What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-10 compared with 2022-05-12 · 99 added, 68 removed, 166 unchanged (50% of the section changed)

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All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.

Growth and percentage comparisons made herein generally refer to the three months ended March 31, 2022 compared with the three months ended March 31, 2021 unless otherwise noted.

Growth and percentage comparisons made herein generally refer to the three and six months ended June 30, 2022 compared with the three and six months ended June 30, 2021 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.

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We are among the world leaders in the emerging NAD+ space.

Through our ChromaDex External Research Program (CERP), we have amassed more than 250 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.

The results of the 250+ research agreements have allowed CERP to help produce the trusted science behind Niagen® and continue to advance the understanding of NAD+ in health, diseases, and aging.

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Our primary focus throughout the COVID-19 pandemic has remained ensuring the health and safety of our employees through office closures or implementing enhanced safety protocols to ensure the well-being of our employees.

We have adapted to the new environment and have been able to successfully conduct business virtually.

We have adapted and have been able to successfully conduct business virtually.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and severity of the pandemic;

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In the first quarter of 2021, we experienced delays due to global components and packaging shortages for our consumer products across our supply chain.

Supply chain delays, among other factors such as store closures, have impacted our sales to partners in international markets.

These supply chain challenges were addressed in the second quarter of 2021 and we have otherwise not encountered any major disruptions in our supply chain.

Supply chain delays, among other factors such as store closures, have impacted our sales to partners in international markets.

It is our intention to maintain adequate safety stocks to support our growth and we currently believe we have adequate inventory on hand to meet current demands.

We have also recently experienced inflation in labor, raw materials and other costs.

We have also recently experienced inflation in labor, raw materials, transportation and other costs.

Inflation can also have a long-term impact as increasing costs may impact our ability to maintain satisfactory margins.

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Furthermore, increases in inflation may not be matched by growth in consumer income, which also could have a negative impact on customer spending.

We will continue to monitor this situation closely as conditions may become more challenging due to ongoing and uncertain economic factors.

If customer sales diminish, we may be required to scale back production volumes which could negatively impact any economies of scale we have previously benefited from.

We have also seen changing prices due to other macroeconomic factors including rising interest rates, fluctuations in currency exchange rates and geopolitical uncertainties such as those surrounding Russia’s invasion of Ukraine.

We will continue to monitor changing prices and inflationary pressures closely as conditions may become more challenging due to ongoing and uncertain economic factors.

Recent Activities

Joint Venture Agreement with Related Parties

On May 19, 2022, we entered into an agreement to form a joint venture (the “JV”) to expand our market strategy to include opportunities in Mainland China and its territories, excluding Hong Kong, Macau and Taiwan (the “Territory”), subject to the terms and satisfaction of the conditions contained therein.

The JV agreement is among Crystal Lake Developments Limited (Crystal Lake), Pioneer Idea Holdings Limited (Pioneer Idea), and Hong Kong (China) Taikuk Group Ltd (Taikuk).

Crystal Lake is indirectly wholly-owned by Li Ka Shing, and Pioneer Idea is indirectly owned by Solina Chau, and each of Mr.

Chau own through affiliated entities more than 5% of our common stock.

The business of the JV will be to market, sell and distribute Tru Niagen® and other products containing NR (the “Products”) developed by us in the Territory.

The JV agreement will have an initial term of 20 years, unless earlier terminated.

Crystal Lake, Pioneer Idea and Taikuk have each agreed to contribute $1.8 million, $1.2 million and $1.0 million, respectively into the JV.

In addition, we have agreed to pay $1.0 million to Taikuk and Taikuk will receive an additional 5% non-voting equity interest in the JV for introducing the parties.

Following the closing of the formation of the JV (the “Closing”), each of the parties will hold the following interest in the JV:

us (71%), Crystal Lake (10.8%), Pioneer Idea (7.2%) and Taikuk (a 11% non-voting interest).

We will have the right to elect three of the five directors in the JV, and Pioneer Idea will have the right to elect the other two directors, with each director having one vote.

Certain material corporate actions will require unanimous approval of the board of the JV.

The Closing is subject to certain customary closing conditions and is expected to occur by the end of the third quarter of 2022.

Prior to being able to commercialize the Products in the Territory, the JV will have to obtain all applicable regulatory approvals, including “Blue Hat” or health food registration with the PRC State Administration for Market Regulation for Products in the name of the Company or its designee (collectively, the “Blue Hat Registration”).

Prior to the JV obtaining the Blue Hat Registration, we will supply the Products to the JV who will appoint a third party sub-distributor to sell the Products in the Territory.

Once Blue Hat Registration is obtained, we will license to the JV certain intellectual property relating to the Products for the JV to manufacture and sell the Products in the Territory.

If the Blue Hat Registration is not obtained within 24 months of Closing (which deadline for obtaining the Blue Hat Registration may be extended by an additional 12 months upon consent of the parties), the JV may repurchase the 11% non-voting interest owned by Taikuk for two dollars.

As of the date of this report, the JV has not yet launched.

Financial Condition and Results of Operations

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Actual results may differ from these estimates under different assumptions or conditions.

As of March 31, 2022, our cash and cash equivalents totaled approximately $21.0 million.

We anticipate that our current cash, cash equivalents, and cash to be generated from net sales will be sufficient to meet our projected operating plans for at least the next twelve months.

In addition, we have an available line of credit up to $10.0 million, subject to certain terms and conditions, from Western Alliance Bank.

As of June 30, 2022, our cash and cash equivalents totaled approximately $17.1 million, of which $16.9 million was unrestricted.

We anticipate that our current unrestricted cash and cash equivalents and cash to be generated from net sales will be sufficient to meet our financial obligations as they become due over at least the next twelve months.

Additionally, we have begun implementing plans to minimize expenses and reduce our cash burn rate for the second half of fiscal year 2022.

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.

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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).

As of March 31, 2022, approximately $47.8 million remains available under the ATM Facility.

As of June 30, 2022, approximately $47.8 million remains available under the ATM Facility.

Our potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well market conditions.

As a result, our ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

Additional capital may come from other public and/or private stock or debt offerings, borrowings under lines of credit or other sources.

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We currently have three operating segments which offer differentiated services.

First, through our Consumer Products segment we provide finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers and distributors.

Through our Consumer Products segment we provide finished dietary supplement products that contain the Company's proprietary ingredients directly to consumers and distributors.

We deliver Niagen® as the sole active ingredient in our consumer product Tru Niagen® which is offered in both convenient capsules and stickpacks.

Additionally, beginning in April 2022, we launched our new consumer product, Tru Niagen® Immune, a combination of immune-boosting nutrition with Niagen® in capsule form.

Second, our ingredients segment develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw material to the manufacturers of consumer products.

Our ingredients segment develops and commercializes proprietary-based ingredient technologies and supplies these ingredients as raw material to the manufacturers of consumer products.

Finally, our Analytical Reference Standards and Services segment focuses on natural product fine chemicals, known as phytochemicals, and related research and development services.

The results of these segments and our consolidated operations are detailed in the discussion that follows.

Our consolidated net sales and net loss for the three months ended on March 31, 2022 and 2021 are as follows:

Three Months Ended March 31,

Our consolidated net sales and net loss for the three and six months ended on June 30, 2022 and 2021 are as follows:

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

(In thousands) 2022 2021 2022 2021

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The following table sets forth our total net sales by reportable segment:

Three Months Ended March 31,

(In thousands) 2022 2021 % Change

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

(In thousands) 2022 2021 % Change 2022 2021 % Change

Consumer Products $ 14,520 $ 15,396 (6) % $ 29,457 $ 27,833 6 %

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Total net sales $ 16,732 $ 17,699 (5) % $ 33,991 $ 32,382 5 %

Total net sales increased approximately 18% for the three months ended March 31, 2022, compared to the same period in 2021.

Total net sales decreased approximately 5% for the three months ended June 30, 2022 compared to the same period in 2021, while total net sales increased approximately 5% for the six months ended June 30, 2022 compared to the same period in 2021.

Changes in sales for the periods indicated were driven by the following:

• Tru Niagen® sales for our Consumer Products segment increased $2.5 million, or 20%, compared to the same period in the prior year.

The increase primarily related to higher e-commerce sales of approximately $1.3 million, and increased sales to A.S.

Watson, a related party, of approximately $1.0 million for the three months ended March 31, 2022 compared to same period in 2021.

The lower sales to A.S.

Watson in the prior year were largely due to shipment delays we experienced in the first quarter of 2021 surrounding COVID-19 supply chain issues which were resolved in the second quarter of 2021.

• Total ingredient sales increased $0.1 million, or 9%, compared to the same period in the prior year driven by an increase in other ingredient sales of approximately $0.2 million which was partially offset by lower Niagen ingredient sales of $0.1 million due to competitive pricing measures for the three months ended March 31, 2022 compared to same period in 2021.

• Analytical reference standards and services segment experienced a lower demand for research and development services which was partially offset by increased demand for reference standards during the three months ended March 31, 2022 compared to same period in 2021 resulting in slightly lower total sales year over year.

• Tru Niagen® sales for our Consumer Products segment decreased $0.9 million, or (6)%, for the three months ended June 30, 2022 compared to the same period in the prior year.

The decrease is related to the initial shelf stocking in Wal-Mart to support our launch in the prior year quarter driving increased sales for the three months ended June 30, 2021, paired with a decline in sales to A.S.

Watson, a related party, of $1.4 million for the three months ended June 30, 2022 compared to the prior year quarter to better align purchases with anticipated consumer demand during the key selling season in late 2022.

These declines were largely offset by higher e-commerce sales of approximately $1.4 million for the three months ended June 30, 2022 compared to the same period in 2021.

For the six months ended June 30, 2022 total consumer product sales increased $1.6 million, or 6%, compared to the same period in 2021.

The higher sales were primarily related to increased e-commerce sales of $2.6 million, largely offset by lower sales to Wal-Mart, following the initial shelf stocking sales in 2021.

• Total ingredient sales remained relatively stable with a decrease of approximately $40 thousand, or (3)%, for the three months ended June 30, 2022 and an increase of $72 thousand, or 3%, for the six months ended June 30, 2022, each compared to the corresponding periods in 2021.

For the three and six months ended June 30, 2022, Niagen® ingredient sales increased $173 thousand and $101 thousand, respectively, compared to the corresponding periods in 2021, while all other ingredient sales decreased $213 thousand and $29 thousand, respectively, during the same periods.

• Analytical reference standards and services segment sales decreased $51 thousand and $87 thousand for the three and six months ended June 30, 2022 compared to the same periods in 2021, respectively.

The decreased sales are attributable to lower research and development sales throughout 2022 compared to 2021, primarily due to the timing of project requests from customers.

Cost of Sales

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The following table sets forth our total cost of sales by reportable segment:

Three Months Ended March 31,

Amount % of net sales

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

Amount % of net sales Amount % of net sales

(In thousands) 2022 2021 2022 2021 2022 2021 2022 2021

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Total cost of sales $ 6,690 $ 6,889 40 % 39 % $ 13,417 $ 12,338 39 % 38 %

Overall, cost of sales, as a percentage of net sales, slightly increased for the three months ended March 31, 2022 compared to the same period in 2021.

Overall, cost of sales, as a percentage of net sales, slightly increased during the three and six months ended June 30, 2022 compared to the same periods in 2021.

Changes in cost of sales were primarily driven by the following:

• Cost of sales, as a percentage of net sales, for our consumer products segment remained substantially similar year over year.

• Cost of sales, as a percentage of net sales, for our ingredients segment increased 8% for the three months ended March 31, 2022, compared to the same period in 2021 primarily as a result of increasing our supply chain head count as we scale the business.

• Cost of sales, as a percentage of net sales, for the analytical reference standards and services segment increased 11% for the three months ended March 31, 2022 compared to the same period in 2021.

Cost of sales for our analytical reference standards and services segment are largely driven by fixed supply chain labor costs which do not increase in proportion to sales.

We increased our supply chain head count in order to scale the business.

Accordingly, as sales decreased and our supply chain labor head count increased for the three months ended March 31, 2022, 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 2021.

• Cost of sales, as a percentage of net sales, for our consumer products segment remained substantially similar for the three months ended June 30, 2022 and 2021 and increased approximately 1% for the six months ended June 30, 2022 compared to the same period in 2021.

The increase is primarily attributable to a shift in our business mix as we experienced higher business-to-business sales during the six months ended June 30, 2021 resulting in greater cost saving benefits from economies of scale on our overall supply chain overhead costs compared to the same period in the current year.

• Cost of sales, as a percentage of net sales, for our ingredients segment increased 2% and 5% for the three and six months ended June 30, 2022, compared to the comparable periods in 2021, respectively.

The increase is primarily a result of higher supply chain overhead costs, as we increased headcount to scale the business, paired with higher costs of raw materials.

• Cost of sales, as a percentage of net sales, for the analytical reference standards and services segment increased 23% and 16% for the three and six months ended June 30, 2022 compared to the same periods in 2021, respectively.

Cost of sales for our analytical reference standards and services segment are largely driven by fixed supply chain overhead costs which do not increase in proportion to sales.

During the first six months of 2022, we increased our supply chain headcount in order to scale the business, increasing our overheads costs.

Accordingly, as sales decreased and our supply chain labor head count increased during 2022, we experienced lower labor and overhead utilization rates resulting in increased cost of sales, as a percentage of net sales, compared to 2021.

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 March 31,

(In thousands) 2022 2021 % Change

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

(In thousands) 2022 2021 % Change 2022 2021 % Change

Gross profit:

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Total gross profit $ 10,042 $ 10,810 (7) % $ 20,574 $ 20,044 3 %

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 $9.7 million, an 18% increase for the three months ended March 31, 2022 compared to the same period in 2021.

• The ingredients segment posted gross profit of $0.7 million for the three months ended March 31, 2022, a decrease of 6% compared to the same period in 2021.

• The analytical reference standards and services segment saw a 43% decrease in gross profit for the three months ended March 31, 2022, compared to the same period in 2021.

For details supporting the changes in gross profit, refer to the discussions above regarding changes in both our net sales and cost of sales for each segment.

Operating Expenses-Sales and Marketing

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Sales and marketing expenses by reportable segment were as follows:

Three Months Ended March 31,

(In thousands) 2022 2021 % Change

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

(In thousands) 2022 2021 % Change 2022 2021 % Change

Sales and marketing expenses:

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Total sales and marketing expenses $ 8,021 $ 6,232 29 % $ 16,258 $ 12,490 30 %

• For the consumer products segment, we increased our direct marketing efforts through Amazon marketplaces, televised commercials, social media, public relations and other customer awareness and acquisition programs as well as increased staffing resulting in total increased marketing expenditures of approximately $1.7 million for the three months ended March 31, 2022 compared to the same period in 2021.

• For the ingredients segment, selling and marketing expenses were approximately $24,000 during the three months ended March 31, 2022.

This is a slight increase from the same period in the prior year due to higher commissionable sales for other ingredients.

• For the analytical reference standards and services segment, total selling and marketing expenses were substantially similar year over year.

• During fiscal year 2022, for our consumer products segment, we launched a direct marketing campaign spanning multiple platforms including Amazon marketplaces, televised commercials, social media, public relations and other customer awareness and acquisition programs in addition to increasing our staffing.

These focused marketing efforts drove increased sales and marketing expense of approximately $1.7 million and $3.6 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

We anticipate these expenses will decrease during the second half of 2022 as we shift our focus to efficient distribution channels and marketing campaigns, coupled with overall expense management.

• For the ingredients segment, selling and marketing expenses were nominal during the three months ended June 30, 2022 and 2021.

Sales and marketing expense increased during the six months ended June 30, 2022 compared to the same period in the prior year largely due to higher commissionable sales for other ingredients.

• For the analytical reference standards and services segment, total selling and marketing expenses increased approximately $0.1 million for each of the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

The increase was primarily driven by headcount increases.

Operating Expenses-Research and Development

Research and development (R&D) expenses consist primarily of clinical trials, product development and process development expenses.

Research and development (R&D) expenses consist primarily of headcount, clinical trials, product development and process development expenses.

Research and development expenses by reportable segment were as follows:

Three Months Ended March 31,

(In thousands) 2022 2021 % Change

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

(In thousands) 2022 2021 % Change 2022 2021 % Change

R&D expenses:

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We allocate R&D expenses related to our Niagen® branded ingredient to the consumer products and ingredients segment, based on revenues recorded.

Overall, we had higher R&D expenses for the three months ended March 31, 2022 compared to the comparable period in 2021 due to increased staffing of research scientists and share-based compensation as well as timing of projects.

Overall, we had higher R&D expenses for the three and six months ended June 30, 2022 compared to the comparable period in 2021 due to increased staffing of research scientists, share-based compensation and timing of projects.

Operating Expenses-General and Administrative

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General and administrative expense for the periods indicated were as follows:

Three Months Ended March 31,

(In thousands) 2022 2021 % Change

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

(In thousands) 2022 2021 % Change 2022 2021 % Change

General and administrative 7,163 9,128 (22) % 16,112 18,679 (14) %

The decrease in general and administrative expense for the three months ended March 31, 2022, compared to the comparable period in 2021 was primarily driven by lower legal expense of $2.7 million related to litigation which was largely offset by increased severance and restructuring expense as well as investments in technology and increased staffing in key functional areas to support growth.

For additional details regarding our litigation see Note 10, Commitments and Contingencies, L egal Proceedings in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Severance and restructuring expenses relate to changes in our executive team.

The decline in general and administrative expense for the three and six months ended June 30, 2022, compared to the comparable periods in 2021 was primarily driven by lower legal expense of $2.4 million and $5.1 million related to litigation which was partially offset by increased investments in technology and increased staffing in key functional areas to support growth.

For additional details regarding our litigation see Note 10, 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.

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 March 31, 2022 and March 31, 2021, 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 months ended March 31, 2022, and 2021, respectively.

At June 30, 2022 and June 30, 2021, 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 six months ended June 30, 2022 and 2021.

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.

Depreciation and Amortization

Depreciation expense was approximately $0.2 million for both of the three months ended March 31, 2022 and 2021.

Depreciation expense was approximately $0.4 million for both of the six months ended June 30, 2022 and 2021.

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 $49 thousand and $60 thousand for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense of intangible assets was approximately $99 thousand for the six months ended June 30, 2022 compared to $121 thousand for the six months ended June 30, 2021.

We amortize intangible assets using a straight-line method, generally over 10 years.

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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 three months ended March 31, 2022 was approximately $0.3 million as compared to $0.1 million for the three months ended March 31, 2021.

Amortization expense of right of use assets for the six months ended June 30, 2022 was approximately $0.5 million as compared to $0.3 million for the six months ended June 30, 2021.

Liquidity and Capital Resources

From inception through March 31, 2022, we have incurred aggregate losses of approximately $176.7 million.

From inception through June 30, 2022, we have incurred aggregate losses of approximately $183.1 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.

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Any inability to raise additional financing would have a material adverse effect on us.

As of March 31, 2022, we had cash and cash equivalents totaling approximately $21.0 million, no material off-balance sheet arrangements, no outstanding borrowings under our line of credit up to $10.0 million with Western Alliance Bank, purchase obligations of $18.6 million related to inventory purchase commitments to be paid over approximately one year and future minimum lease obligations of $5.5 million to be paid over approximately six years.

While we anticipate that our current cash, cash equivalents, and cash to be generated from net sales will be sufficient to meet our projected operating plans for at least the next twelve months and beyond, we may seek additional funds to support both our short-term and long-term operating objectives, either through additional equity or debt financings or collaborative agreements or from other sources.

As of June 30, 2022, we had cash and cash equivalents of $17.1 million, no material off-balance sheet arrangements, no outstanding borrowings under our line of credit with Western Alliance Bank, purchase obligations of $15.1 million related to inventory purchase commitments to be paid over approximately one year and future minimum lease obligations of $5.3 million to be paid over approximately six years.

We anticipate that our current unrestricted cash and cash equivalents of $16.9 million and cash to be generated from net sales will be sufficient to meet our financial obligations as they become due over at least the next twelve months and beyond.

However, we may seek additional funds to support both our short-term and long-term operating objectives, either through additional equity or debt financings or collaborative agreements or from other sources.

Furthermore, 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 of March 31, 2022.

Our potential use of the ATM facility is subject to the satisfaction of various conditions in the ATM Facility agreement as well market conditions.

As a result, our ability to rely on the ATM Facility to raise liquidity is limited to a material extent.

As a result of the COVID-19 pandemic and other macroeconomic factors such as rising interest rates, inflation and geopolitical uncertainties, 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.

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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 was approximately $7.2 million and $5.4 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in cash used for the three months ended March 31, 2022 compared to March 31, 2021 of $1.8 million was primarily due to increases in our net loss and inventories paired with a decrease in our accounts payable which were partially offset by an increase in accrued expenses.

Net cash used in operating activities was approximately $11.0 million and $13.3 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease in cash used for the six months ended June 30, 2022 compared to June 30, 2021 of $2.3 million was primarily driven by the timing of collections for our trade receivables accounting for $4.3 million which was partially offset by increases in our inventories of $1.7 million.

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.

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Investing cash flows consist primarily of capital expenditures and investment activities.

Cash used in investing activities was approximately $25 thousand and $46 thousand for the three months ended March 31, 2022 and 2021, respectively.

The decrease in cash used during the three months ended March 31, 2022 compared to March 31, 2021 of $21 thousand is attributable to fewer purchases of leasehold improvements and equipment.

Cash used in investing activities was approximately $110 thousand for the six months ended June 30, 2022 compared to $311 thousand for the six months ended June 30, 2021.

The decrease in cash used during the six months ended June 30, 2022 of $201 thousand compared to the same period in 2021 is attributable to fewer purchases of leasehold improvements and equipment.

Net cash used in and provided by financing activities:

Financing cash flows consist primarily of proceeds from issuance of our common stock, exercise of stock options through employee equity incentive plans and repayment of short-term and long-term debt.

Cash used in financing activities was approximately $3 thousand for the three months ended March 31, 2022, compared to net cash provided by financing activities of approximately $33.4 million for the three months ended March 31, 2021.

The difference in cash activities is largely attributable to proceeds from the issuance of common stock pursuant to the Securities Purchase Agreement with EverFund as well as the exercise of employee stock options, both of which occurred during the three months ended March 31, 2021 but not during the three months ended March 31, 2022.

Cash used in financing activities was approximately $7 thousand for the six months ended June 30, 2022, compared to net cash provided by financing activities of approximately $35.7 million for the six months ended June 30, 2021.

The difference in cash activities is largely attributable to proceeds from the issuance of common stock pursuant to the Securities Purchase Agreement with EverFund, the ATM Facility transaction, as well as the exercise of employee stock options, all of which occurred during the six months ended June 30, 2021 with no similar activity during the six months ended June 30, 2022.

Critical Account Estimates

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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