What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-07 compared with 2022-04-08 · 73 added, 80 removed, 175 unchanged (47% of the section changed)

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Leveraging our extensive expertise in E3 ligases together with our proprietary DNA-encoded libraries, we have built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell.

Our drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels.

Our wholly owned pipeline comprises four clinical stage drug candidates including targeted protein degraders of Bruton’s tyrosine kinase (BTK), a B-cell signaling protein, and inhibitors of Casitas B-lineage lymphoma proto-oncogene B (CBL-B), an E3 ligase that regulates T-cell activation.

Our lead drug candidate from our protein degradation portfolio, NX-2127, is an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies.

Targeted Protein Modulation, our drug discovery approach, either harnesses or inhibits the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels to treat disease.

Our wholly owned pipeline comprises four clinical stage drug candidates in our Targeted Protein Degradation and Targeted Protein Elevation portfolios.

Targeted Protein Degradation:

Our portfolio of targeted protein degraders of Bruton’s tyrosine kinase (BTK), a B‑cell signaling protein, comprises NX‑2127, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B‑cell malignancies, and NX‑5948, an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases.

We are currently enrolling patients in a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

We have initiated the first of several potential Phase 1b expansion cohorts for patients with relapsed chronic lymphocytic leukemia, and enrollment continues in the Phase 1a dose-escalation portion of the trial for patients with several types of non-Hodgkin lymphoma.

We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

Our second drug candidate from our protein degradation portfolio, NX-5948, is also an orally bioavailable BTK degrader for the treatment of relapsed or refractory B-cell malignancies and potentially autoimmune diseases.

We are actively recruiting in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with relapsed or refractory B-cell malignancies.

Our lead drug candidate from our E3 ligase inhibitor portfolio, NX-1607, for which we were awarded an Innovative Passport from the UK Medicines and Healthcare products Regulatory Agency to accelerate time to market and facilitate patient access to novel drugs to treat serious and life-threatening diseases, is an orally bioavailable CBL-B inhibitor for immuno-oncology indications.

Targeted Protein Elevation:

Our portfolio of inhibitors of Casitas B-lineage lymphoma proto-oncogene B (CBL-B), an E3 ligase that regulates the activation of multiple immune cell types including T cells and NK cells, comprises NX-1607, an orally bioavailable CBL-B inhibitor for immuno-oncology indications and for which we were awarded an Innovative Passport from the UK Medicines and Healthcare products Regulatory Agency to accelerate time to market and facilitate patient access to novel drugs to treat serious and life-threatening diseases, and NX-0255, for ex vivo use to enhance adoptive T-cell therapy including our drug-enhanced tumor infiltrating lymphocyte (TIL) therapy, DeTIL-0255.

We are currently enrolling patients in the Phase 1a portion of a Phase 1a/1b dose-escalation and cohort expansion study in patients with solid tumors and lymphomas.

We are also advancing the development of a CBL-B inhibitor, NX‑0255, for ex vivo use to enhance adoptive T-cell therapy.

We are currently enrolling patients in the Phase 1 clinical trial for our first cell therapy candidate, DeTIL-0255, in patients with gynecologic cancers including ovarian cancer, endometrial cancer, and cervical cancer.

Beyond these clinical candidates, we are advancing additional wholly owned, preclinical programs that may expand our therapeutic areas beyond oncology and autoimmune disease to viral diseases, including COVID-19.

Our therapeutic areas may be further expanded through our established strategic collaborations with Sanofi S.A.

Preclinical programs:

Beyond our clinical candidates, we are advancing additional wholly owned and partnered preclinical programs within our core therapeutic focus in cancer and selectively in non-oncology therapeutic areas.

Our pipeline includes highly validated and classically undruggable targets across our proprietary efforts, academic collaborations and our established strategic collaborations with Sanofi S.A.

(Sanofi), and Gilead Sciences, Inc.

Since the commencement of our operations, we have devoted substantially all of our resources to conducting research and development activities, establishing and maintaining our intellectual property portfolio, establishing our corporate infrastructure, raising capital and providing general and administrative support for these operations.

We have funded our operations to date primarily from proceeds received under collaboration and license agreements with Sanofi, Gilead, and Celgene Corporation (Celgene) and the issuance and sale of common and redeemable convertible preferred stock.

We have funded our operations to date primarily from proceeds received under collaboration and license agreements with Sanofi, Gilead, and Celgene Corporation and the issuance and sale of common stock and redeemable convertible preferred stock.

We do not expect to generate product revenue unless and until we successfully develop and obtain approval for the commercialization of a drug candidate, and we cannot assure you that we will ever generate significant revenue or profits.

Since inception, we have generally incurred significant losses and negative cash flows from operations.

During the three months ended February 28, 2022 and 2021, we incurred net losses of $42.5 million and $24.3 million, respectively.

As of February 28, 2022, we had an accumulated deficit of $263.4 million.

During the six months ended May 31, 2022 and 2021, we incurred net losses of $87.9 million and $50.7 million, respectively.

As of May 31, 2022, we had an accumulated deficit of $308.8 million.

These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations.

We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our drug candidates, which we expect will take a number of years.

We expect our expenses will increase substantially as we advance our drug candidates through preclinical and into clinical development;

We expect our expenses will increase substantially as we advance our drug candidates through preclinical and clinical development;

enter advanced clinical development and scale up external manufacturing capabilities to supply clinical trials;

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and the execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under such arrangements.

As of February 28, 2022, we had $385.7 million in cash, cash equivalents and investments.

As of May 31, 2022, we had $348.8 million in cash, cash equivalents and investments.

In July 2020, we closed our initial public offering (IPO) and issued 12,550,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 1,550,000 shares of common stock in August 2020) at a price to the public of $19.00 per share for net proceeds of $218.1 million, after deducting underwriting discounts and commissions of $16.7 million and expenses of $3.6 million.

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Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidates resulting from the collaboration.

We retain the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States under certain conditions.

We retain the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States under certain conditions and subject to certain limitations.

The collaboration excludes our current internal protein degradation programs for which we retain all rights, and also excludes our future internal programs, provided that we have distinguished future programs as excluded from the scope of the collaboration.

Over time, Gilead may elect to replace the initial drug targets with other drug targets.

For drug targets that are subject to the collaboration, we are obligated to use commercially reasonable efforts to undertake a research program in accordance with a research plan agreed to by the parties and established on a target-by-target basis.

We have primary responsibility under the agreement for performing preclinical research activities (including target validation, drug discovery, identification or synthesis) pursuant to a research plan.

Each party will bear its own costs in the conduct of research activities.

Gilead will be responsible for any development, commercialization and manufacturing activities, unless we exercise our co-development and co-promotion option.

For those programs that we exercise our option to co-develop and co-promote, we and Gilead will split U.S.

development costs as well as U.S.

profits and losses evenly, and we will be eligible to receive royalties on ex-U.S.

net sales and reduced milestone payments.

Upon signing the Gilead Agreement, Gilead paid us an upfront payment of $45.0 million plus $3.0 million in additional fees.

In addition, from the signing of the Gilead Agreement to February 28, 2022, we received payments of $24.5 million for research milestones and additional payments.

Additionally, we recognized a research milestone in February 2022 and received a payment of $6.0 million in the second fiscal quarter of 2022.

As of February 28, 2022, we are eligible to receive up to approximately $2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, from the signing of the Gilead Agreement to May 31, 2022, we received payments of $30.5 million for research milestones and additional payments.

Additionally, we recognized a research milestone in May 2022 and anticipate a payment of $1.5 million in the third fiscal quarter of 2022.

As of May 31, 2022, we are eligible to receive up to approximately $2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, we are eligible to receive tiered royalties from mid-single digit to low tens percentages on annual net sales from any commercial products directed to the optioned collaboration targets, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Gilead Agreement of $6.2 million and $2.7 million during the three months ended February 28, 2022 and 2021, respectively.

As of February 28, 2022 and November 30, 2021, there was $40.9 million and $41.1 million, respectively, of deferred revenue related to payments received by us under the Gilead Agreement.

We recognized collaboration revenue from the Gilead Agreement of $6.1 million and $12.3 million during the three and six months ended May 31, 2022, respectively, and $3.7 million and $6.5 million during the three and six months ended May 31, 2021, respectively.

As of May 31, 2022 and November 30, 2021, there was $34.8 million and $41.1 million, respectively, of deferred revenue related to payments received and to be received by us under the Gilead Agreement.

Sanofi Collaboration and License Agreement

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In December 2021, we entered into the Second Sanofi Amendment to the collaboration agreement with Sanofi to extend the substitution deadline on certain targets.

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of drug candidates resulting from the collaboration, while we retain the option to co-develop, co-promote and co-commercialize all drug candidates in the United States directed to up to two targets under certain conditions.

For drug targets that are subject to the collaboration, we have primary responsibility for conducting preclinical research activities (including target validation, drug discovery, identification or synthesis) in accordance with the applicable research plan agreed to by the parties and established on a target-by-target basis.

We are obligated to use commercially reasonable efforts to identify relevant target binders and chimeric targeting molecules (CTMs) in order to identify development candidates.

Subject to certain exceptions, each party will bear its own costs in the conduct of such research.

Sanofi will be responsible for any development and commercialization activities unless we exercise our co-development and co-promotion option.

For those programs that we exercise our option to co-develop, co-promote and co-commercialize, we will be responsible for a portion of the U.S.

development costs, and the parties will split U.S.

profits and losses evenly, and we will be eligible to receive royalties on ex-U.S.

net sales and reduced milestone payments on such optioned products.

Upon signing the Sanofi Agreement, Sanofi paid us an upfront payment of $55.0 million.

Subsequently, in January 2021, Sanofi paid us an additional $22.0 million to exercise its option to expand the number of targets beyond the initial targets included in the collaboration.

In addition, from the signing of the Sanofi Agreement to February 28, 2022, we received a payment of $1.0 million for a research milestone.

Additionally, we recognized another research milestone in February 2022 and anticipate a payment of $2.0 million in the second fiscal quarter of 2022.

As of February 28, 2022, we are eligible to receive up to approximately $2.5 billion in total payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Sanofi Agreement of $3.4 million and $ 2.3 million during the three months ended February 28, 2022 and 2021 , respectively .

As of February 28, 2022 and November 30, 2021 , there was $57.7 million and $59.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

In addition, from the signing of the Sanofi Agreement to May 31, 2022, we received payments of $3.0 million for research milestones.

As of May 31, 2022, we are eligible to receive up to approximately $2.5 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which we exercise our option to co-develop and co-promote, for which we share profits and losses evenly.

We recognized collaboration revenue from the Sanofi Agreement of $5.3 million and $8.7 million during the three and six months ended May 31, 2022, respectively, and $3.3 million and $5.6 million during the three and six months ended May 31, 2021, respectively.

As of May 31, 2022 and November 30, 2021, there was $52.4 million and $59.2 million, respectively, of deferred revenue related to payments received by us under the Sanofi Agreement.

Components of Results of Operations

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Our critical accounting policies and more significant areas involving management’s judgments and estimates used in preparation of our financial statements are discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K.

There have been no significant changes to these policies for the three months ended February 28, 2022.

There have been no significant changes to these policies for the three and six months ended May 31, 2022.

Recent Accounting Pronouncements

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Results of Operations

Comparison of the three months ended February 28, 2022 and 2021

Our results of operations for the three months ended February 28, 2022 and 2021 are summarized as follows (in thousands):

Comparison of the three and six months ended May 31, 2022 and 2021

Our results of operations for the three and six months ended May 31, 2022 and 2021 are summarized as follows (in thousands):

Three Months Ended

Six Months Ended

Collaboration revenue

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Collaboration Revenue

Our collaboration revenue for the three months ended February 28, 2022 and 2021 is summarized as follows (in thousands):

Our collaboration revenue for the three and six months ended May 31, 2022 and 2021 is summarized as follows (in thousands):

Three Months Ended

Six Months Ended

Total collaboration revenue

Our collaboration revenue increased by $4.6 million during the three months ended February 28, 2022 compared to the three months ended February 28, 2021.

The increase was primarily due to the recognition of revenue as a cumulative catch up for activities satisfied in previous periods as we achieved certain research milestones under our collaborations with Gilead and Sanofi.

The increase was also due to increased effort resulting in a higher percentage of completion of performance obligations under our collaboration with Gilead and Sanofi in the current period.

Our collaboration revenue increased by $4.3 million and $9.0 million during the three and six months ended May 31, 2022 compared to the three and six months ended May 31, 2021, respectively.

The increases were primarily due to increased effort resulting in a higher percentage of completion of performance obligations under our collaborations with Gilead and Sanofi in the current period.

The increases were also due to changes in transaction price that resulted in higher revenue recognized in each period and impacted the cumulative catch up in revenue for activities satisfied in previous periods.

Research and Development Expenses

Our research and development expenses for the three months ended February 28, 2022 and 2021 are summarized as follows (in thousands):

Our research and development expenses for the three and six months ended May 31, 2022 and 2021 are summarized as follows (in thousands):

Three Months Ended

Six Months Ended

Compensation and related personnel costs

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Total research and development expenses

Our research and development expenses increased by $20.1 million during the three months ended February 28, 2022 compared to the three months ended February 28, 2021.

There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense of $7.6 million and $2.3 million, respectively, that were attributable to higher headcount.

There was also an increase in cost related to supplies and contract research and preclinical activities of $4.4 million and $0.6 million, respectively, as we continued to expand our preclinical development activities and drug discovery research, and an increase in costs related to contract manufacturing and clinical of $1.6 million and $2.0 million, respectively, primarily due to ongoing clinical trial startup and patient enrollment.

General and A dministrative E xpenses

Our general and administrative expenses increased by $2.7 million during the three months ended February 28, 2022 compared to the three months ended February 28, 2021.

Our research and development expenses increased by $21.5 million during the three months ended May 31, 2022 compared to the three months ended May 31, 2021.

There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense of $7.2 million and $2.0 million, respectively, that were primarily attributable to higher headcount.

The increase in non-cash stock-based compensation expense was also attributable to the issuance of restricted stock units (RSUs).

There was also an increase in cost related to supplies and contract research and preclinical activities of $4.6 million as we continued to expand our preclinical development activities and drug discovery research, and an increase in contract manufacturing and clinical costs of $5.3 million primarily due to the ramping up of our clinical trial programs and ongoing patient enrollment.

Our research and development expenses increased by $41.6 million during the six months ended May 31, 2022 compared to the six months ended May 31, 2021.

There was an increase in compensation and related personnel costs and in non-cash stock-based compensation expense of $ 14.8 million and $ 4.3 million, respectively, that were primarily attributable to higher headcount.

The increase in non-cash stock-based compensation expense was also attributable to the issuance of RSUs .

There was also an increase in cost related to supplies and contract research and preclinical activities of $ 9.6 million as we continued to expand our preclinical development activities and drug discovery research, and an increase in contract manufacturing and clinical costs of $ 8.9 million primarily due to the ramping up of our clinical trial programs and ongoing patient enrollment.

General and Administrative Expenses

Our general and administrative expenses increased by $2.1 million during the three months ended May 31, 2022 compared to the three months ended May 31, 2021.

There was an increase of $0.6 million in compensation and related expenses and an increase of $0.9 million in non-cash stock-based compensation expense, both of which were primarily attributable to higher headcount.

There was also an increase of $0.6 million in professional service expenses, including legal and accounting expenses related to infrastructure improvements.

Our general and administrative expenses increased by $4.8 million during the six months ended May 31, 2022 compared to the six months ended May 31, 2021.

There was an increase of $1.0 million in compensation related expenses and an increase of $1.9 million in non-cash stock-based compensation expense, both of which were primarily attributable to higher headcount.

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In March 2021, we completed a follow-on offering and issued 5,175,000 shares of our common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $31.00 per share for net proceeds of $150.2 million, after deducting underwriting discounts and commissions of $9.6 million and expenses of $0.6 million.

To date, our operations have primarily been funded through the net proceeds from equity offerings of $536.4 million and proceeds from collaborations of $306.5 million.

As of May 31, 2022, our operations have primarily been funded through the net proceeds from equity offerings of $536.4 million and proceeds from collaborations of $308.5 million.

We do not have any products approved for sale, and we have not generated any revenue from product sales.

As of February 28, 2022, we had $385.7 million in cash, cash equivalents and investments.

As of May 31, 2022, we had $348.8 million in cash, cash equivalents and investments.

Funding Requirements

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We have a shelf registration statement on Form S-3 on file with the SEC.

This shelf registration statement, which includes a base prospectus, allows us at any time to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units or any combination of securities described in the prospectus in one or more offerings.

This shelf registration statement, which includes a base prospectus, allows us at any time to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and units or any combination of such securities described in the prospectus in one or more offerings.

In addition, in August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Co.

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We agreed to pay Piper Sandler a commission of 3% of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement.

As of February 28, 2022, we have not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement.

As of May 31, 2022 , we had not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement.

In June 2022, we issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement for net proceeds of approximately $19.

3 million after deducting offering commissions and expenses paid by us ( the June 2022 ATM Offering ).

As of the closing of the June 2022 ATM Offering , we ha d $130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

Unless otherwise specified in a prospectus supplement accompanying the base prospectus, we intend to use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes, which may include funding research, clinical and process development, increasing our working capital, reducing indebtedness, acquisitions or investments in businesses, products or technologies that are complementary to our own and capital expenditures.

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In the long term, our ability to support our working capital and capital expenditure requirements will depend on many factors, including the following:

the progress, costs and results of our planned and ongoing Phase 1 clinical trials for our lead drug candidates NX-2127, NX-1607, NX-5948 and DeTIL-0255, and any future clinical development of such drug candidates;

the progress, costs and results of our ongoing Phase 1 clinical trials for our lead drug candidates NX-2127, NX-1607, NX-5948 and DeTIL-0255, and any future clinical development of such drug candidates;

the scope, progress, costs and results of preclinical and clinical development for our other drug candidates and development programs;

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If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

As of February 28, 2022, our material cash requirements include the following contractual and other obligations (in thousands):

As of May 31, 2022, our material cash requirements include the following contractual and other obligations (in thousands):

Payments due by period

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We did not have during the periods presented, and we do not currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Our cash flows for the three months ended February 28, 2022 and 2021 are summarized as follows (in thousands):

Three Months Ended February 28,

Cash (used in) provided by operating activities

Our cash flows for the six months ended May 31, 2022 and 2021 are summarized as follows (in thousands):

Six Months Ended May 31,

Cash used in operating activities

Cash (used in) provided by investing activities

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Operating activities

Net cash used in operating activities was $42.6 million for the three months ended February 28, 2022 and consisted of a net loss of $42.5 million and an increase in net assets of $9.0 million, offset by non-cash adjustments of $8.9 million.

The increase in net assets consisted primarily of a decrease in accrued expenses and other liabilities of $3.3 million primarily related to the payment of annual incentive compensation, an increase in contract assets of $2.0 million related to a milestone recognized pursuant to the Sanofi Agreement, a decrease in deferred revenue of $1.6 million and an increase in prepaid expenses and other assets of $1.5 million primarily related to increased prepaid clinical and contract manufacturing costs.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $6.1 million and amortization of operating lease right-of-use assets of $1.3 million.

Net cash provided by operating activities was $8.1 million for the three months ended February 28, 2021 and consisted of a decrease in net assets of $28.

0 million and non-cash adjustments of $ 4.3 million, offset by a net loss of $24.3 million.

The decrease in net assets consisted primarily of an increase in deferred revenue of $17.0 million and a decrease in contract assets of $7.5 million.

Net cash used in operating activities was $75.5 million for the six months ended May 31, 2022 and consisted of a net loss of $87.9 million and an increase in net assets of $6.5 million, offset by non-cash adjustments of $18.9 million.

The increase in net assets consisted of a decrease in deferred revenue of $13.1 million as we increased effort in our programs and recognized revenue, a decrease in operating lease liabilities of $2.5 million and an increase in prepaid expenses and other assets of $1.5 million primarily related to increased prepaid clinical and contract manufacturing costs and software license costs, offset by a decrease in accounts receivable of $6.0 million related to payments received under the Gilead Agreement, an increase in accrued expenses and other liabilities of $2.8 million primarily related to equipment purchases and the accrual of annual incentive compensation and an increase in accounts payable of $1.7 million.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $12.8 million, amortization of operating lease right-of-use assets of $2.6 million and depreciation and amortization expenses of $2.3 million.

Net cash used in operating activities was $23.5 million for the six months ended May 31, 2021 and consisted of our net loss of $50.7 million, offset by a decrease in net assets of $17.1 million and non-cash adjustments of $10.1 million.

The decrease in net assets consisted primarily of an increase in deferred revenue of $19.9 million and an increase in accounts receivable of $2.5 million.

Non-cash adjustments primarily consisted of stock-based compensation expenses of $6.6 million, amortization of operating lease right-of-use assets of $1.6 million and depreciation and amortization expenses of $1.3 million.

Investing activities

Net cash used in investing activities was $40.0 million for the three months ended February 28, 2022 and consisted of the maturity of investments of $58.7 million, offset by the purchase of investments of $15.2 million and the purchase of property and equipment of $3.5 million.

Net cash used in investing activities was $2.4 million for the three months ended February 28, 2021 and consisted primarily of the purchase of investments of $47.7 million, offset by the maturity of investments of $46.2 million.

Net cash provided by investing activities was $35.3 million for the six months ended May 31, 2022 and consisted of the maturity of investments of $121.6 million, offset by the purchase of investments of $80.0 million and the purchase of property and equipment of $6.3 million.

Net cash used in investing activities was $59.5 million for the six months ended May 31, 2021 and consisted primarily of the purchase of investments of $183.2 million, partially offset by the sale of investments of $7.0 million and the maturity of investments of $119.7 million.

Financing activities

Net cash provided by financing activities was $1.5 million for the three months ended February 28, 2022 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan.

Net cash provided by financing activities was $1.4 million for the three months ended February 28, 2021 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan.

Quantitative and Qualitative Disclosures About Market Risk

Our market risks, as of February 28, 2022, have not changed materially from those discussed in “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended November 30, 2021, filed with the SEC on January 28, 2022.

Net cash provided by financing activities was $1.9 million for the six months ended May 31, 2022 and consisted primarily of proceeds from the issuance of common stock under our Employee Stock Purchase Plan.

Net cash provided by financing activities was $151.8 million for the six months ended May 31, 2021 and consisted primarily of proceeds from the issuance of common stock from our follow-on offering in March 2021.

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