ALPHA TEKNOVA, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes thereto included in Part I, Item I of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto for the year endedDecember 31, 2021 , included in the 2021 Annual Report on Form 10-K (the 2021 Annual Report on Form 10-K) filed onMarch 18, 2022 with theSecurities and Exchange Commission (SEC). You should review the sections titled "Cautionary Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements and in Part II, Item 1A, "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in the 2021 Annual Report on Form 10-K. Unless the context otherwise requires, the terms "Teknova," the "Company," "we," "us," and "our" in this Quarterly Report on Form 10-Q refer toAlpha Teknova, Inc. Overview Since our founding in 1996, we have been providing critical reagents that enable the discovery, research, development, and production of biopharmaceutical products such as drug therapies, novel vaccines, and molecular diagnostics. Our more than 3,000 active customers span the entire continuum of the life sciences market, including leading pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostics franchises, and academic and government research institutions. We offer three primary product types: pre-poured media plates for cell growth and cloning, liquid cell culture media and supplements for cellular expansion, and molecular biology reagents for sample manipulation, resuspension, and purification. In 2017, we achievedInternational Organization for Standardization (ISO) 13485:2016 certification, enabling us to manufacture products for use in diagnostic and therapeutic applications. Our certification allows us to offer solutions across the entire customer product development workflow, supporting our customers' need for materials in greater volume and that meet increasingly stringent regulatory requirements as they scale from research to commercialization. We manufacture our products at ourHollister, California headquarters and stock inventory of raw materials, components, and finished goods at that location. We rely on a limited number of suppliers for certain raw materials, and we have no long-term supply arrangements with our suppliers, as we order on a purchase order basis. We ship our products directly from our warehouses inHollister, California andMansfield, Massachusetts to our customers and distributors pursuant to purchase orders. We typically recognize revenue when products are shipped. We generated revenue of$11.7 million during the three months endedJune 30, 2022 , which represents an increase of$3.4 million as compared to revenue of$8.3 million during the three months endedJune 30, 2021 . For the three months endedJune 30, 2022 and 2021, only 3.5% and 3.0%, respectively, of our revenue was generated from customers located outside ofthe United States . We generated revenue of$22.8 million during the six months endedJune 30, 2022 , which represents an increase of$5.4 million as compared to revenue of$17.4 million during the six months endedJune 30, 2021 . For the six months endedJune 30, 2022 and 2021, only 3.2% and 3.5%, respectively, of our revenue was generated from customers located outside ofthe United States . Our sales outside ofthe United States are denominated inU.S. Dollars. We had an operating loss of$6.6 million during the three months endedJune 30, 2022 , compared to an operating loss of$2.5 million during the three months endedJune 30, 2021 . We had an operating loss of$12.5 million during the six months endedJune 30, 2022 , compared to an operating loss of$3.4 million during the six months endedJune 30, 2021 . We expect our expenses will continue to increase in future periods in connection with our ongoing activities as we:
•
attract, hire and retain qualified personnel;
•
invest in processes and infrastructure to enable manufacturing automation and expand capacity;
•
develop new products and services and create intellectual property;
•
build our brand and market, and sell new and existing products and services; and
•
potentially acquire businesses or technologies to accelerate the growth of our business.
We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including the impact on our customers, employees, suppliers, business partners, and distribution channels. We are unable to predict the impact that the COVID-19 pandemic will have on our customers, employees, suppliers, business partners, and distribution channels, future financial position and operating results due to numerous uncertainties; however, any material effect on these factors could adversely impact us.
18
--------------------------------------------------------------------------------Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, rising inflation, supply chain constraints, as well as other unanticipated consequences remain unknown.
The situation surrounding the COVID-19 pandemic remains fluid, and we believe that we have, and will continue to, successfully navigate the uncertain environment. We continue to actively manage our response to the COVID-19 pandemic in collaboration with customers, team members, and business partners. For further information regarding the impact of the COVID-19 pandemic on the Company, please see Item 1A., "Risk Factors" in this report.
Results of Operations
Comparison of the Three Months Ended
The following tables set forth our results of operations for the three months
ended
For the Three Months Ended June
30,
2022 2021 $ Change % Change
Revenue $ 11,690 $ 8,313 $ 3,377 40.6 %
Cost of sales 6,443 4,959 1,484 29.9 %
Gross profit 5,247 3,354 1,893 56.4 %
Operating expenses:
Research and development 1,929 851 1,078 126.7 %
Sales and marketing 2,598 904 1,694 187.4 %
General and administrative 7,059 3,838 3,221 83.9 %
Amortization of intangible assets 287 287 - -
Total operating expenses 11,873 5,880 5,993 101.9 %
Loss from operations (6,626 ) (2,526 ) (4,100 ) 162.3 %
Other income (expenses), net
Interest income (expense), net 28 (304 ) 332 (109.2 )%
Other expense, net - (3 ) 3 (100.0 )%
Total other income (expenses), net 28 (307 ) 335 (109.1 )%
Loss before income taxes (6,598 ) (2,833 ) (3,765 ) 132.9 %
Benefit from income taxes (395 ) (583 ) 188 (32.2 )%
Net loss $ (6,203 ) $ (2,250 ) $ (3,953 ) 175.7 %
Revenue
Our revenue disaggregated by product category for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % Change
Lab Essentials $ 8,393 $ 6,456 $ 1,937 30.0 %
Clinical Solutions 2,943 1,593 1,350 84.7 %
Sample Transport - 37 (37 ) (100.0 )%
Other 354 227 127 55.9 %
Total revenue $ 11,690 $ 8,313 $ 3,377 40.6 %
Total revenue was
Lab Essentials revenue was$8.4 million for the three months endedJune 30, 2022 , an increase of$1.9 million , or 30.0%, compared to$6.5 million for the three months endedJune 30, 2021 . The growth in Lab Essentials revenue was primarily attributable to higher average revenue per customer and, to a somewhat lesser extent, to an increased number of customers. Clinical Solutions revenue was$2.9 million for the three months endedJune 30, 2022 , an increase of$1.4 million , or 84.7%, compared to$1.6 million for the three months endedJune 30, 2021 . The increase in Clinical Solutions revenue was primarily attributable to higher average revenue per customer and, to a lesser extent, to an increased number of customers. 19 --------------------------------------------------------------------------------Sample Transport revenue was not significant for the three months endedJune 30, 2022 and 2021, respectively. Beginning in early 2021 there was a decline in market demand for COVID-19 testing and an increase in market supply of sample transport products. As a result, in 2021, we decided to cease production of sample transport medium and no longer market those products.
Our revenue disaggregated by geographic region, for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % Change
United States $ 11,285 $ 8,061 $ 3,224 40.0 %
International 405 252 153 60.7 %
Total revenue $ 11,690 $ 8,313 $ 3,377 40.6 %
Revenue from sales to customers in the U.S. was $11.3 million for the three
months ended June 30, 2022 , and $8.1 million for the three months ended June 30,
2021 . Revenue from U.S. sales was consistent period over period, representing
96.5% and 97.0% of our total revenue during the three months ended June 30, 2022
and 2021, respectively.
Revenue from sales to customers in markets outside of the U.S. was $0.4 million
for the three months ended June 30, 2022 , and $0.3 million for the three months
ended June 30, 2021 . Revenue from international sales was also consistent,
representing 3.5% and 3.0% of our total revenue during the three months ended
June 30, 2022 and 2021, respectively.
Gross profit
Our gross profit for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % Change
Cost of sales $ 6,443 $ 4,959 $ 1,484 29.9 %
Gross profit 5,247 3,354 1,893 56.4 %
Gross profit % 44.9 % 40.3 %
Gross profit percentage was 44.9% for the three months ended June 30, 2022 , and
40.3% for the three months ended June 30, 2021 . The increase in gross profit
percentage for the three months ended June 30, 2022 , was primarily driven by a
$0.7 million reserve taken against Sample Transport inventory during the three
months ended June 30, 2021 , partially offset by higher labor costs.
Operating expenses
Our operating expenses for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % Change
Research and development $ 1,929 $ 851 $ 1,078 126.7 %
Sales and marketing 2,598 904 1,694 187.4 %
General and administrative 7,059 3,838 3,221 83.9 %
Amortization of intangible assets 287 287 - -
Total operating expenses $ 11,873 $ 5,880 $ 5,993 101.9 %
Research and development expenses were $1.9 million for the three months ended
June 30, 2022 , and $0.9 million for the three months ended June 30, 2021 . The
increase was primarily driven by additional headcount, supplies, and
professional fees to support our new product and process development efforts.
Sales and marketing expenses were $2.6 million for the three months ended June
30, 2022 , and $0.9 million for the three months ended June 30, 2021 . The
increase was primarily driven by additional headcount to develop our commercial
presence and improve customer support, as well as higher marketing expenses.
General and administrative expenses were $7.1 million for the three months ended
June 30, 2022 , and $3.8 million for the three months ended June 30, 2021 . The
increase was primarily driven by additional headcount, professional fees,
stock-based compensation, and insurance expenses incurred to build the
infrastructure necessary to support our growth strategy.
20
--------------------------------------------------------------------------------Other income (expenses), net
Our other income (expenses), net for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % Change
Interest income (expense), net $ 28 $ (304 ) $ 332 (109.2 )%
Other expense, net - (3 ) 3 (100.0 )%
Total other income (expenses), net $ 28 $ (307
)
Total other income (expenses), net were not significant for the three months endedJune 30, 2022 , as we capitalized$0.3 million of interest during the period. For the three months endedJune 30, 2021 , total other expenses were$0.3 million , which primarily related to interest expense related to our long-term debt agreement entered into in lateMarch 2021 .
Benefit from income taxes
Our benefit from income taxes for the three months ended
For the Three Months Ended June 30,
2022 2021 $ Change % ChangeBenefit from income taxes $ (395 ) $ (583 )$ 188 (32.2 )% Effective tax rate 6.0 % 20.6 % Our benefit from income taxes was$0.4 million for the three months endedJune 30, 2022 , which was primarily due to a federal deferred tax benefit from losses in that period. Our benefit from income taxes was$0.6 million for the three months endedJune 30, 2021 . The decrease in our benefit from income taxes for the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 , was attributable to operating losses not expected to be benefitted.
Comparison of the Six Months Ended
The following tables set forth our results of operations for the six months
ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Revenue $ 22,837 $ 17,391 $ 5,446 31.3 %
Cost of sales 12,241 9,012 3,229 35.8 %
Gross profit 10,596 8,379 2,217 26.5 %
Operating expenses:
Research and development 3,942 1,548 2,394 154.7 %
Sales and marketing 4,195 1,609 2,586 160.7 %
General and administrative 14,354 8,002 6,352 79.4 %
Amortization of intangible assets 574 574 - -
Total operating expenses 23,065 11,733 11,332 96.6 %
Loss from operations (12,469 ) (3,354 ) (9,115 ) 271.8 %
Other income (expenses), net
Interest income (expense), net 15 (296 ) 311 (105.1 )%
Other expense, net - (2 ) 2 (100.0 )%
Total other income (expenses), net 15 (298 ) 313 (105.0 )%
Loss before income taxes (12,454 ) (3,652 ) (8,802 ) 241.0 %
Benefit from income taxes (754 ) (747 ) (7 ) 0.9 %
Net loss $ (11,700 ) $ (2,905 ) $ (8,795 ) 302.8 %
21--------------------------------------------------------------------------------
Revenue
Our revenue disaggregated by product category for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Lab Essentials $ 15,368 $ 13,246 $ 2,122 16.0 %
Clinical Solutions 6,755 2,664 4,091 153.6 %
Sample Transport 6 961 (955 ) (99.4 )%
Other 708 520 188 36.2 %
Total revenue $ 22,837 $ 17,391 $ 5,446 31.3 %
Total revenue was
Lab Essentials revenue was$15.4 million for the six months endedJune 30, 2022 , an increase of$2.1 million , or 16.0%, compared to$13.2 million for the six months endedJune 30, 2021 . The growth in Lab Essentials revenue was primarily attributable to an increased number of customers and, to a somewhat lesser extent, to higher average revenue per customer. Clinical Solutions revenue was$6.8 million for the six months endedJune 30, 2022 , an increase of$4.1 million , or 153.6%, compared to$2.7 million for the six months endedJune 30, 2021 . The increase in Clinical Solutions revenue was primarily attributable to higher average revenue per customer and, to a lesser extent, to an increased number of customers.Sample Transport revenue was not significant for the six months endedJune 30, 2022 , compared to$1.0 million for the six months endedJune 30, 2021 . The decline inSample Transport revenue was due to the decline in market demand for COVID-19 testing and an increase in market supply of sample transport products, each of which began in early 2021. As a result, in 2021, we decided to cease production of sample transport medium and no longer market those products.
Our revenue disaggregated by geographic region, for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
United States $ 22,105 $ 16,776 $ 5,329 31.8 %
International 732 615 117 19.0 %
Total revenue $ 22,837 $ 17,391 $ 5,446 31.3 %
Revenue from sales to customers in the U.S. was $22.1 million for the six months
ended June 30, 2022 , and $16.8 million for the six months ended June 30, 2021 .
Revenue from U.S. sales was consistent period over period, representing 96.8%
and 96.5% of our total revenue during the six months ended June 30, 2022 and
2021, respectively.
Revenue from sales to customers in markets outside of the U.S. was $0.7 million
for the six months ended June 30, 2022 , and $0.6 million for the six months
ended June 30, 2021 . Revenue from international sales was also consistent,
representing 3.2% and 3.5% of our total revenue during the six months ended June
30, 2022 and 2021, respectively.
Gross profit
Our gross profit for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Cost of sales $ 12,241 $ 9,012 $ 3,229 35.8 %
Gross profit 10,596 8,379 2,217 26.5 %
Gross profit % 46.4 % 48.2 %
Gross profit percentage was 46.4% for the six months ended June 30, 2022 , and
48.2% for the six months ended June 30, 2021 . The decrease in gross profit
percentage for the six months ended June 30, 2022 , was primarily driven by
higher labor costs, partially offset by a $0.7 million reserve taken against
Sample Transport inventory during the six months ended June 30, 2021 .
22
--------------------------------------------------------------------------------Operating expenses
Our operating expenses for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Research and development $ 3,942 $ 1,548 $ 2,394 154.7 %
Sales and marketing 4,195 1,609 2,586 160.7 %
General and administrative 14,354 8,002 6,352 79.4 %
Amortization of intangible assets 574 574 - -
Total operating expenses $ 23,065 $ 11,733 $ 11,332 96.6 %
Research and development expenses were
Sales and marketing expenses were$4.2 million for the six months endedJune 30, 2022 , and$1.6 million for the six months endedJune 30, 2021 . The increase was primarily driven by additional headcount to develop our commercial presence and improve customer support, as well as higher marketing expenses. General and administrative expenses were$14.4 million for the six months endedJune 30, 2022 , and$8.0 million for the six months endedJune 30, 2021 . The increase was primarily driven by additional headcount as well as professional fees, stock-based compensation, and insurance expense incurred to build the infrastructure necessary to support our growth strategy.
Other income (expenses), net
Our other income (expenses), net for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Interest income (expense), net $ 15 $ (296 ) $ 311 (105.1 )%
Other expense, net - (2 ) 2 (100.0 )%
Total other income (expenses), net $ 15 $
(298 )
Total other income (expenses), net were not significant for the six months endedJune 30, 2022 , as we capitalized$0.6 million of interest during the period. For the six months endedJune 30, 2021 , total other expenses were$0.3 million , which primarily related to interest expense.
Benefit from income taxes
Our benefit from income taxes for the six months ended
For the Six Months Ended June 30,
2022 2021 $ Change % Change
Benefit from income taxes $ (754 ) $ (747 ) $ (7 ) 0.9 %
Effective tax rate 6.1 % 20.5 %
Our benefit from income taxes was $0.8 million for the six months ended June 30,
2022 , which was primarily due to a federal deferred tax benefit from losses in
that period. Our benefit from income taxes was $0.7 million for the six months
ended June 30, 2021 . The increase in our benefit from income taxes for the six
months ended June 30, 2022 , compared to the six months ended June 30, 2021 , was
attributable to an increase in operating loss.
Liquidity and Capital Resources
Our principal liquidity requirements are to fund our operations (which includes, but is not limited to, maintaining sufficient levels of inventory to meet the anticipated demand of our customers) and our capital expenditures, including the expansion of our manufacturing operations such as the construction of a new manufacturing, warehouse, and distribution facilities inHollister, California . The primary source of financing for our operations was our initial public offering (IPO), which we completed inJune 2021 , and resulted in net proceeds to us of$99.1 million , after deducting underwriting discounts and commissions of$7.7 million and offering expenses of$3.6 million . As ofJune 30, 2022 , we had$68.4 million in net working capital, which included$64.7 million in cash and cash equivalents. 23 -------------------------------------------------------------------------------- In addition to our existing cash and cash equivalents balance, our principal source of liquidity is our credit facility as described below in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Credit Facility." To facilitate our expected growth, we may also lease or purchase additional office, manufacturing, warehouse, and/or distribution facilities. See "Notes to Financial Statements-Note 7-Leases." We expect to continue to make investments as we expand our operations and increase capacity. In particular, we are building a new manufacturing facility inHollister, California , which we expect to be a significant use of cash over the next 6 to 12 months. We are carrying the majority of these fixed assets as construction in progress on our balance sheet until parts of the facility are put into service. These uses of cash are not reasonably likely to result in material changes in the Company's liquidity. The Company may also use its liquidity to pursue potential acquisitions that further or accelerate its strategy.
Credit Facility
OnMay 10, 2022 , the Company entered into the Amended and Restated Credit and Security Agreement (Term Loan) as borrower, withMidCap Financial Trust (MidCap), as agent and lender, and the additional lenders from time to time party thereto (the Amended Term Loan Credit Agreement) and the Amended and Restated Credit and Security Agreement (Revolving Loan) as borrower, with MidCap as agent and lender, and the additional lenders from time to time party thereto (the Amended Revolving Loan Credit Agreement, together with the Amended Term Loan Credit Agreement, the Amended Credit Agreement). The Amended Credit Agreement provides for a$57.135 million credit facility (the Amended Credit Facility) consisting of a$52.135 million senior secured term loan (the Amended Term Loan) and a$5.0 million working capital facility (the Amended Revolver). The Amended Term Loan consists of the$12.0 million balance made available in 2021 under the previous credit facility and an additional$40.135 million , staged such that$5.135 million was funded upon closing of the Amended Credit Agreement, an additional$5.0 million will be funded onOctober 31, 2022 ,$10.0 million is available in the first half of 2023,$10.0 million is available in the second half of 2023 and$10.0 million is available in the first half of 2024, with the borrowing in the second half of 2023 and in the first half of 2024 being contingent upon achieving trailing twelve months of Clinical Solutions revenue of$15.0 million and$19.0 million , respectively, and liquidity requirements (as defined in the Amended Credit Agreement) of$10.0 million and$15.0 million , respectively. The maximum loan amount under the Amended Revolver is$5.0 million , and the Company may request the lenders to increase such amount up to$15.0 million . Borrowings on the Amended Revolver are limited in accordance with a borrowing base calculation. The interest on the Amended Term Loan is based on the annual rate of one-month London Inter-Bank Offered Rate (LIBOR) plus 6.45%, subject to a LIBOR floor of 1.00%. If any advance under the Term Loan is prepaid at any time, the prepayment fee is based on the amount being prepaid and an applicable percentage amount, such as 3%, 2%, or 1%, based on the date the prepayment is made after the closing date of the Amended Term Loan. Interest on the outstanding balance of the Amended Revolver will be payable monthly in arrears at an annual rate of one-month LIBOR plus 3.75%, subject to a LIBOR floor of 1.00%. The maturity date of the Amended Credit Facility isMay 1, 2027 . On the date of termination of the Amended Term Loan or the date on which the obligations under the Amended Term Loan become due and payable in full, the Company will pay an exit fee in an amount equal to five percent of the total aggregate principal amount of term loans made pursuant to the Amended Term Loan as of such date. The Amended Credit Agreement contains a financial covenant based upon a trailing twelve months of net revenue, including a requirement of$42.5 million in the twelve months endingDecember 31, 2022 . We believe these sources of liquidity will be sufficient to fund our liquidity requirements for at least the next 24 months. We may, however, require or elect to secure additional financing as we continue to execute our business strategy. If we require or elect to raise additional funds, we may do so through equity or debt financing, which may or may not be available on favorable terms and could require us to agree to covenants that limit our operating flexibility. We are currently working with our lender to amend certain financial covenants applicable to the Amended Term Loan and the Amended Revolver to take account of our revised revenue outlook for 2022. However, we can make no assurances that such amendments will be agreed by our lender. If we breach a financial covenant of a credit agreement, then substantially all our outstanding debt could become due, and our credit agreements could be terminated, which could have a material adverse impact on our operations and liquidity. To meet the Company's future working capital needs, the Company may need to raise additional debt or equity financing. While the Company has implemented a plan to control its expenses and to satisfy its obligations under the Amended Credit Facility throughout the one year period from the date of issuance of these interim financial statements, the Company cannot guarantee that it will be able to maintain compliance with its loan agreements, raise additional equity, contain expenses, or increase revenue. 24 -------------------------------------------------------------------------------- The following table sets forth, for the periods indicated, net cash flows used in operating activities, used in investing activities, and provided by financing activities (in thousands): For the Six Months Ended June 30, 2022 2021 Net cash used in operating activities$ (11,039 ) $ (1,150 ) Net cash used in investing activities (16,837 ) (6,202 ) Net cash provided by financing activities 5,092 112,059
Net (decrease) increase in cash and cash equivalents
$ 104,707 Operating Activities Net cash used in operating activities consists primarily of net loss adjusted for certain non-cash items (including depreciation and amortization, bad debt expense, deferred taxes, loss on disposal of property, plant and equipment, inventory reserve, amortization of debt issuance costs, and stock-based compensation expense), and the effect of changes in working capital and other activities. Net cash used in operating activities was$11.0 million for the six months endedJune 30, 2022 , which primarily consisted of net loss of$11.7 million plus net adjustments for non-cash charges of$2.8 million , offset by net changes in operating assets and liabilities of$2.2 million . The primary non-cash adjustments to net loss included$1.5 million of depreciation and amortization and$1.7 million of stock-based compensation, partially offset by$0.8 million in deferred taxes. Net cash used in changes in operating assets and liabilities consisted primarily of a$1.2 million increase in accounts receivable,$2.5 million increase in inventories, a$0.3 million decrease in accounts payable, and a$0.6 million increase in other non-current assets, partially offset by a$1.1 million decrease in income taxes receivable, a$0.7 million decrease in prepaid expenses and other current assets, and a$0.6 million increase in accrued liabilities. Net cash used in operating activities was$1.2 million for the six months endedJune 30, 2021 , which primarily consisted of net loss of$2.9 million plus net adjustments for non-cash charges of$2.1 million , offset by net changes in operating assets and liabilities of$0.3 million . The primary non-cash adjustments to net loss included$1.4 million of depreciation and amortization,$0.5 million of stock-based compensation,$0.7 million related to an inventory reserve, and$0.2 million related to a bad debt reserve, partially offset by$0.7 million in deferred taxes. Net cash used in changes in operating assets and liabilities consisted primarily of a$1.0 million increase in inventories and$0.2 million increase in income taxes receivable, partially offset by a$0.3 million decrease in accounts receivable,$0.4 million decrease in prepaid expenses and other current assets, and$0.2 million increase in accrued liabilities.
Investing Activities
Net cash used in investing activities relates primarily to capital expenditures and purchases of marketable securities, partially offset by proceeds from maturities and sales of marketable investments.
Net cash used in investing activities was
Net cash used in investing activities was$6.2 million for the six months endedJune 30, 2021 , which primarily consisted of purchases of property, plant and equipment of$8.6 million . This was partially offset by receipt of proceeds from sales and maturities of short-term marketable securities of$1.1 million and$0.7 million , respectively, and proceeds from a loan to a related party of$0.5 million . Financing Activities Net cash provided by financing activities primarily relates to proceeds from long-term debt, offset by related debt issuance costs and payment of issuance costs for the IPO. Net cash provided by financing activities was$5.1 million for the six months endedJune 30, 2022 , which was primarily attributable to proceeds from long-term debt of$5.1 million , partially offset by related debt issuance costs of$0.2 million and payment of exit fee costs related to our debt refinancing of$0.1 million . We also received proceeds of$0.1 million from the exercise of stock options and$0.1 million from issuance of common stock under our employee stock purchase plan. Net cash provided by financing activities was$112.1 million for the six months endedJune 30, 2021 , which was primarily attributable to proceeds from our IPO, net of underwriters' commissions and discounts of$102.7 million and proceeds from long-term debt of$11.9 million , partially offset by related debt issuance costs of$0.2 million and payment of costs related to our IPO of$2.3 million . 25 --------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
Our condensed financial statements have been prepared in accordance withU.S. generally accepted accounting principles (GAAP). The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, future events may cause us to change our assumptions and estimates, which may require adjustment. Actual results could differ from these estimates. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of our 2021 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies and estimates as compared to those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in the 2021 Annual Report on Form 10-K.
Emerging Growth Company and
We qualify as an "emerging growth company" as defined in the JOBS Act. As long as we qualify as an emerging growth company, we may take advantage of certain exemptions from various reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include, but are not limited to:
•
reduced obligations with respect to financial data, including presenting only two years of audited financial statements;
•
an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•
reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements; and
•
exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from adopting new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.
Under the JOBS Act, we will remain an emerging growth company until the earliest to occur of:
•
the last day of the fiscal year in which we have total annual gross revenues of
•
the last day of our fiscal year following the fifth anniversary of the date of the closing of our IPO;
•
the date on which we have issued more than
•
the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the Exchange Act) (i.e., the first day of the fiscal year after we have (i) more than$700.0 million in outstanding common equity held by our non-affiliates, measured each year on the last business day of our most recently completed second fiscal quarter, and (ii) been public for at least 12 months). We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that (i) the market value of our voting and non-voting common stock held by non-affiliates equals or exceeds$250.0 million measured on the last business day of our most recently completed second fiscal quarter, and our annual revenues are more than$100.0 million during the most recently completed fiscal year or (ii) the market value of our voting and non-voting common stock held by non-affiliates equals or exceeds$700.0 million measured on the last business day of our most recently completed second fiscal quarter. 26 --------------------------------------------------------------------------------
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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