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    BARK   US68622E1047

BARK, INC.

(BARK)
  Report
Delayed Nyse  -  04:00 2022-09-23 pm EDT
1.830 USD   +0.55%
09/16ANALYSIS-'IT'S A CAR WITH BROKEN BRAKES' : investors see unrelenting yen descent
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09/12BARK, INC. : Other Events (form 8-K)
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09/06BARK Announces Participation in the Jefferies Virtual Pet Care & Wellness Conference
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BARK, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/09/2022 | 04:58pm EDT
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our condensed
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the unaudited condensed consolidated
financial statements and notes thereto contained in this Quarterly Report on
Form 10-Q and the audited consolidated financial statements and notes thereto
for the year ended March 31, 2022 contained in the Annual Report on Form 10-K
filed with the SEC on May 31, 2022. This discussion contains forward-looking
statements and involves numerous risks and uncertainties, including, but not
limited to, those described in the "Risk Factors" sections of this Quarterly
Report on Form 10-Q. Actual results may differ materially from those contained
in any forward-looking statements. Unless the context otherwise requires,
references to "we", "us", "our", "the Company" and "BARK" are intended to mean
the business and operations of BARK, Inc. and its subsidiaries. The unaudited
condensed consolidated financial statements for the three months ended June 30,
2022 and 2021, respectively, present the financial position and results of
operations of BARK, Inc. and its wholly-owned subsidiaries.

Overview


Founded in 2011, BARK is the world's most dog-centric company, devoted to making
dogs happy with the best products, services and content. Our dog-obsessed team
applies its data-driven understanding of what makes each dog special by
designing playstyle-specific toys, satisfying treats, great food for your dog's
breed, effective and easy to use dental care, and dog-first experiences that
foster the health and happiness of dogs everywhere. We aim to build lifelong
relationships with our customers and their pups in order to drive strong
customer retention and lifetime value. BARK loyally serves dogs with themed toys
and treats subscriptions, BarkBox and BARK Super Chewer; custom product
collections through retail partners, including Target and Amazon; high-quality,
nutritious meals made for your breed with BARK Food; and products that meet
dogs' dental needs with BARK Bright. As a direct to consumer-first company, our
growing data and machine-learning capabilities inform future product development
and enable BARK to provide personalized experiences and product offerings for
dog parents nationwide.

Impact of COVID-19

The extent to which the COVID-19 pandemic will continue to impact our business
will depend on future developments related to the geographic spread of the
disease, the duration and severity of the outbreak, travel restrictions,
required social distancing, governmental mandates, business closures or
governmental or business disruptions, and the effectiveness of actions taken in
the United States and other countries to prevent, contain and treat the virus
and any additional government stimulus programs. These impacts are highly
uncertain and cannot be predicted with certainty.

As this crisis unfolded, we monitored conditions closely and adapted our
operations to meet federal, state and local standards, while continuing to meet
the needs of the dogs and dog parents we serve and to ensure the safety and
well-being of our team members. While conditions appear to be improving, we are
still unable to predict the duration of the COVID-19 pandemic, including the
emergence and spread of variants of COVID-19, and therefore the ultimate impact
of the COVID-19 pandemic on our operating results, financial condition and cash
flows. As such, risks still remain. In addition, the COVID-19 pandemic has had,
and continues to have, an unprecedented and unexpected effect on the global
economy, civil society, labor markets, and certain industries. As a result, it
is difficult to predict the magnitude or scope of the impact these effects will
or may have directly, or indirectly, on our business, operating results and
financial condition.

We continued to experience increases in inbound freight costs due to the
challenges in the current import market, as transpacific ships and trade lanes
continue to be overburdened with volume and experience a significant shortage of
equipment and capacity due to the COVID-19 pandemic. We expect increased freight
costs and supply chain disruptions to continue to impact our business, although
we cannot predict the duration or magnitude of such impacts. Please refer to the
"Special Note Regarding Forward-Looking Statements" and the "Risk Factors" in
this Quarterly Report on Form 10-Q.

                                       18

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Key Performance Indicators


We use the following key financial and operating metrics to evaluate our
business and operations, measure our performance, identify trends affecting our
business, project our future performance, and make strategic decisions. These
key financial and operating metrics should be read in conjunction with the
following discussion of our results of operations and financial condition
together with our condensed consolidated financial statements and the related
notes and other financial information included elsewhere in this Quarterly
Report on Form 10-Q.

                                                       Three Months Ended
                                                            June 30,
                                                     2022                    2021
Subscription Shipments (in thousands)                           3,811       

3,608

Active Subscriptions (in thousands)                             2,276       

1,952

New Subscriptions (in thousands)                                  259              280
CAC                                       $                     50.80    $       48.36
LTV:CAC                                                          4.5x             5.0x
Average Order Value                       $                     31.07    $       29.21


Subscription Shipments

We define Subscription Shipments as the total number of subscription product
shipments shipped in a given period. Subscription Shipments does not include
gift subscriptions or one-time subscription shipments.

Active Subscriptions


Our ability to expand the number of Active Subscriptions is an indicator of our
market penetration and growth. We define Active Subscriptions as the total
number of unique product subscriptions with at least one shipment during the
last 12 months. Active Subscriptions does not include gift subscriptions or
one-time subscription purchases.

New Subscriptions

We define New Subscriptions as the number of unique subscriptions with their first shipment occurring in a period.

Customer Acquisition Cost


Customer Acquisition Cost ("CAC") is a measure of the cost to acquire New
Subscriptions in our Direct to Consumer business segment. This unit economic
metric indicates how effective we are at acquiring each New Subscription. CAC is
a monthly measure defined as media spend in our Direct to Consumer business
segment in the period indicated, divided by total New Subscriptions in such
period. Direct to Consumer media spend is primarily comprised of internet and
social media advertising fees.

Lifetime Value

Lifetime Value ("LTV") is the dollar value of each subscription as measured by the cumulative Direct to Consumer Gross Profit for the average life of the subscription.

Average Order Value

Average Order Value ("AOV") is Direct to Consumer revenue for the period divided by Subscription Shipments for the same period.

                                       19

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Components of Our Results of Operations


We operate with two reportable segments: Direct to Consumer and Commerce, to
reflect the way our chief operating decision maker ("CODM") reviews and assesses
the performance of the business.

Revenue

Direct to Consumer

Direct to Consumer revenue consists of product sales through our monthly subscription boxes, as well as sales through our website, BarkShop.com ("BarkShop"):


Toys and Treats Subscriptions-Our principal revenue generating products consist
of a tailored assortment of premium and highly durable toys and treats sold
through our BarkBox and Super Chewer monthly subscriptions. BarkBox and Super
Chewer subscription rates vary based on the type of subscription plan selected
by the customer, with Super Chewer's price point being slightly higher based on
additional costs of the more durable product, but resulting in similar gross
margins. Subscription plans are offered as monthly, six month or annual
commitments. Subscription revenue is recognized at a point in time as control is
transferred to the subscriber upon delivery of each monthly box.

On a monthly basis, toys and treats subscription customers have the option to purchase additional toys, treats, or essential products to add to their respective subscription boxes, through our add to box ("ATB") offering. ATB revenue is recognized at a point in time as control is transferred to the customer upon delivery of goods to the subscriber.


BARK Bright-BARK Bright revenue consists of sales of our health and wellness
solutions, with our initial product being a dental solution, sold primarily
through monthly subscriptions. Subscription revenue is recognized at a point in
time as control is transferred to the subscriber upon delivery of each monthly
box. Revenue for BARK Bright sales to retailers and through marketplaces is
recognized at a point in time as controls is transferred to the customer upon
delivery of goods..

BARK Food-BARK Food revenue consists of sales of personalized and nutritious
meals for dogs sold at a meal per day price. Revenue is recognized at a point in
time, as control is transferred to the customer upon delivery of goods.

BarkShop-BarkShop revenue consists of sales of individual toys, treats and other
products through our website, BarkShop. Revenue relating to the sale of goods on
BarkShop is recognized at a point in time as control is transferred to the
customer upon delivery of goods.

Commerce

We also generate revenue from product sales to retailers and through marketplaces. See below for additional information on each offering.

Retail-Retail revenue consists of sales of individual BARK toys, treats, and BARK Bright health and wellness solutions, mainly through major retailers. Revenue is recognized at a point in time as control is transferred to the customer upon the delivery of goods.


Online Marketplaces-Online marketplaces revenue consists of sales of toys, BARK
Bright health and wellness solutions and BARK Home products sold through major
marketplaces. BARK Home consists of an assortment of proprietary essential
products for daily life, including dog beds, bowls, collars, harnesses and
leashes. Online marketplaces revenue is recognized upon delivery of goods to the
end customer.

                                       20
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Cost of Revenue

Cost of revenue primarily consists of the purchase price of inventory sold, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs.

Operating Expenses

Operating expenses consist of general and administrative and advertising and marketing expenses.


General and Administrative

General and administrative expenses consist primarily of compensation and
benefits costs, including stock-based compensation expense, office expense,
including rent, insurance, professional service fees, and other general overhead
costs including depreciation and amortization of right-of-use, fixed and
intangible assets, account management support teams, and commissions. General
and administrative expenses also include fees charged by third parties that
provide payment processing services, fulfillment costs, which represent costs
incurred in operating and staffing fulfillment and customer service centers,
including costs attributable to receiving, inspecting, picking, packaging and
preparing customer orders for shipment, outbound freight costs associated with
shipping orders to customers, and responding to inquiries from customers.

Advertising and Marketing


Advertising and marketing expense consists primarily of internet advertising,
promotional items, agency fees, other marketing costs and compensation and
benefits expenses, including stock-based compensation expense, for employees
engaged in advertising and marketing.

Interest Expense

Interest expense primarily consists of interest incurred under our line of credit, term loan and convertible promissory notes agreements, and amortization of debt issuance costs.


Other Income (Expense), Net

Other income (expense), net, primarily consists of changes in the fair value of our warrant liabilities and loss on extinguishment of debt.

                                       21

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Results of Operations


We operate in two reportable segments to reflect the way our chief operating
decision maker ("CODM") reviews and assesses the performance of the business.
See Note 2, "Summary of Significant Accounting Policies," in our condensed
consolidated financial statements for the three months ended June 30, 2022 and
2021 included elsewhere in this Quarterly Report on Form 10-Q.

                                                           Three Months Ended June 30,
                                                             2022                  2021               % Change
                                                                  (in thousands)
Condensed Consolidated Statements of Operation and
Comprehensive Loss Data:
Revenue
Direct to Consumer                                     $      118,397          $ 105,376                   12.4  %
Commerce                                                       12,753             12,230                    4.3  %
Total revenue                                                 131,150            117,606                   11.5  %
Cost of revenue
Direct to Consumer                                             47,148             40,819                   15.5  %
Commerce                                                        8,188              6,996                   17.0  %
Total cost of revenue                                          55,336             47,815                   15.7  %
Gross profit                                                   75,814             69,791                    8.6  %
Operating expenses:
General and administrative                                     79,589             69,471                   14.6  %
Advertising and marketing                                      16,363             17,178                   (4.7) %
Total operating expenses                                       95,952             86,649                   10.7  %
Loss from operations                                          (20,138)           (16,858)                  19.5  %
Interest expense                                               (1,389)            (1,561)                 (11.0) %
Other income (expense), net                                     6,119             (6,385)                      N/M
Net Loss before income taxes                                  (15,408)           (24,804)                 (37.9) %
Provision for income taxes                                          -                  -                    0.0  %
Net Loss and comprehensive loss                        $      (15,408)         $ (24,804)                 (37.9) %

N/M means not meaningful.


                                       22
--------------------------------------------------------------------------------

Comparison of the Three Months Ended June 30, 2022 and June 30, 2021

Revenue

                             Three Months Ended
                                  June 30,
                            2022            2021         $ Change      % Change
                                     ( in thousands)
Revenue
Direct to Consumer      $ 118,397       $ 105,376       $ 13,021         12.4  %
Commerce                   12,753          12,230            523          4.3  %
Total revenue           $ 131,150       $ 117,606       $ 13,544         11.5  %
Percentage of Revenue
Direct to Consumer           90.3  %         89.6  %
Commerce                      9.7  %         10.4  %


Direct to Consumer revenue increased by $13.0 million, or 12.4%, for the three
months ended June 30, 2022 compared to the three months ended June 30, 2021.
This increase was primarily driven by a 5.6% or 0.2 million increase in
Subscription Shipments, in addition to a 6.4% increase in average order value.

Commerce revenue increased by $0.5 million for the three months ended June 30,
2022 compared to the three months ended June 30, 2021. This increase was
primarily driven by volume increases amongst existing retailer partners, as well
as the addition of new retail partners since June 30, 2021.

Gross Profit

                            Three Months Ended
                                 June 30,
                           2022           2021         $ Change      % Change
                                    ( in thousands)
Gross Profit
Direct to Consumer        71,249         64,557          6,692         10.4  %
Commerce                   4,565          5,234           (669)       (12.8) %
Total gross profit      $ 75,814       $ 69,791       $  6,023          8.6  %

Percentage of revenue 57.8 % 59.3 %



Direct to Consumer gross profit increased by $6.7 million while Commerce gross
profit decreased by $0.7 million for the three months ended June 30, 2022
compared to the three months ended June 30, 2021. The increase in Direct to
Consumer gross profit is primarily due to increased revenue of $13.0 million.
The decrease in Commerce gross profit is primarily attributable to increased
slotting fees for new retail accounts and higher than average customer
chargebacks resulting from supply chain delays.

Gross profit as a percentage of revenue decreased 1.5% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. This decrease was primarily due to increased costs related to inbound freight.

                                       23

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Operating Expenses

General and Administrative Expense

                                     Three Months Ended June 30,
                                    2022                       2021         $ Change      % Change
                                                  ( in thousands)
General and administrative    $      79,589                 $ 69,471       $ 10,118         14.6%
Percentage of revenue                  60.7   %                 59.1  %


General and administrative expense increased by $10.1 million, or 14.6%, for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. This increase during the period was primarily due to: increased
fulfillment and shipping costs of $6.9 million attributable to the 5.6% increase
in Subscription Shipments and increased third-party shipping rates; increased
compensation expense of $3.7 million due to an increase in headcount, including
increased total stock-based compensation expense of $1.2 million; increased
donation expense of $1.4 million; increased depreciation and amortization
expense of $1.0 million attributable to additional fulfillment centers;
increased software expense of $0.8 million attributable to an increase in
headcount; increased office expenses of $0.6 million; and increased insurance
expense of $0.4 million. The increase in general and administrative expenses was
offset by a decrease in professional and legal fees of $5.0 million attributable
to costs incurred in the prior year associated with the merger.


Advertising and Marketing

                                     Three Months Ended June 30,
                                    2022                       2021         $ Change       % Change
                                                  ( in thousands)
Advertising and marketing     $      16,363                 $ 17,178       $    (815)       (4.7)%
Percentage of revenue                  12.5   %                 14.6  %


Advertising and marketing expense decreased by $0.8 million, or 4.7%, for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021. The decrease during the period is attributable to a Company reduction in
marketing spend.

Interest Expense

                               Three Months Ended June 30,
                              2022                       2021         $ Change       % Change
                                            ( in thousands)
Interest expense        $      (1,389)                $ (1,561)      $     172        (11.0)%
Percentage of revenue            (1.1)  %                 (1.3) %


Interest expense decreased by $0.2 million, or 11.0%, for the three months ended
June 30, 2022 compared to the three months June 30, 2021. This decrease was due
primarily to lower non-cash interest in connection with our convertible
promissory notes during the the three months ended June 30, 2021.

                                       24

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Other Income (Expense), Net

                                     Three Months Ended June 30,
                                    2022                       2021         $ Change      % Change
                                                  ( in thousands)
Other income (expense), net   $      6,119                  $ (6,385)      $ 12,504          N/M
Percentage of revenue                  4.7   %                  (5.4) %
N/M means not meaningful.


Other income (expense) increased by $12.5 million for the three months ended
June 30, 2022 compared to the three months ended June 30, 2021. This increase in
other income (expense), net, was primarily due to the $6.0 million of income
compared to $3.9 million expense related to the changes in fair value of our
warrant liabilities during the periods ended June 30, 2022 and June 30, 2021,
respectively. Additionally, the Company incurred $2.6 million loss on
extinguishment of debt during the three months ended June 30, 2021.

Non-GAAP Financial Measures


We report our financial results in accordance with GAAP. However, management
believes that Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin,
Adjusted Net Income (Loss) Per Common Share, Adjusted EBITDA and Adjusted EBITDA
Margin, all non-GAAP financial measures (together the "Non-GAAP Measures"),
provide investors with additional useful information in evaluating our
performance.

We calculate Adjusted Net Income (Loss) as net income (loss), adjusted to
exclude: (1) stock-based compensation expense, (2) change in fair value of
warrants and derivatives, (3) sales and use tax expense, (4) one-time
transaction costs associated with the financing and merger, (5) noncash
duplicate rent expense incurred during the relocation of our corporate
headquarters, (6) executive transition costs, and (7) loss on extinguishment of
debt.
We calculate Adjusted Net Income (Loss) Margin by dividing Adjusted Net Income
(Loss) for the period by Revenue for the period.

We calculate Adjusted Net Income (Loss) Per Common Share by dividing Adjusted Net Income (Loss) for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.


We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: (1)
interest expense, (2) depreciation and amortization, (3) stock-based
compensation expense, (4) change in fair value of warrants and derivatives, (5)
sales and use tax expense, (6) one-time transaction costs associated with the
financing and merger, (7) noncash duplicate rent expense incurred during the
relocation of our corporate headquarters, (8) executive transition costs, (9)
loss on extinguishment of debt.
We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period
by revenue for the period.

The Non-GAAP Measures are financial measures that are not required by, or
presented in accordance with GAAP. We believe that the Non-GAAP Measures, when
taken together with our financial results presented in accordance with GAAP,
provides meaningful supplemental information regarding our operating performance
and facilitates internal comparisons of our historical operating performance on
a more consistent basis by excluding certain items that may not be indicative of
our business, results of operations or outlook. In particular, we believe that
the use of the Non-GAAP Measures are helpful to our investors as they are
measures used by management in assessing the health of our business, determining
incentive compensation and evaluating our operating performance, as well as for
internal planning and forecasting purposes.

The Non-GAAP Measures are presented for supplemental informational purposes
only, have limitations as an analytical tool and should not be considered in
isolation or as a substitute for financial information presented in accordance
with GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the
measures do not properly reflect capital commitments to be paid in the future,
(2) although depreciation and amortization are non-

                                       25

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cash charges, the underlying assets may need to be replaced and Adjusted EBITDA
and Adjusted EBITDA Margin do not reflect these capital expenditures, (3)
Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of
stock-based compensation expense, which is an ongoing expense for our company
and (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other
non-operating expenses, including interest expense. In addition, our use of the
Non-GAAP Measures may not be comparable to similarly titled measures of other
companies because they may not calculate the Non-GAAP Measures in the same
manner, limiting its usefulness as a comparative measure. Because of these
limitations, when evaluating our performance, you should consider the Non-GAAP
Measures alongside other financial measures, including our net income (loss) and
other results stated in accordance with GAAP.

The following table presents a reconciliation of Adjusted Net Loss to net loss,
the most directly comparable financial measure stated in accordance with GAAP,
and the calculation of net loss margin, Adjusted Net Loss Margin and Adjusted
Net Loss Per Common Share for the periods presented:

Adjusted Net Loss

                                                                        Three Months Ended
                                                                             June 30,
                                                                   2022                      2021
                                                               (in thousands, except per share data)
Net loss                                                   $         (15,408)          $      (24,804)
Stock-based compensation expense                                       4,343                    3,098
Change in fair value of warrants and derivatives                      (5,996)                   3,899
Sales and use tax expense (1)                                            (83)                       -

Transaction costs (2)                                                      -                    5,198
Loss on extinguishment of debt                                             -                    2,598
Executive transition costs (3)                                           106                        -
Duplicate headquarters rent (4)                                          603                        -
Adjusted net loss                                          $         (16,435)          $      (10,011)
Net loss margin                                                       (11.75)  %               (21.09) %
Adjusted net loss margin                                              (12.53)  %                (8.51) %

Adjusted net loss per common share - basic and diluted $ (0.09) $ (0.09) Weighted average common shares used to compute adjusted net loss per share attributable to common stockholders - basic and diluted

175,491,912             108,762,540


                                       26
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The following table presents a reconciliation of Adjusted EBITDA to net loss,
the most directly comparable financial measure stated in accordance with GAAP,
and the calculation of net loss margin and Adjusted EBITDA margin for the
periods presented:

Adjusted EBITDA

                                                        Three Months Ended
                                                             June 30,
                                                       2022            2021
                                                          (in thousands)
Net loss                                           $ (15,408)      $ (24,804)
Interest expense                                       1,389           1,561
Depreciation and amortization expense                  2,016             

844

Stock-based compensation expense                       4,343           

3,098

Change in fair value of warrants and derivatives (5,996) 3,899 Sales and use tax expense (1)

                            (83)              -
Transaction costs (2)                                      -           

5,198

Loss on extinguishment of debt                             -           

2,598

Executive transition costs (3)                           106               -
Duplicate headquarters rent (4)                          603               -
Adjusted EBITDA                                    $ (13,030)      $  (7,607)
Net loss margin                                       (11.75) %       (21.09) %
Adjusted EBITDA margin                                 (9.94) %        (6.47) %



(1) Sales and use tax expense relates to recording a liability for sales and use
tax we did not collect from our customers. Historically, we had collected state
or local sales, use, or other similar taxes in certain jurisdictions in which we
only had physical presence. On June 21, 2018, the U.S. Supreme Court decided, in
South Dakota v. Wayfair, Inc. that state and local jurisdictions may, at least
in certain circumstances, enforce a sales and use tax collection obligation on
remote vendors that have no physical presence in such jurisdiction. A number of
states have positioned themselves to require sales and use tax collection by
remote vendors and/or by online marketplaces. The details and effective dates of
these collection requirements vary from state to state and accordingly, we
recorded a liability in those periods in which we created economic nexus based
on each state's requirements. Accordingly, we now collect, remit, and report
sales tax in all states that impose a sales tax.

(2)Transactions costs represent non-recurring consulting and advisory costs with
respect to the merger agreement entered into with Northern Star Acquisition
Corp. on December 16, 2020.
(3) Executive transition costs includes recruiting expenses incurred by the
Company.
(4)Noncash duplicate rent expense incurred during the relocation of our
corporate headquarters.

Liquidity and Capital Resources


Since inception, we have funded our operations with proceeds from sales of our
capital stock and proceeds from borrowings in addition to cash generated by our
operations. As of June 30, 2022, we had cash and cash equivalents of
approximately $177.2 million. We expect that our cash and cash equivalents,
together with cash provided by our operating activities and proceeds from
borrowings (as defined below), will be sufficient to fund our operations for at
least the next 12 months. We are required to comply with certain financial and
non-financial covenants related to our borrowing agreements, which we expect to
be in compliance with during the next 12 months. Our future capital requirements
will depend on many factors, including our pace of new and existing customer
growth and our investments in partnerships and unexplored channels. We may be
required to seek additional equity or debt financing.

                                       27

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2025 Convertible Notes


On November 27, 2020, we issued $75.0 million aggregate principal amount of 2025
Convertible Notes to Magnetar Capital, LLC ("Magnetar"). The Company received
net proceeds of approximately $74.7 million from the sale of the 2025
Convertible Notes, after deducting fees and expenses of approximately $0.3
million. The Company recorded the expenses as a discount to the note and will
amortize over the term of the note. The 2025 Convertible Notes will mature on
December 1, 2025, unless earlier converted, redeemed or repurchased. For a
period of one year from the issuance date of the 2025 Convertible Notes, certain
funds affiliated with Magnetar Financial LLC (collectively, "Magnetar") may
request the Company issue additional notes up to $25.0 million aggregate
principal amount.

The Company used approximately $27.6 million of the net proceeds from the sale
of the 2025 Convertible Notes to repay the outstanding term loans with Western
Alliance Bank and Pinnacle.

The 2025 Convertible Notes are governed by the Indenture. The 2025 Convertible
Notes bear interest at the annual rate of 5.50%, payable entirely in
payment-in-kind annually on December 1st of each year commencing December 1,
2021, compounded annually.

If the 2025 Convertible Notes are not converted into common stock by the maturity date, the Company must repay the outstanding principal amount plus accrued interest.


The 2025 Convertible Notes contain call and put options to be settled in cash
contingent upon the occurrence of a change of control and a default interest
rate increase of 3.0% applicable upon the occurrence of an event of default that
when evaluated under the guidance of ASC 815, Derivatives and Hedging, are
embedded derivatives requiring bifurcation at fair value. The fair value
calculation includes Level 3 inputs including the estimated fair value of the
Company's common stock and assumptions regarding the probability that the
contingent call or put will be exercised or an event of default will occur.
Management determined that the probability that the contingent events will occur
was near zero at inception and has remained near zero as of June 30, 2022.
Therefore, the Company did not record a derivative liability related to these
features at June 30, 2022. The Company will assess the probability of occurrence
quarterly during the term of the 2025 Convertible Notes.

As of June 30, 2022 and March 31, 2022, the Company had $79.2 million of outstanding borrowings under the note purchase agreement governing the purchase and sale of the 2025 Convertible Notes agreement.

Western Alliance Bank-Line of Credit and Term Loan


In October 2017, the Company entered into a new loan and security agreement (the
"Western Alliance Agreement") and issued a warrant to purchase preferred stock
("Initial Western Alliance Warrant") to Western Alliance Bank ("Western
Alliance"), which provided for a secured revolving line of credit (the "Credit
Facility") in an aggregate principal amount of up to $35.0 million with a
maturity date of October 12, 2020.

On December 7, 2018, the Company amended the Western Alliance Agreement, which
included the issuance of a warrant to purchase common stock ("Subsequent Western
Alliance Warrant") to Western Alliance. The modification to the Western Alliance
Agreement provided for an additional term loan of $10.0 million at issuance and
an incremental seasonal loan of $5.0 million. The seasonal loan matured and was
repaid on March 31, 2020. The term loan matures December 31, 2021.

On July 31, 2020, the Company amended the Western Alliance Agreement and
extended the expiration of the warrants to July 31, 2030. The modification to
the Western Alliance Agreement amended the maturity date of the Credit Facility
to August 12, 2021.

On November 27, 2020, the Company repaid the outstanding $10.0 million principal
of the term loan with Western Alliance Bank, as well as $0.2 million of early
repayment fees, using proceeds from the issuance of the 2025 Convertible Notes
(the "2025 Convertible Notes"). See further discussion of the 2025 Convertible
Notes issuance below.

                                       28
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In conjunction with the 2025 Convertible Notes issuance, the Company amended the
Western Alliance Agreement to extend the Credit Facility repayment date from
August 12, 2021 to December 31, 2021.

On January 22, 2021, the Company amended the Western Alliance Agreement to extend the Credit Facility maturity date to May 31, 2022.


On October 29, 2021, the Company and Western Alliance entered into the eleventh
loan and security modification agreement, which increased the sublimit for
foreign exchange services and export, import, and standby letters of credit
under the Company's existing loan and security agreement with Western Alliance
to $2.7 million.

On May 27, 2022, the Company and Western Alliance entered into the twelfth loan
and security modification agreement, which extended the Credit Facility maturity
date to June 30, 2022.

On June 30, 2022, the Company and Western Alliance entered into the thirteenth
loan and security modification agreement, which extended the Credit Facility
maturity date to July 15, 2022.

On August 3, 2022, the Company and Western Alliance entered in the fourteenth
loan and security modification agreement, which extended the Credit Facility
maturity date to May 31, 2023.

The interest rate for borrowings under the Credit Facility, as amended, is equal to (i) the greater of the prime rate that is published in the Money Rates section of The Wall Street Journal from time to time (the "Prime Rate") and 5.25%, plus (ii) half of one percent (0.50%), per annum.


The Credit Facility has a borrowing base subject to an amount equal to eighty
percent (80.00%) of the Company's trailing three months of subscription revenue.
Western Alliance has a firstpriority perfected security interest in
substantially all of the Company's assets, including its rights to its
intellectual property.

As of June 30, 2022 and March 31, 2022, the Company had no outstanding borrowings under the Credit Facility. The full amount of the Credit Facility of $35.0 million is available to be borrowed by the Company if or when needed through the termination date of the agreement of May 31, 2023.


Under the terms of this Credit Facility, the Company is required to comply with
certain financial and nonfinancial covenants, including covenants to maintain
certain liquidity amounts, as defined in the amended Western Alliance Agreement.
As of June 30, 2022 and March 31, 2022, the Company was compliant with its
financial covenants.


Cash Flows

Comparison of the Three Months Ended June 30, 2022 and 2021.


The following table summarizes our cash flows for the three months ended
June 30, 2022 and 2021:

                                                                Three Months Ended June 30,
                                                                2022                    2021
                                                                       (in thousands)
Net cash used in by operating activities                  $      (17,425)         $     (61,871)
Net cash used in investing activities                             (4,735)                (8,305)
Net cash provided by financing activities                              1                353,723

Net increase (decrease) in cash and restricted cash $ (22,154)

$ 283,547

Cash flows used in Operating Activities

Net cash flows in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.

                                       29

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Net cash flows used in operating activities is derived by adjusting our net loss for:

•non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses;

•changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.


For the three months ended June 30, 2022, net cash used in operating activities
was $17.4 million. The $17.4 million of net cash used in operating activities
consisted of net loss of $15.4 million adjusted for non-cash charges totaling
$2.3 million and a net decrease of $4.3 million in our net operating assets and
liabilities. The non-cash charges primarily consisted of $6.0 million for
changes in fair value of warrants, $4.3 million for stock based compensation,
and $3.3 million for depreciation and amortization. The decrease in our net
operating assets and liabilities was driven by the changes in inventory of $5.2
million to support current demand, accounts payable and accrued expenses of $2.5
million related to increased expenditures to support general business growth, as
well as the timing of payments, other liabilities of $0.1 million, and prepaid
expenses and other current assets of $0.1 million. The decrease in our net
operating assets and liabilities was partially offset by the change in deferred
revenue of $2.9 million, and accounts receivable of $1.4 million.

For the three months ended June 30, 2021, net cash used in operating activities
was $61.9 million. The $61.9 million of net cash used in operating activities
consisted of net loss of $24.8 million adjusted for non-cash charges totaling
$10.8 million and a net decrease of $47.9 million in our net operating assets
and liabilities. The non-cash charges primarily consisted of $3.9 million for
changes in fair value of warrants, $3.1 million for stock based compensation,
$2.6 million loss on extinguishment of debt and $0.8 million for depreciation
and amortization. The decrease in our net operating assets and liabilities was
driven by the changes in inventory of $24.9 million to support current demand,
accounts payable and accrued expenses of $13.7 million related to increased
expenditures to support general business growth, as well as the timing of
payments, other liabilities of $11.9 million, and prepaid expenses and other
current assets of $1.3 million. The decrease in our net operating assets and
liabilities was partially offset by the change in deferred revenue of $3.5
million, and accounts receivable of $0.8 million.

Cash flows used in Investing Activities


For the three months ended June 30, 2022 and 2021, net cash used in investing
activities was $4.7 million and $8.3 million, respectively, primarily due to
capital expenditures.

Cash flows provided by Financing Activities

For the three months ended June 30, 2022, net cash provided by financing activities was de minimis as the payment of capital leases of $0.2 million was offset by proceeds from the exercise of stock options of $0.2 million.


For the three months ended June 30, 2021, net cash provided by financing
activities was $353.7 million, primarily due to proceeds of $227.1 million
proceeds from reverse recapitalization and proceeds from the PIPE of $200.0
million. The increase in cash provided by financing activities was partially
offset by the repayments of outstanding borrowings on our line of credit of
$34.3 million, payments of transaction costs of $24.7 million, payment of
deferred underwriting fees $8.9 million, and repayment of the outstanding PPP
loan of $5.2 million.

Critical Accounting Policies and Estimates


Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
condensed consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about

                                       30

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items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.


Except as described in Note 2, "Summary of Significant Accounting Policies -
Recent Accounting Pronouncements Adopted," to our condensed consolidated
financial statements included in this Quarterly Report on Form 10-Q, there have
been no material changes to our critical accounting policies and estimates as
compared to the critical accounting policies and estimates disclosed in our
audited consolidated financial statements and notes thereto for the year ended
March 31, 2022 contained in the Annual Report on Form 10-K filed with the SEC on
May 31, 2022.

                                       31

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