The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year endedDecember 31, 2020 filed with theSecurities and Exchange Commission onApril 2, 2021 (the "Form 10-K") and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q. The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 10-K in the section entitled "Risk Factors" in the Form 10-K for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited financial statements and notes thereto that appear elsewhere in this report.
Except as otherwise indicated herein or as the context otherwise requires,
references in this quarterly report to "we," "us," "our," "Company," and
"Agrify" refer to
As described elsewhere in this report, all share and per share amounts set forth below have been presented on a retroactive basis to reflect a 1-for-1.581804 reverse stock split of our outstanding common stock implemented on January
12, 2021.
Dollar amounts are in thousands unless otherwise specified, except share and per share data.
Overview We are a developer of highly advanced and proprietary precision hardware and software grow solutions for the indoor agriculture marketplace and provide equipment and solutions for extraction, post-processing, and testing for the cannabis and hemp industry. We believe we are the only company with an automated and fully integrated grow solution in the industry. We believe ourAgrify "Precision Elevated™" cultivation solution is vastly differentiated from anything else on the market in that it combines our seamlessly integrated hardware and software offerings with a wide range of associated services such as consulting, engineering, and construction to form what we believe is the most complete solution available from a single provider. The totality of our product mix and service capabilities forms an unrivaled ecosystem in what has historically been an extremely fragmented market. As a result, we believe we are well situated to create a dominant market position in the indoor agriculture sector.
We have seven wholly-owned subsidiaries,AGM Service Corp LLC (formerlyAGM Service Corp Inc. ),TriGrow Systems, LLC ("TriGrow", which acted as our exclusive distributor and which was acquired inJanuary 2020 asTriGrow Systems, Inc. and converted toTriGrow Systems, LLC inMay 2020 ),Harbor Mountain Holdings, LLC ("HMH", which assembled and produced many of our products and which was acquired inJuly 2020 ),Ariafy Finance, LLC ,Agxion, LLC ,Cascade Sciences, LLC (which was acquired as part of the Precision-Cascade Acquisition) andPrecision Extraction NewCo, LLC (which is a newly formed subsidiary in connection with the Precision-Cascade Acquisition). We also own 50% ofTeejan Podponics International LLC ("TPI") sinceDecember 2018 ; 60% ofAgrify-Valiant, LLC , formed inDecember 2019 ; and 75% ofAgrify Brands, LLC (formerlyTriGrow Brands, LLC , which was acquired as part of theJanuary 2020 acquisition of TriGrow). For further details about theJanuary 2020 andJuly 2020 acquisitions please refer to our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theU.S. Securities and Exchange Commission ("SEC") onApril 2, 2021 . Public Offerings OnFebruary 1, 2021 , we completed an initial public offering ("IPO") of 5,400,000 shares of our common stock at a price of$10.00 per share, less certain underwriting discounts and commissions. OnFebruary 4, 2021 , we closed on the sale of an additional 810,000 shares of common stock on the same terms and conditions pursuant to the exercise of the underwriters' over-allotment option. In connection with the IPO, we granted the underwriters warrants to purchase an aggregate of 186,300 shares of common stock (equal to 3% of the aggregate number of shares of common stock issued in the IPO) at an exercise price of$12.50 per share (equal to 125% of the IPO price). The exercise of the over-allotment option brought the total number of shares of common stock sold by us in the IPO to 6,210,000 shares and the total net proceeds received by us to approximately$57 million , after deducting underwriting discounts and commissions and estimated offering expenses. 22 OnFebruary 19, 2021 , we consummated a secondary public offering (the "February Offering") of 5,555,555 shares of our common stock at a price of$13.50 per share, less certain underwriting discounts and commissions. OnMarch 22, 2021 , we closed on the sale of an additional 833,333 shares of common stock on the same terms and conditions pursuant to the exercise of the underwriters' over-allotment option. In connection with the February Offering, we granted the underwriters warrants to purchase an aggregate of 191,667 shares of common stock (equal to 3% of the aggregate number of shares of common stock issued in the February Offering) at an exercise price of$16.875 per share (equal to 125% of the February Offering). The exercise of the over-allotment option brought the total number of shares of common stock sold by us in the February Offering to 6,388,888 shares and the total net proceeds received by us to approximately$80 million , after deducting underwriting discounts and commissions and estimated offering expenses. OnSeptember 14, 2021 , we entered into a letter agreement and waiver (the "Letter Agreement"), to amend the terms of our underwriting agreement with the representative of the underwriters in the IPO. Pursuant to the Letter Agreement, the representative agreed to waive the right of first refusal included in the underwriting agreement in consideration of (i) a cash payment to the representative of$2.4 million ; and (ii) the right to participate as a co-manager with ten percent (10%) of the economics with respect to our next public offering of securities, payable in cash upon the closing of such offering.
Series A Convertible Preferred Stock
Beginning in the first quarter of 2020, we issued an aggregate of 60,000 shares of our Series A Convertible Preferred Stock, or Series A Preferred Stock, for an aggregate purchase price of$6 million . InMay 2020 , we completed our offering of Series A Preferred with the issuance of an additional 40,000 shares of Series A Preferred for an aggregate purchase price of$4 million . All outstanding shares of Series A Preferred Stock automatically converted immediately prior to the closing of our IPO into 1,373,038 shares of common stock at a conversion price of$7.72 per share.
Coronavirus ("COVID-19") Pandemic
The coronavirus was first identified in people in late 2019. COVID-19 spread rapidly throughout the world, and, inMarch 2020 , theWorld Health Organization characterized COVID-19 as a pandemic. COVID-19 is a pandemic of respiratory disease spreading from person-to-person that poses a serious public health risk. It has significantly disrupted supply chains and businesses around the world. The extent and duration of the COVID-19 impact, on our operations and financial position and on the global economy, is uncertain. Uncertainty remains regarding the length of time it will take for the COVID-19 pandemic to subside, including the time it will take for vaccines to be broadly distributed and accepted inthe United States and the rest of the world, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic. We continue to service our customers amid uncertainty and disruption linked to COVID-19 and are actively managing our business to
respond to the impact. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted inthe United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions about collection of accounts and notes receivable, the valuation and recognition of stock- based compensation expense, valuation allowance for deferred tax assets and useful life of fixed assets and intangible assets. 23 Financial Overview
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America , or GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimate, which include estimates related to accruals, stock-based compensation expense, and reported amounts of revenues and expenses during the reported period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions. Revenue Recognition
In accordance with Topic 606, we account for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party's rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.
We generate revenue from the following sources: (1) equipment sales, (2) services sales and (3) construction contracts.
We sell our equipment and services to customers under a combination of a contract and purchase order. Equipment revenue includes sales from proprietary products designed and engineered by us such as vertical farming units, container farms, integrated grow racks, and LED grow lights, and non-proprietary products designed, engineered, and manufactured by third parties such as air cleaning systems and pesticide-free surface protection. Construction contracts normally provide for payment upon completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of these contracts, they are primarily structured as fixed-price contracts, under which the Company agrees to do the entire project for a fixed amount. The Company also enters time-and-materials contracts under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including materials, as incurred at rates agreed to in the contract. The Company uses two main sub-contractors to execute the construction contracts. We generally provide a one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25, we accrue for product warranties when the loss is probable and can be reasonably estimated. AtSeptember 30, 2021 , we had no product warranty accrual our de minimis historical financial warranty experience.
Accounting for Stock-Based Compensation
We follow the provisions of ASC Topic 718, "Compensation - Stock Compensation." ASC Topic 718 establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under our Stock Option Plans. The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon our history of having never issued a dividend and management's current expectation of future action surrounding dividends. We calculate the expected volatility of the stock price based on the corresponding volatility of our peer group stock price for a period consistent with the underlying instrument's expected term. The expected lives for such grants were based on the simplified method for employees and directors. In arriving at stock-based compensation expense, we estimate the number of stock-based awards that will be forfeited due to employee turnover. Our forfeiture assumption is based primarily on its turn-over historical experience. If the actual forfeiture rate is higher than the estimated forfeiture rate, then an adjustment will be made to increase the estimated forfeiture rate, which will result in a decrease to the expense recognized in our financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an adjustment will be made to lower the estimated forfeiture rate, which will result in an increase to expense recognized in our financial statements. The expense we recognize in future periods will be affected by changes in the estimated forfeiture rate and may differ significantly from amounts recognized in the current period.
It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed above.
24 Fair Value of Common Stock Historically, for all periods prior to our IPO, the fair values of the shares of common stock underlying our share-based awards were determined on each grant date by our board of directors. Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; our financial condition and operating results, including our levels of available capital resources; equity market conditions affecting comparable public companies; general U.S. market conditions; and the lack of marketability of our common stock. Valuations of our common stock were prepared by an unrelated third-party valuation firm in accordance with the guidance provided by theAmerican Institute of Certified Public Accountants Practice Guide , Valuation of Privately-Held-Company Equity Securities Issued as Compensation. For our valuation performed onMarch 20, 2020 , andSeptember 14, 2020 , we used the income and market methods to estimate our enterprise value under various financing scenarios based on the discounted cash flow approach and a market approach of comparable peer public companies. The estimated enterprise value under each method was then allocated to the common stock, discount for lack of marketability was applied, and the resulting value of common stock was probability-weighted across the various financing scenarios to determine the fair value of common stock.
The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.
Results of Operations
Comparison of the Three and Nine Months Ended
The following table summarizes our results of operations for the three and nine months endedSeptember 30, 2021 , as compared to the three and nine months endedSeptember 30, 2020 : Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 Revenue, net$ 15,751 $ 2,813 $ 34,584 $ 7,734 Cost of goods sold 16,131 3,012 34,977 6,874 Gross (loss) profit (380 ) (199 ) (393 ) 860 OPERATING EXPENSES Research and development 827 449 2,483 2,392 Selling, general and administrative expenses 8,595 1,937 18,850 6,940 Total operating expenses 9,422 2,386 21,333 9,332 Operating loss (9,802 ) (2,585 ) (21,726 ) (8,472 ) OTHER INCOME (EXPENSE), NET Interest income (expense), net 45 (103 ) 68 (139 ) Other expenses (15 ) - (78 ) - Gain on extinguishment of notes payable - - 2,685 - Other income (expense), net 30 (103 ) 2,675 (139 ) Net loss before non-controlling interest (9,772 ) (2,688 ) (19,051 ) (8,611 ) (Loss) gain attributable to non-controlling interest (14 ) 17 153 (49 ) Net loss attributable to Agrify Corporation.$ (9,758 ) $ (2,705 ) $ (19,204 ) $ (8,562 ) Net loss per share attributable to common stockholders - basic and diluted$ (0.47 ) $ (0.67 ) $ (1.07 ) $ (2.13 ) Weighted average common shares outstanding - basic and diluted 20,834,388 4,211,677
18,068,736 4,163,860 25 Revenues
Our goal is to provide our customers with a variety of products to address their entire indoor agriculture needs. Our core product offering includes ourAgrify Vertical Farming Units (or AVFUs) and Agrify Integrated Grow Racks with our Agrify™ Insights software, which in 2020 and 2021 are supplemented with environmental control products, grow lights, and facility build-out services. We continue to monitor and address the COVID-19 pandemic impacts on our supply chain. Although the availability of various products is dependent on our suppliers, their locations, and the extent to which they are impacted by the COVID-19 pandemic, we are proactively working with manufacturers to meet the needs of our customers during the pandemic. Product shortages have generally led to fluctuations in prices globally, with corresponding impacts to sales and interim profits. We generate revenue from sales of cultivation solutions, including ancillary products and services, Agrify™ Insights software and facility build-outs. We believe that our product mix form an integrated ecosystem which allows us to be engaged with our potential customers from early stages of the grow cycle - first during the facility build-out, to the choice of cultivation solutions and then running the grow business with our Agrify™ Insights software. We believe that delivery of each solution in the grow cycle will generate sales of additional solutions and services.
The following table provides a breakdown of our revenue for the three and nine
months ended
Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 Cultivation solutions, including ancillary products and services$ 2,702 $ 99 $
3,969$ 4,594 Agrify™ Insights software - - 8 - Facility build-outs 12,995 2,597 30,466 3,019 Services 54 117 141 121$ 15,751 $ 2,813 $ 34,584 $ 7,734 Revenue for the three months endedSeptember 30, 2021 and 2020 was generated mainly from facility build outs and cultivation solutions, respectively. For the three months endedSeptember 30, 2021 and 2020, we sold 114 and 0 AVFUs, respectively.
Revenue for the nine months ended
26 Cost of Revenues
Cost of goods sold include direct cost of parts and outsourced assembly and installation services that are necessary for delivery of our products.
The following table provides a breakdown of our cost of revenue for the three
and nine months ended
Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 Cultivation solutions, including ancillary products and services$ 3,570 $ 505 $
5,456$ 3,945 Facility build-outs 12,561 2,507 29,521 2,929$ 16,131 $ 3,012 $ 34,977 $ 6,874
During the first six months of 2020, we outsourced the manufacturing of our AVFUs to HMH, which we acquired inJuly 2020 . Although the primary reason we acquired HMH was to expand our research, development and testing capabilities, the acquisition will also provide us with internal capabilities to manufacture small quantities of AVFUs and to reduce our cost of manufacturing. In addition, inDecember 2020 , we entered into a five-year supply agreement withMack Molding Co. ("Mack") pursuant to which Mack will become a key supplier of our AVFUs. InFebruary 2021 , we placed a purchase order with Mack amounting to approximately$5.2 million towards initial production of AVFUs during 2021. InJune 2021 , the Company increased the purchase order with Mack to approximately$11.5 million towards production of AVFUs during 2021 and 2022. We believe the supply agreement with Mack will provide us with increased scaling capabilities and the ability to meet the potential future demand of our customers more efficiently. The supply agreement contemplates that, following an introductory period, we will negotiate a minimum percentage of our AVFU requirements that we will purchase from Mack each year based on the agreed upon pricing formula. The introductory period is not time-based but rather refers to the production of an initial number of units after which the parties have rights to adjust pricing and negotiate a certain minimum requirements percentage. We believe this approach will result in both parties making a more informed decision with respect to the pricing and other terms of the supply agreement with Mack. Gross Profit (Loss) Our gross profit (loss) represents total revenue less the cost of goods sold, and gross margin percentage is gross profit (loss) expressed as a percentage of total revenue. For the three months endedSeptember 30, 2021 , our gross loss was$380 compared to a gross loss of$199 for the three months endedSeptember 30, 2020 . For the nine months endedSeptember 30, 2021 , our gross loss was$393 compared to a gross profit of$860 for the nine months endedSeptember 30, 2020 . Our gross profit (loss) margin percentage decreased to (2.4%) for the three months endedSeptember 30, 2021 compared to (7.1%) in the same period in 2020. The decrease in gross loss was primarily related to an increase in outside services for the production of AVFUs of$415 , discount on the sale of AVFUs for$399 , which was partially offset by an increase in facility build outs that contributed$433 to gross profit. Our gross profit (loss) margin percentage decreased to (1.1%) for the nine months endedSeptember 30, 2021 compared to a 11.1% increase in the same period in 2020. The decrease in gross profit was primarily related to (i) an increase in outside services in the production of AVFU's during the quarter of$415 and other product related increases of$523 , (ii) the discount on the sale of AVFU's sold during the quarter of$399 , and (iii) revenue mix that included higher revenue from facility build-outs which contributed$944 to gross profit. Research and Development
Research and development expenses consisted primarily of costs incurred for the development of our Agrify™ Insights software and next generation AVFUs, which includes:
? employee-related expenses, including salaries, benefits, and travel;
? expenses incurred by subcontractor under agreements to provide engineering work
related to the development of our next generation AVFUs;
? expenses related to our facilities, depreciation, and other expenses, which
include direct and allocated expenses for rent and maintenance of facilities,
insurance and other supplies. 27 For the three months endedSeptember 30, 2021 and 2020, research and development expenses were$827 and$449 , respectively. The increase of$378 is primarily attributable to increase in employee-related expenses, including salaries, benefits, bonus, and stock-based compensation of$718 . The increase in expenses was offset by the halted development of hardware solution for deployment of rapid grow solution of$141 in the third quarter of fiscal 2020 and expenses related to grant of stock options in the amount of$121 . For the nine months endedSeptember 30, 2021 and 2020, research and development expenses were$2,483 and$2,392 , respectively. The increase of$91 is primarily attributable increase in employee-related expenses, including salaries, benefits, bonus, and stock-based compensation of approximately$980 and an increase in other costs amounting to$425 . The increase in expenses was offset by the halted development of hardware solution for deployment of rapid grow solution of$813 during 2020 and a decrease in consulting fees of$392 . As a percentage of net revenue, research and development expenses were 5.3% and 16%, respectively, from total revenue for the three months endedSeptember 30, 2021 and 2020. As a percentage of net revenue, research and development expenses were 7.1% and 30.9%, respectively, from total revenue for the nine months endedSeptember 30, 2021 and 2020 (or 7.1% and 20.4% when excluding the one-time halted cost). We expect to continue to invest in future developments of our AVFUs and Agrify™ Insights software. In the coming years, we believe that research and development expenses measured as percentage of revenue will decrease due to an increase in our total revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of salaries and related costs for personnel, including stock-based compensation and travel expenses, in selling, executive and other administrative functions. Other general and administrative expenses include professional fees for legal, consulting and accounting services as well as facility related costs.
For the three months endedSeptember 30, 2021 and 2020, general and administrative expenses were$8,595 and$1,937 , respectively. The increase is attributable mainly to payroll and related expenses of$1,356 , stock-based compensation in the amount of$855 , one time termination of financing in the amount of$2,400 , legal expenses of$438 , insurance expenses of$735 and depreciation and amortization expenses of$157 . For the nine months endedSeptember 30, 2021 and 2020, general and administrative expenses were$18,850 and$6,940 , respectively. The increase is attributable mainly to payroll and related expenses of$2,726 , stock-based compensation in the amount of$3,289 , one time termination of financing$2,400 , insurance expenses of$1,843 , legal expenses of$571 , marketing and sales related expenses of$496 and depreciation and amortization expenses of$401 . Other Income (Expense), Net Interest income was$45 for the three months endedSeptember 30, 2021 , compared to interest expense of$103 for the three months endedSeptember 30, 2020 , reflecting a change of$148 . Interest income was$68 for the nine months endedSeptember 30, 2021 , compared to interest expense of$139 for the nine months endedSeptember 30, 2020 , reflecting a change of$207 . The increase in interest income is attributable mainly to interest from held to maturity securities. Other expenses were$15 and$78 for the three and nine months endedSeptember 30, 2021 , respectively, compared to null for the three and nine months endedSeptember 30, 2020 , are attributable to interest expense related items. Gain on extinguishment of notes payable was null and$2,685 for the three and nine months endedSeptember 30, 2021 , respectively, compared to null for the three and nine months endedSeptember 30, 2020 . 28
Income (Loss) Attributable to Non-Controlling Interest
We consolidate the results of operations of two less than wholly-owned entities into our consolidated results of operations. OnDecember 8, 2019 , we formedAgrify-Valiant, LLC , a joint-venture limited liability company in which we are 60% majority owner andValiant-America, LLC owns 40%.Agrify-Valiant, LLC started its operations during the second quarter of 2020. OnJanuary 22, 2020 , as part of the acquisition of TriGrow, we received TriGrow's 75% interest inAgrify Brands, LLC (formerlyTriGrow Brands, LLC ), a licensor of an established portfolio of consumer brands that utilize our grow technology. The license of these brands is ancillary to the sale of our AVFUs and provides a means to differentiate customers' products in the marketplace. It is not a material aspect of our business and we have not realized any royalty income. Accordingly, we are currently evaluating whether to continue this legacy business from an operational standpoint, as well as from a legal and regulatory perspective.
Loss attributable to non-controlling interest represents the portion of profit (or loss) that are attributable to non-controlling interest calculated as a product of the net income of the entity multiplied by the percentage of ownership held by the non-controlling interest.
Liquidity and Capital Resources
Upon the closing of the February Offering, we had approximately$139 million in cash and cash equivalents. We believe such amount, together with cash flows from financing, will be sufficient to support our planned operations for at least the next 12 months. Our current working capital needs are to support accounts receivable growth, manage inventory to meet demand forecasts and support operational growth. Our long-term financial needs primarily include working capital requirements and capital expenditures. There are many factors that may negatively impact our available sources of funds in the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of our securities. The amount of cash generated from operations is dependent upon factors such as the successful execution of our business strategy and general economic conditions. We may opportunistically raise debt capital, subject to market and other conditions. Additionally, as part of our growth strategies, we may also raise debt capital for strategic alternatives and general corporate purposes. If additional financing is required from outside sources, we may not be able to raise such capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected. Indebtedness
We entered into two Loan Agreements and Promissory Notes (collectively the "PPP Loan") withBank of America pursuant to the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") administered by theU.S. Small Business Administration . We received total proceeds of approximately$823 from the unsecured PPP Loans which are scheduled to mature during 2022 and 2025. Subject to certain conditions, the PPP Loan may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP. We applied for the forgiveness of the PPP Loans during the third and fourth quarters of 2021 for approximately$44 . If the remaining principal amount is not forgiven in full, we would be obligated to repay any principal amount not forgiven and interest accrued thereon. Cash Flows
The following table presents the major components of net cash flows (used in)
and provided by operating, investing and financing activities for the nine
months ended
Nine months ended September 30, 2021 2020 Net cash (used in) provided by: Operating Activities$ (17,557 ) $ (10,723 ) Investing Activities (84,683 ) (1,195 ) Financing Activities$ 138,875 $ 16,670 29
Cash Flow from Operating Activities
For the nine months endedSeptember 30, 2021 , we incurred a net loss of$19,204 , which included non-cash expenses of$508 related to depreciation and amortization,$4,007 in connection with the issuance and acceleration of stock options, stock-based payment of$176 related to HMH acquisition, non-cash interest expenses of$50 related to loans, and gain attributed to non-controlling interest in the amount of$153 . Net cash was reduced by a$7,861 increase in accounts receivable, a$5,227 increase in prepaid inventory due to demand forecast and a$3,523 increase in prepaid expenses, partially offset by a$7,367 increase in accrued expenses and other current liabilities and$7,906 increase in accounts payable. For the nine months endedSeptember 30, 2020 , we realized net loss of$8,562 , which included non-cash expenses of$261 related to depreciation and amortization,$803 in connection with the issuance of stock options, non-cash interest expenses of$95 related to the issuance of notes payable and$119 from the disposal of fixed assets, partially offset by loss attributed to non-controlling interest in the amount of$49 . Net cash was reduced by a$622 increase in accounts receivable, a$1,673 increase in prepaid inventory due to demand forecast, a$2,099 decrease in deferred revenue, partially offset by$507 increase in accrued expenses, a$42 decrease in prepaid expenses, and a$455 increase in accounts payable.
Cash Flow from Investing Activities
Net cash used in investing activities relates to capital expenditures and purchase of held to maturity securities. The capital expenditures support growth and investment in property and equipment, to expand research, development and testing capabilities and, to a lesser extent, the replacement of existing equipment.
For the nine months ended
For the nine months ended
Cash Flow from Financing Activities
For the nine months endedSeptember 30, 2021 , net cash provided by financing activities was$138,875 , attributable to$56,961 proceeds from our initial IPO,$79,839 from our secondary public offering, both net of fees, and proceeds from the exercise of options and warrants of$2,229 , offset by$154 payments of financing leases. For the nine months endedSeptember 30, 2020 , net cash provided by financing activities was$16,670 , primarily attributable to the$10,000 proceeds from the issuance of our Series A Preferred Stock,$5,800 proceeds from the issuance of notes payable and the$823 PPP Loan under the CARES Act. 30
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