the three and nine months ended September 30, 2021, and September 30, 2020, respectively. As defined in ASC 740, Income Taxes, future realization of the tax benefit will depend on the existence of sufficient taxable income, including the expectation of continued future taxable income. 29 Table of Contents Depreciation and Amortization Depreciation expense was approximately $0.7 million for both of the nine months ended September 30, 2021 and September 30, 2020. We depreciate our assets on a straight-line basis, based on the estimated useful lives of the respective assets. Amortization expense of intangible assets was approximately $0.2 million for both of the nine months ended September 30, 2021 and September 30, 2020. We amortize intangible assets using a straight-line method, generally over 10 years. For licensed patent rights, the useful lives are 10 years or the remaining term of the patents underlying licensing rights, whichever is shorter. The useful lives of subsequent milestone payments that are capitalized are the remaining useful life of the initial licensing payment that was capitalized. Amortization expense of right of use assets for the nine months ended September 30, 2021 was approximately $0.4 million as compared to $0.3 million for the nine months ended September 30, 2020. Liquidity and Capital Resources From inception through September 30, 2021, we have incurred aggregate losses of approximately $163.6 million. These losses are primarily due to expenses associated with the development and expansion of our operations and investments to protect our intellectual property, including litigation-related expenses. These operations have been financed through capital contributions, the issuance of common stock and warrants through private placements, and the issuance of debt. Our board of directors periodically reviews our capital requirements in light of our proposed business plan. Our future capital requirements will remain dependent upon a variety of factors, including cash flow from operations, the ability to increase sales, increasing our gross profits from current levels, reducing selling and administrative expenses as a percentage of net sales, continued development of customer relationships, and our ability to market our new products successfully. However, based on our results from operations, we may determine that we need additional financing to implement our long-term business plan. There can be no assurance that any such financing will be available on terms favorable to us or at all. Without adequate financing we may have to delay or terminate product and service expansion and curtail certain selling, general and administrative expenses. Any inability to raise additional financing would have a material adverse effect on us. Pursuant to the Financing on February 23, 2021, we received proceeds of $24.9 million, net of offering costs. Additionally, in June 2021, under the ATM facility, we received proceeds of $1.9 million, net of offering costs. While we anticipate that our current cash, cash equivalents, and available line of credit up to $7.0 million from Western Alliance Bank will be sufficient to meet our projected operating plans for at least the next twelve months, we may seek additional funds, either through additional equity or debt financings or collaborative agreements or from other sources. Our line of credit currently expires on November 12, 2021. We are actively working with Western Alliance Bank to extend this line of credit prior to its expiration. The line of credit is an additional source of liquidity available to us, however any inability to access any portion of the amount available under this line will not have an adverse effect on our ability to satisfy our obligations or support operations. We do not believe any delays in or inability to obtain an extension of this line of credit will impact our ability to meet our operating objectives. Further, in June 2020, we filed a $125.0 million registration statement on Form S-3 with the Commission, utilizing a “shelf” registration process. Under this shelf registration process, we may sell securities from time to time, including up to $50.0 million, pursuant to the ATM Facility, of which approximately $47.8 million remains available. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. 30 Table of Contents Net cash used in operating activities Cash used in operating activities is net loss adjusted for certain non-cash items and changes in operating assets and liabilities Net cash used in operating activities for the nine months ended September 30, 2021 was approximately $19.2 million as compared to approximately $10.6 million for the nine months ended September 30, 2020. Along with our net loss, increases in our trade receivables, inventories and prepaid and other assets were the largest uses of cash during the nine months ended September 30, 2021, partially offset by noncash share-based compensation expense and an increase in accounts payable. Net cash used in operating activities for the nine months ended September 30, 2020 largely reflects the net loss, a decrease in allowance for doubtful trade receivables and a decrease in accounts payable, partially offset by noncash share-based compensation expense, a decrease in trade receivables and an increase in accrued expenses. We expect our operating cash flows to fluctuate significantly in future periods as a result of fluctuations in our operating results, shipment timetables, trade receivable collections, inventory management, and the timing of our payments, among other factors. Net cash used in investing activities Net cash used in investing activities was approximately $0.4 million for the nine months ended September 30, 2021, compared to approximately $0.2 million for the nine months ended September 30, 2020. Net cash used in investing activities for the nine months ended September 30, 2021 and 2020 mainly consisted of purchases of leasehold improvements and equipment. Net cash provided by financing activities Net cash provided by financing activities was approximately $36.0 million for the nine months ended September 30, 2021, compared to approximately $7.5 million for the nine months ended September 30, 2020. Net cash provided by financing activities for the nine months ended September 30, 2021 primarily consisted of proceeds from the issuance of common stock pursuant to the Financing, ATM Facility transaction and the exercise of stock options. Net cash provided by financing activities for the nine months ended September 30, 2020 consisted of proceeds from the issuance of common stock and the exercise of stock options. Contractual Obligations and Commitments During the nine months ended September 30, 2021, there were no material changes outside of the ordinary course of business in the specified contractual obligations disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in our Annual Report, other than as disclosed in “Item 1 Financial Statements” of this Quarterly Report on Form 10-Q. Off-Balance Sheet Arrangements During the nine months ended September 30, 2021, we had no material off-balance sheet arrangements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 31 Table of Contents