What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-13 · 84 added, 81 removed, 232 unchanged (42% of the section changed)

47 unchanged sentences

As a result of the Exchange and the change in our business and operations, a discussion of our past financial results is not pertinent, and under applicable accounting principles, the historical financial results of SmartKem, the accounting acquirer, prior to the Exchange are considered our historical financial results.

We are a pioneer in the in the manufacture of Application Specific Organic Materials for organic thin-film transistor (OTFT) backplanes that power the next generation of flexible electronics, displays, sensors and logic.

Our unique TRUFLEX® technology allows inks to be deposited at a low temperature on low-cost substrates, resulting in transistor stacks that are flexible, bendable, wearable, and lightweight.

These can be used in a number of next generation display technologies including bendable smartphone displays, curved automotive displays, full color e-paper displays, wearables, fingerprint sensors, printed biosensors and logic.

We are seeking to reshape the world of electronics with a revolutionary semiconductor platform that enables a new generation of displays, sensors and logic.

SmartKem’s patented TRUFLEX® inks are solution deposited at a low temperature, on low-cost substrates to make organic thin-film transistor (OTFT) circuits.

Our semiconductor platform can be used in a number of applications including mini-LED displays, AMOLED displays, fingerprint sensors and logic circuits.

We develop our materials at our research and development facility in Manchester, UK, and at our semiconductor manufacturing process at the Centre of Process Innovation (CPI) in Sedgefield, UK.

We have an extensive IP portfolio including approximately 120 issued patents.

Since our inception in 2009, we have devoted substantial resources to the research and development of materials and production processes for the manufacture of organic thin film transistors and the enhancement of our intellectual property.

Our loss before income taxes was $2.4 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively.

Our loss before income taxes was $11.8 million and $21.1 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, our accumulated deficit was $69.7 million.

Substantially all of our

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

Our loss before income taxes was $2.7 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively.

Our loss before income taxes was $14.4 million and $21.7 million for the nine months

ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, our accumulated deficit was $72.4 million.

Substantially all of our operating losses have resulted from expenses incurred in connection research and development activities and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

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The new options were issued pursuant to our 2021 Plan.

The new options replacing the SmartKem Unapproved Options cover an aggregate of 402,586 shares of our common stock, with options covering 336,557 shares of our common stock having an exercise price of

$0.001 per share and the options covering the remaining 66,029 shares of our common stock having an exercise price of $2.00 per share.

The new options replacing the SmartKem Unapproved Options cover an aggregate of 402,586

shares of our common stock, with options covering 336,557 shares of our common stock having an exercise price of $0.001 per share and the options covering the remaining 66,029 shares of our common stock having an exercise price of $2.00 per share.

SmartKem is considered the accounting acquirer in the Exchange and will account for the transaction as a capital transaction because SmartKem’s former shareholders received substantially all of the voting rights in the combined entity and SmartKem’s senior management represents all of the senior management of the combined entity.

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The income associated with these items are recognized in the period which the research and development expenses occurred.

Additionally, during the three months ended June 30, 2021, the Company received government grants under the United Kingdom’s Coronavirus Job Retention Scheme.

Additionally, during the three months ended September 30, 2021, the Company received government grants under the United Kingdom’s Coronavirus Job Retention Scheme.

Operating Expenses

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The period-to-period comparisons of financial results in the tables below are not necessarily indicative of future results.

Three month-periods ended June 30, 2021 and 2020

Our results of operations for the three month-periods ended June 30, 2021 and 2020 are as follows:

Three Months Ended June 30,

Three month-periods ended September 30, 2021 and 2020

Our results of operations for the three month-periods ended September 30, 2021 and 2020 are as follows:

Three Months Ended September 30,

Increase (Decrease)

Cost of revenues

Cost of revenue

Other Operating Income

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Loss from operations

Non Operating Income

Gain on foreign currency transactions

Non Operating (Expense)/Income

(Loss)/gain on foreign currency transactions

Interest expense

Interest income

Total non operating income

Loss before income tax

Total non operating (expense)/income

Loss before income taxes

Income tax expense

1 unchanged sentence

Total comprehensive loss

We did not record any revenue in the three months ended June 30, 2021 or for the comparable period of 2020.

Accordingly, revenue, cost of revenues and gross profit were all unchanged at $0 for both periods.

Other operating income increased by $70 thousand, or 37%, to $256 thousand for the three months ended June 30, 2021, compared to $186 thousand for the 2020 period.

Other operating income in the 2021 period largely comprised $252 thousand in research and development tax credit.

Other operating income in the comparable period of 2020 comprised $186 thousand in research and development tax credits.

Operating expenses increased $1.5 million, or 119%, to $2.7 million for the three months ended June 30, 2021, compared to $1.2 million for the comparable period of 2020.

We did not record any revenue in the three months ended September 30, 2021, compared to $50 thousand of revenue for the three months ended September 30, 2020.

Accordingly, revenue, cost of revenues and gross profit were all $0 for the three months ended September 30, 2021, a 100% decrease in each of these balances compared to the three months ended September 30, 2020.

Other operating income decreased by $300 thousand, or 40%, to $447 thousand for the three months ended September 30, 2021, compared to $747 thousand for the 2020 period.

Other operating income in 2021 comprised research and development tax credits while in 2020 it comprised $245 thousand of research and development tax credits and $502 thousand of research and development grant monies.

Operating expenses increased $1.3 million, or 95%, to $2.7 million for the three months ended September 30, 2021, compared to $1.4 million for the comparable period of 2020.

The increase was primarily due to the matters described below.

Research and development expense, which represents 50% and 80% of our total operating expenses for the three months ended June 30, 2021 and 2020, respectively, increased by $0.4 million, or 36%, to $1.4 million for the three months ended June 30, 2021, compared to $1.0 million for the three months ended June 30, 2020.

Research and development expense, which represents 50% and 79% of our total operating expenses for the three months ended September 30, 2021 and 2020, respectively, increased by $0.3 million, or 23%, to $1.4 million for the three months ended September 30, 2021, compared to $1.1 million for the three months ended September 30, 2020.

The increase was primarily due to expenses incurred in further developing core materials and in fabricating demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 50% and 20% of our total operating expenses for the three months ended June 30, 2021 and 2020 respectively increased by $1.1 million or 454% to $1.3 million for the three months ended June 30, 2021, compared to $0.2 million for the three months ended June 30, 2020.

This increase was mainly due to an increase in staff costs resulting from adding to our sales teams in the US and Asia and the strengthening of our finance team to prepare our company for US public company financial reporting, as well as from the additional legal, accounting and insurance expenses of operating as a public company.

The gain on foreign currency transactions was $57 thousand for the three months ended June 30, 2021, compared to $0 thousand for the three months ended June 30, 2020, an increase of $57 thousand.

The increase was due to fluctuations in U.S.

Selling, general and administrative expense, which represents 50% and 21% of our total operating expenses for the three months ended September 30, 2021 and 2020, respectively increased by $1.1 million or 368% to $1.4 million for the three months ended September 30, 2021, compared to $0.3 million for the three months ended September 30, 2020.

This increase was mainly due to an increase in staff costs resulting from adding to our sales teams in the US and Asia and the strengthening of our finance team to prepare our company’s US public company financial reporting, as well as from the additional legal, accounting and insurance expenses of operating as a public company.

The loss on foreign currency transactions was $386 thousand for the three months ended September 30, 2021, compared to a gain of $1 thousand for the three months ended September 30, 2020, an increase of $387 thousand.

The loss was due to fluctuations in U.S.

pound value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiary balances.

Interest income was less than $2 thousand for the three months ended June 30, 2021, compared to $1 thousand for the three months ended June 30, 2020.

The increase was due to higher average cash deposits during the second quarter of 2021 compared to the second quarter of 2020, offset by reductions in the credit interest rates on our cash deposits.

The loss before income taxes was $2.4 million for the three months ended June 30, 2021, an increase of $1.3 million, compared to a loss before income taxes of $1.1 million for the three months ended June 30, 2020.

Interest income was less than $1 thousand for the three months ended September 30, 2021, compared to $0 for the three months ended September 30, 2020.

The increase was due to higher average cash deposits during the third quarter of 2021 compared to the third quarter of 2020, offset by reductions in the credit interest rates on our cash deposits.

The loss before income taxes was $2.7 million for the three months ended September 30, 2021, an increase of $2.0 million, compared to a loss before income taxes of $0.6 million for the three months ended September 30, 2020.

The increase in loss was attributable to the higher research and development expense and the higher selling, general and administrative expense described in the preceding paragraphs.

Six month-periods ended June 30, 2021 and 2020

Our results of operations for the six month-periods ended June 30, 2021 and 2020 are as follows:

Six Months Ended June 30,

Nine month-periods ended September 30, 2021 and 2020

Our results of operations for the nine month-periods ended September 30, 2021 and 2020 are as follows:

Nine Months Ended September 30,

Increase (Decrease)

Cost of revenues

Cost of revenue

Other Operating Income

5 unchanged sentences

Loss from operations

Non Operating Expense

Non Operating (Expense)/Income

Loss on foreign currency transactions

4 unchanged sentences

Total non operating expense

Loss before income tax

Loss before income taxes

Income tax expense

1 unchanged sentence

Total comprehensive loss

We did not record any revenue in the six months ended June 30, 2021, compared to $20.8 thousand of revenue for the six months ended June 30, 2020.

Accordingly, revenue, cost of revenues and gross profit were all $0 for the first half of 2021, a 100% decrease in each of these balances compared to the six months ended June 30, 2020.

Other operating income increased by $310 thousand, or 82%, to $688 thousand for the six months ended June 30, 2021, compared to $378 thousand for the 2020 period.

We did not record any revenue in the nine months ended September 30, 2021, compared to $71 thousand of revenue for the nine months ended September 30, 2020.

Accordingly, revenue, cost of revenues and gross profit were all $0 for the nine months ended September 30, 2021, a 100% decrease in each of these balances compared to the nine months ended September 30, 2020.

Other operating income was $1.1 million for both the nine months ended September 30, 2021 and the nine months ended September 30, 2020.

Other operating income in 2021 largely comprised $944 thousand of research and development tax credits and $181 thousand in research and development grant monies.

Other operating income in 2020 comprised $378 thousand in research and development tax credits.

Operating expenses increased $9.1 million, or 318%, to $12.0 million for the six months ended June 30, 2021 compared to $2.9 million for the comparable period of 2020.

Other operating income in 2020 comprised $623 thousand of research and development tax credits and $502 thousand of research and development grant monies.

Operating expenses increased $10.5 million, or 245%, to $14.7 million for the nine months ended September 30, 2021, compared to $4.3 million for the comparable period of 2020.

The increase was primarily due to the matters described below.

Research and development expense, which represents 45% and 73% of our total operating expenses for the six months ended June 30, 2021 and 2020, respectively, increased by $3.3 million, or 154%, to $5.4 million for the six months ended June 30, 2021, compared to $2.1 million for the six months ended June 30, 2020.

Research and development expense, which represents 46% and 75% of our total operating expenses for the nine months ended September 30, 2021 and 2020, respectively, increased by $3.5 million, or 109%, to $6.7 million for the nine months ended September 30, 2021, compared to $3.2 million for the nine months ended September 30, 2020.

The increase was primarily due to stock-based compensation expense in 2021 as detailed in Note 11 Share-Based Compensation to our unaudited consolidated financial statements (Part I, Item 1 of this Form 10-Q) and expenses incurred in further developing core materials and in fabricating demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 44% and 27% of our total operating expenses for the six months ended June 30, 2021 and 2020, respectively, increased by $4.6 million or 593% to $5.3 million for the six months ended June 30, 2021, compared to $0.8 million for the six months ended June 30, 2020.

This increase was mainly due stock-based compensation expense in 2021 as detailed in Note 11 Share-Based Compensation to our

unaudited consolidated financial statements (Part I, Item 1 of this Form 10-Q), from adding to our sales teams in the US and Asia and the strengthening of our finance team to prepare our company for US public company financial reporting, as well as from the additional legal, accounting and insurance expenses of operating as a public company.

Transaction costs of $1.3 million associated with the Exchange were incurred in the six months ended June 30, 2021.

The loss on foreign currency transactions was $413 thousand for the six months ended June 30, 2021, compared to $1 thousand for the six months ended June 30, 2020, an increase of $412 thousand.

Selling, general and administrative expense, which represents 45% and 25% of our total operating expenses for the nine months ended September 30, 2021 and 2020, respectively, increased by $5.6 million, or 531%, to $6.7 million for

the nine months ended September 30, 2021, compared to $1.1 million for the nine months ended September 30, 2020.

This increase was mainly due stock-based compensation expense in 2021 as detailed in Note 11 Share-Based Compensation to our unaudited consolidated financial statements (Part I, Item 1 of this Form 10-Q), from adding to our sales teams in the US and Asia and the strengthening of our finance team to prepare our company’s US public company financial reporting, as well as from the additional legal, accounting and insurance expenses of operating as a public company.

Transaction costs of $1.3 million associated with the Exchange were incurred in the nine months ended September 30, 2021.

The loss on foreign currency transactions was $799 thousand for the nine months ended September 30, 2021, compared to $0 for the nine months ended September 30, 2020, an increase of $799 thousand.

The increase was due to fluctuations in U.S.

pound value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiary balances.

Interest expense was $19 thousand for the six months ended June 30, 2021, compared to $6.8 million for the six months ended June 30, 2020, a decrease of $6.8 million.

Interest expense was $19 thousand for the nine months ended September 30, 2021, compared to $6.8 million for the nine months ended September 30, 2020, a decrease of $6.8 million.

The decrease resulted from the conversion in early 2020 of all outstanding loan notes to equity which resulted in the interest expense recognition of unamortized loan discounts.

Interest income was $2 thousand for the six months ended June 30, 2021, compared to $3 thousand for the six months ended June 30, 2020 as a result of reductions in the credit interest rates on our cash deposits.

The change in fair value of derivative assets was zero for the six months ended June 30, 2021, compared to $6.3 million for the six months ended June 30, 2020, a decrease of $6.3 million or 100%.

The 2020 change in market value reflected the change in probability of conversion immediately before the conversion date.

The loss on conversion of convertible notes payable was zero for the six months ended June 30, 2021, compared to $5.5 million for the six months ended June 30, 2020.

This loss was measured as the difference between the fair value of the A ordinary shares issued and the carrying value of the convertible loan notes plus accrued interest and the fair market value of the embedded derivative on the date of conversion in 2020.

The loss before income taxes was $11.8 million for the six months ended June 30, 2021, a decrease of $9.3 million, compared to a loss before income taxes of $21.1 million for the six months ended June 30, 2020.

Interest income was $3 thousand for the nine months ended September 30, 2021, unchanged from the nine months ended September 30, 2020.

Reductions in the credit interest rates on our cash deposits offset the higher average cash deposits held in 2021.

The change in fair value of derivative assets was zero for the nine months ended September 30, 2021, compared to $6.3 million for the nine months ended September 30, 2020, a decrease of $6.3 million or 100%.

The decrease resulted from the 2020 change in market value reflected the change in probability of conversion immediately before the conversion date.

The loss on conversion of convertible notes payable was $0 for the nine months ended September 30, 2021, compared to $5.5 million for the nine months ended September 30, 2020.

The 2020 loss resulted from the difference between the fair value of the A ordinary shares issued and the carrying value of the convertible loan notes plus accrued interest and the fair market value of the embedded derivative on the date of conversion in 2020.

The loss before income taxes was $14.4 million for the nine months ended September 30, 2021, a decrease of $7.3 million, compared to a loss before income taxes of $21.7 million for the nine months ended September 30, 2020.

The decrease in loss was attributable to a reduction in non-operating losses resulting from the accounting recognition of loans converted to equity during 2020, partially offset by higher stock compensation expense, transaction costs from the Exchange in 2021 and operating expenses associated with being a public company.

Liquidity and Capital Resources

Since inception, we have not generated significant revenue from product sales, and we have incurred significant operating losses and had an accumulated deficit of $69.7 million as of June 30, 2021.

Since inception, we have not generated significant revenue from product sales, and we have incurred significant operating losses and had an accumulated deficit of $72.5 million as of September 30, 2021.

We have not commercialized any products and may not generate significant revenue from product sales during 2021, if at all.

To date, we have funded our operations primarily with proceeds from the private sale of equity and debt securities and borrowing against our research and development credits.

As of June 30, 2021, our cash and cash equivalents were $16.4 million.

As of September 30, 2021, our cash and cash equivalents were $14.7 million.

The following table shows a summary of our cash flows for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Operating Activities

Net cash used in operating activities was $6.4 million for the six months ended June 30, 2021, compared to $2.8 million for the six months ended June 30, 2020, an increase of $3.6 million.

The increase resulted primarily from lower research and development grant receipts in 2021, the expenses incurred in connection with the Exchange and increased operating expenses associated with being a public company.

Net cash used in operating activities was $8.1 million for the nine months ended September 30, 2021, compared to $2.6 million for the nine months ended September 30, 2020, an increase of $5.5 million.

The increase resulted primarily from our increased research and development activity, the operating expenses associated with being a public company, the expenses incurred in connection with the Exchange and movements in our working capital balances.

Investing Activities

We used $121 thousand of cash in investing activities during the six months ended June 30, 2021, compared to net cash used of $88 thousand for the six months ended June 30, 2020, an increase of $33 thousand.

We used $282 thousand of cash in investing activities during the nine months ended September 30, 2021, compared to net cash used of $90 thousand for the nine months ended September 30, 2020, an increase of $192 thousand.

The increase resulted primarily from a higher level of investment in laboratory and capital equipment in 2021.

Financing Activities

Net cash provided by financing activities was $22.2 million for the six months ended June 30, 2021 compared with $4.3 million generated from financing activities in 2020.

Net cash provided by financing activities during the six months ended June 30, 2021 resulted primarily from the net proceeds of the Offering.

We expect that our cash and the net proceeds from the Offering will be sufficient to support our operations through the first quarter of 2023.

Net cash provided by financing activities was $22.2 million for the nine months ended September 30, 2021 compared with $4.6 million generated from financing activities in 2020.

Net cash provided by financing activities during the nine months ended September 30, 2021 resulted primarily from the net proceeds of the Offering.

We expect that our cash and cash equivalents will be sufficient to support our operations through the first quarter of 2023.

We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities.

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To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take

specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or products, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate commercialization, our research and product development, or grant rights to develop and market our products that we would otherwise prefer to develop and market ourselves.

In January 2021 SmartKem entered into a Facility Agreement (the “Facility Agreement”) with FRCF 2 Limited (“Lender”) pursuant to which the Lender provided SmartKem with a secured term loan facility in the amount of $738,000 (the “Facility”) as an advance against certain research and development tax credit payments expected to be received by SmartKem.

Interest on amounts outstanding on the Facility bear interest at a monthly rate of 1.25%, compounded monthly, and is payable on demand.

Payment of all amounts outstanding on the Facility is due on July 26, 2021.

SmartKem has the right to prepay all or part of the outstanding amounts under the Facility, subject to a pre-payment penalty equal to two months’ accrued interest if such amounts are repaid prior to March 26, 2021.

SmartKem is required to repay the Facility with the proceeds of the expected tax credit payments.

SmartKem paid the Lender an arrangement fee of $37,000 in connection with the establishment of the Facility.

SmartKem has agreed to certain affirmative and negative covenants in the Facility Agreement requiring SmartKem to provide certain information to the Lender and preventing SmartKem from, among other things:

(i) incurring additional indebtedness for borrowed money,

(ii) making certain payments to insiders, (iii) selling, transferring or otherwise disposing of assets other than in the ordinary course of business or in other limited circumstances, (iv) creating any additional security interest on any of its assets, (v) engaging in any sale lease-back transaction, (vi) selling, transferring or otherwise disposing of its receivables on recourse terms, (vii) entering into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts, or (viii) entering into any other preferential arrangement.

In January 2021 SmartKem entered into a Facility Agreement (the “Facility Agreement”) with FRCF 2 Limited (“Lender”) pursuant to which the Lender provided SmartKem with a secured term loan facility in the amount of $738 thousand (the “Facility”) as an advance against certain research and development tax credit payments expected to be received by SmartKem.

Interest on amounts outstanding on the Facility bore interest at a monthly rate of 1.25%, compounded monthly, and were payable on demand.

Payment of all amounts outstanding on the Facility were due on July 26, 2021.

SmartKem had the right to prepay all or part of the outstanding amounts under the Facility, subject to a pre-payment penalty equal to two months’ accrued interest if such amounts were repaid prior to March 26, 2021.

SmartKem was required to repay the Facility with the proceeds of the expected tax credit payments.

SmartKem paid the Lender an arrangement fee of $37 thousand in connection with the establishment of the Facility.

SmartKem agreed to certain affirmative and negative covenants in the Facility Agreement requiring SmartKem to provide certain information to the Lender and preventing SmartKem from, among other things:

(i) incurring additional indebtedness for borrowed money, (ii) making certain payments to insiders, (iii) selling, transferring or otherwise disposing of assets other than in the ordinary course of business or in other limited circumstances, (iv) creating any additional security interest on any of its assets, (v) engaging in any sale lease-back transaction, (vi) selling, transferring or otherwise disposing of its receivables on recourse terms, (vii) entering into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts, or (viii) entering into any other preferential arrangement.

Upon the occurrence of any event of default (defined to include, among other things, payment defaults, a breach of any representation, warranty or covenant, certain bankruptcy-related events or a Change of Control of SmartKem), the Lender may declare all amounts outstanding under the Facility due and owing (at which point interest would begin to accrue at a default rate of 4% per month) and exercise its rights with respect to its security interest in SmartKem’s assets.

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To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operation, and cash flows will be affected.

A summary of our critical accounting policies is presented in Note 2 Summary of Significant Accounting Policies to our unaudited consolidated financial statements (Part I, Item 1 of this Form 10-Q).

There were no material changes to our critical accounting policies during the three and six months ended June 30, 2021.

A summary of our critical accounting policies is presented in Note 2 Summary of Significant Accounting Policies to our unaudited

consolidated financial statements (Part I, Item 1 of this Form 10-Q).

There were no material changes to our critical accounting policies during the three and nine months ended September 30, 2021.

Going Concern Evaluation

SmartKem’s condensed consolidated financial statements included elsewhere herein have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Our condensed consolidated financial statements included elsewhere herein have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We have financed our activities principally from the issuance of ordinary shares, and debt securities.

We have experienced recurring losses since inception and expect to incur additional losses in the future in connection with research and development activities.

In the six months ended June 30, 2021, we raised net proceeds of $22.2 million through the Offering and at June 30, 2021 we had $16.4 million of cash after funding net cash used in operations for the six month period ended June 30, 2021 of $6.4 million, $2.7 million of which was used in the three months ended June 30, 2021.

In the nine months ended September 30, 2021, we raised net proceeds of $22.2 million through the Offering and at September 30, 2021 we had $14.7 million of cash after funding net cash used in operations for the nine month period ended September 30, 2021 of $8.1 million, $1.7 million of which was used in the three months ended September 30, 2021.

We expect that our available cash balances will provide sufficient liquidity to fund our current obligations and projected working capital and capital expenditure requirements for at least the next 12 months.

1 unchanged sentence

Internal Control Over Financial Reporting

During the year ended December 31, 2020 and for the period ended June 30, 2021, our management and independent registered public accounting firm identified material weaknesses related (i) the fact that certain members of our finance team and personnel are able to operate across a number of different functions and have user access that gives rise to segregation of duties risks in connection with our information technology infrastructure and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place, or not operating effectively.

During the year ended December 31, 2020 and for the period ended September 30, 2021, our management and independent registered public accounting firm identified material weaknesses related (i) the fact that certain members of our finance team and personnel are able to operate across a number of different functions and have user access that gives rise to segregation of duties risks in connection with our information technology infrastructure and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place, or not operating effectively.

We are currently in the process of remediating these material weaknesses and are taking steps that we believe will address their underlying causes.

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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