The following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled "Risk Factors" and elsewhere in this report. Please also see the section titled "Cautionary Note Regarding Forward-Looking Statements." Overview We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH. BPH is the most common prostate disease and impacts approximately 40 million men inthe United States . The AquaBeam Robotic System employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue. We designed our AquaBeam Robotic System to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions. We designed Aquablation therapy to deliver effective, safe and durable outcomes for males suffering from lower urinary tract symptoms, or LUTS, due to BPH that are independent of prostate size and shape or surgeon experience. We have developed a significant and growing body of clinical evidence, which includes nine clinical studies and over 100 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As ofMarch 31, 2022 , we had an install base of 150 AquaBeam Robotic Systems globally, including 93 inthe United States . OurU.S. pivotal trial, the WATER study, is the only FDA pivotal study randomized against transurethral resection of prostate, or TURP, which is the historical standard of care for the surgical treatment of BPH. In this study, Aquablation therapy demonstrated superior safety and non-inferior efficacy compared to TURP across prostate sizes between 30 ml and 80 ml, and superior efficacy in a subset of patients with prostates larger than 50 ml. We have established strong relationships with key opinion leaders, or KOLs, within the urology community and collaborated with key urological societies in global markets. This support has been instrumental in facilitating broader acceptance and adoption of Aquablation therapy. As a result of our strong KOL network and our compelling clinical evidence, Aquablation therapy has been added to clinical guidelines of various professional associations, including theAmerican Urological Association . Inthe United States , we sell our products to hospitals. We are initially targeting 860 high-volume hospitals that perform, on average, more than 200 resective procedures annually and account for approximately 70% of all hospital-based resective procedures. Over time, we will gradually expand our focus to also include mid- and low-volume hospitals. These customers in turn bill various third-party payors, such as commercial payors and government agencies, for treatment payment of each patient. Effective in 2021, all local Medicare Administrative Contractors, or MACs, which represent 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states. We also have favorable coverage decisions from several large commercial payors, includingAetna , Anthem, Cigna, Humana,Health Care Service Corporation ,Independence Blue Cross Blue Shield , BlueCross -Massachusetts ,Emblem Health , and CareFirst. We plan to leverage these recent successes in our active discussions with all commercial payors to establish additional positive national and regional coverage policies. Outside ofthe United States , we have ongoing efforts in key markets to expand established coverage and improve payment which we believe will expand patient access to Aquablation therapy. We manufacture the AquaBeam Robotic System, the handpiece, integrated scope and other accessories at our facility inRedwood City, California . This includes supporting the supply chain distribution and logistics of the 28 -------------------------------------------------------------------------------- various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers. Each AquaBeam Robotic System is shipped to our customers with a third-party manufactured ultrasound system and probe. We utilize a well-known third-party logistics provider located inthe United States andthe Netherlands to ship our products to our customers globally. We generated revenue of$14.2 million and incurred a net loss of$17.2 million for the three months endedMarch 31, 2022 , compared to revenue of$7.2 million and a net loss of$12.8 million for the three months endedMarch 31, 2021 . As ofMarch 31, 2022 , we had cash and cash equivalents of$284.3 million and an accumulated deficit of$278.7 million . We completed our IPO inSeptember 2021 , which raised$172.4 million , net of issuance costs. Previously, our primary sources of capital have been from private placements of redeemable convertible preferred securities and debt financing agreements. As ofMarch 31, 2022 , we have raised$337.1 million from private placements of redeemable convertible preferred securities from our investors. We expect our expenses will increase for the foreseeable future, in particular as we continue to make substantial investments in sales and marketing, operations and research and development. Moreover, we expect to incur additional expenses as a result of operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of theSEC and those of any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses. Based on our operating plan, we currently believe that our existing cash and cash equivalents, anticipated revenue and available debt financing arrangements will be sufficient to meet our capital requirements and fund our operations through at least the next twelve months from the issuance date of the financial statements. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional public equity or debt securities or obtain an additional credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Additional financing may not be available at all, or in amounts or on terms unacceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our products.
Factors Affecting Our Performance
We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future. While these factors may present significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled "Risk Factors" for more information. These factors include: •Grow our install base of AquaBeam Robotic Systems: As ofMarch 31, 2022 , we had an install base of 150 AquaBeam Robotic Systems globally, including 93 inthe United States . Inthe United States , we are initially focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery. We are initially targeting 860 high-volume hospitals that we estimate perform, on average, more than 200 resective procedures annually and account for approximately 70% of all hospital-based resective procedures. To penetrate these hospitals, we will continue to increase our direct team of capital sales representatives, who are focused on driving system placement within hospitals by engaging with key surgeons and decision makers to educate them about the compelling value proposition of Aquablation therapy. As we increase our install base of AquaBeam Robotic systems our revenue will increase as a result of the system sale and resulting utilization. •Increase system utilization: Our revenue is significantly impacted by the utilization of our AquaBeam robotic system. Once we place a system within a hospital our objective is to establish Aquablation therapy as the surgical treatment of choice for BPH. Within each hospital we are initially focused on targeting urologists who perform medium-to-high volumes of resective procedures and converting their resective cases to Aquablation therapy. To accomplish this, we will continue expanding our team of highly trained Aquablation representatives and clinical specialists who are focused on driving system utilization within the hospital, providing education and training support and ensuring excellent user experiences. As urologists 29 -------------------------------------------------------------------------------- gain experience with Aquablation therapy we will leverage their experiences to capture more surgical volumes and establish Aquablation therapy as the surgical standard of care. •Reimbursement and coverage decisions by third-party payors. Healthcare providers inthe United States generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to cover all or part of the cost of procedures using our AquaBeam Robotic System. The revenue we are able to generate from sales of our products depends in large part on the availability of sufficient reimbursement from such payors. Effective in 2021, all local MACs, representing 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states. We believe that these favorable coverage decisions have been a catalyst for hospital adoption of our AquaBeam Robotic System. We believe our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from several large commercial payors, includingAetna , Anthem, Cigna, Humana,Health Care Service Corporation ,Independence Blue Cross Blue Shield , BlueCross -Massachusetts ,Emblem Health , and CareFirst. We plan to leverage these recent successes in our active discussions with commercial payors to establish additional positive national and regional coverage policies. We believe that additional commercial payor coverage will contribute to increasing utilization of our system over time. Outside ofthe United States , we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy. •Cost of sales. The results of our operations will depend, in part, on our ability to increase our gross margins by more effectively managing our costs to produce our AquaBeam Robotic System and single-use disposable handpieces, and to scale our manufacturing operations efficiently. We anticipate that as we expand our sales and marketing efforts and drive further sales growth, our purchasing costs on a per unit basis may decrease, and in turn improve our gross margin. As our commercial operations continue to grow, we expect to continue to realize operating leverage through increased scale efficiencies. •Investment in research and development to drive continuous improvements and innovation. We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of the AquaBeam Robotic System. We also plan to leverage our treatment data and software development capabilities to integrate artificial intelligence and machine learning to enable computer-assisted anatomy recognition and improved treatment planning and personalization. Our future growth is dependent on these continuous improvements which require significant resources and investment.
Impact of the COVID-19 Pandemic
The COVID-19 outbreak and the consequential economic disruptions have negatively impacted and may continue to negatively impact our operations, revenue and overall financial condition. In response to the pandemic, numerous state and local jurisdictions imposed, and others in the future may impose, "shelter-in-place" orders, quarantines, executive orders, and similar government orders and restrictions for their residents to control the spread of COVID-19. Starting inmid-March 2020 , the governor ofCalifornia , where our headquarters are located, issued "shelter-in-place" or "stay at home" orders restricting non-essential activities, travel, and business operations, subject to certain exceptions for necessary activities. Such orders or restrictions have resulted in our headquarters closing, slowdowns and delays, travel restrictions, and cancellation of training and other events, among other effects, thereby negatively impacting our operations. Additionally, inthe United States , governmental authorities have recommended, and in certain cases required, that elective, specialty and other procedures and appointments be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19. These measures and challenges have decreased the number of BPH procedures generally, and consequently could have slowed adoption of our AquaBeam therapy and may have impacted our ability to sell our AquaBeam Robotic System. We believe the number of our systems sold has been impacted as health care organizations globally have prioritized the treatment of patients with COVID-19, and as health care organizations continue to experience consequential economic disruptions from the COVID-19 pandemic such as budget shortfalls and staffing shortages. 30
-------------------------------------------------------------------------------- Numerous procedures have been and in certain jurisdictions in which we operate are continuing to be cancelled or delayed as a result of local public health measures and hospital policies. We have also experienced disruptions, and may experience future disruptions, including: delays in sales personnel becoming fully trained and productive; difficulties and delays in physician outreach and training physicians to use our AquaBeam Robotic System; restrictions on personnel to travel; delays in follow-ups of our clinical studies; challenges with maintaining adequate supply from third-party manufacturers of components and finished goods and distribution providers; and access to physicians for training and case support. While many restrictions associated with COVID-19 have more recently been relaxed, the longevity and extent of the various COVID-19 pandemic remains uncertain, including due to the emergence and impact of the COVID-19 variants and continued economic disruptions. These measures and challenges may continue for the duration of the pandemic and may negatively impact our revenue growth while the pandemic continues.
Components of Our Results of Operations
Revenue
We generate our revenue primarily from the capital portion of our business, which includes sales and rentals of our AquaBeam Robotic System, and from the recurring revenue associated with sales of our single-use disposable handpieces that are used during each surgery performed with our system. Other revenue is derived primarily from service and repair and extended service contracts with our existing customers. We expect our revenue to increase in absolute dollars for the foreseeable future as we continue to focus on driving adoption of Aquablation therapy, and increased system utilization, though it may fluctuate from quarter to quarter. The following table presents revenue by significant geographical locations for the periods indicated: Three Months Ended March 31, 2022 2021 United States 88 % 87 % Outside the United States 12 % 13 % We expect that both ourU.S. and international revenue will increase in the near term as we continue to expand the install base of AquaBeam Robotic Systems and increase the units sold of our single-use disposable handpieces. We expect our increase in revenues in absolute dollars to be larger inthe United States .
Cost of Sales and Gross Margin
Cost of sales consists primarily of material costs, direct labor and manufacturing overhead costs, warranty and service costs, and other direct costs such as shipping costs. A significant portion of our cost of sales currently consists of manufacturing overhead costs. These overhead costs include compensation for personnel, including stock-based compensation, facilities, equipment and operations supervision, quality assurance and material procurement. We expect our cost of sales to increase in absolute dollars for the foreseeable future primarily as, and to the extent, our revenue grows, or we make additional investments in our manufacturing capabilities, though it may fluctuate from period to period. We calculate gross margin percentage as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, primarily, product and geographic mix and the resulting average selling prices, production volumes, manufacturing costs and product yields, and to a lesser extent the implementation of cost reduction strategies. We expect our gross margin to increase over the long term as our production volume increases and as we spread the fixed portion of our manufacturing overhead costs over a larger number of units produced, thereby significantly reducing our per unit manufacturing costs, though it may fluctuate from quarter to quarter. Our gross margins can fluctuate due to geographic mix. To the extent we sell more systems and handpieces inthe United States , we expect our margins will increase due to the higher average selling prices as compared to sales outside ofthe United States . 31
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Operating Expenses
Research and Development
Research and development, or R&D, expenses consist primarily of engineering, product development, regulatory affairs, consulting services, materials, depreciation and other costs associated with products and technologies being developed. These expenses include employee and non-employee compensation, including stock-based compensation, supplies, materials, quality assurance expenses, consulting, related travel expenses and facilities expenses. We expect our R&D expenses to increase in absolute dollars for the foreseeable future as we continue to develop, enhance and commercialize new products and technologies, though it may fluctuate from quarter to quarter. However, we expect our R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts.
Selling, General and Administrative
Selling, general and administrative, or SG&A, expenses consist primarily of compensation for personnel, including stock-based compensation, related to selling, marketing, clinical affairs, professional education, finance, information technology, and human resource functions. SG&A expenses also include commissions, training, travel expenses, promotional activities, conferences, trade shows, professional services fees, audit fees, legal fees, insurance costs and general corporate expenses including allocated facilities-related expenses. Clinical expenses include clinical trial design, clinical site reimbursement, data management and travel expenses. We expect our SG&A expenses to increase in absolute dollars for the foreseeable future as we expand our commercial infrastructure and incur additional fees associated with operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of theSEC and those of any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses, though it may fluctuate from quarter to quarter. However, over time, we expect our SG&A expenses to decrease as a percentage of revenue.
Interest and Other Income (Expense), Net
Interest Expense
Interest expense consists primarily of interest expense from our loan payable.
Interest and Other Income (Expense), Net
Interest and other income (expense), net, consists primarily of interest income from our cash and cash equivalents balances, and fair value adjustments from our redeemable convertible preferred stock warrant liabilities and our loan facility derivative liability. In connection with our sales of redeemable convertible preferred stock, we issued warrants to purchase shares of our Series E redeemable convertible preferred stock. We classified these warrants as a liability on our balance sheets that we remeasured to fair value at each reporting date with the corresponding change in fair value being recognized in our statements of operations. Upon completion of our IPO inSeptember 2021 , the redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital in stockholders' equity (deficit) for warrants exercised and statement of operations for warrants expired. Additionally, in connection with the loan facility, we are obligated to pay a fee upon the earlier occurrence of a defined liquidity event, including but not limited to, a merger or sale of our assets or voting stock, or our achieving a$200 million trailing twelve months revenue target, in each case, bySeptember 2029 . The fee is calculated at the time of the liquidity event occurrence to be$1.0 million if only the first installment has been drawn,$2.0 million if the first two installments have been drawn,$2.4 million if the first three installments have been drawn, or$3.0 million if all four installments have been drawn, in each case, upon the occurrence of the liquidity event. We adjust the carrying values of the loan facility derivative liability for changes in fair value and recognize those changes in interest and other income (expense), net. 32 --------------------------------------------------------------------------------
Results of Operations
The following tables show our results of operations for the periods indicated: Three Months Ended March 31, Change 2022 2021 $ % (in
thousands, except percentages)
Revenue$ 14,197 $ 7,192 $ 7,005 97 % Cost of sales 6,505 3,665 2,840 77 Gross profit 7,692 3,527 4,165 118 Gross margin 54 % 49 % Operating expenses: Research and development 5,011 4,522 489 11 Selling, general and administrative 18,385 10,349 8,036 78 Total operating expenses 23,396 14,871 8,525 57 Loss from operations (15,704) (11,344) (4,360) (38) Interest expense (1,421) (1,464) 43 3 Interest and other income (expense), (60) (14) net (46) (329) Net loss$ (17,185) $ (12,822) $ (4,363) (34)
Comparison of Three Months Ended
Revenue Three Months Ended March 31, Change 2022 2021 $ % (in thousands, except percentages) System sales and rentals $ 8,496$ 4,831 $ 3,665 76 % Handpieces and other consumables 5,189 2,225 2,964 133 Service 512 136 376 276 Total revenue$ 14,197 $ 7,192 $ 7,005 97 Revenue increased$7.0 million , or 97%, to$14.2 million during the three months endedMarch 31, 2022 , compared to$7.2 million during the three months endedMarch 31, 2021 . The growth in revenue was primarily attributable to an increase of$6.3 million in revenues derived fromthe United States . The increase was due to higher sales volumes of both our AquaBeam Robotic System and our single-use disposable handpieces, resulting from the expansion of insurance coverage and the increase in personnel in our sales and marketing organizations. In addition, sales of both our AquaBeam Robotic System and our single-use disposable handpieces outside ofthe United States increased by$0.6 million in sales volume.
Cost of Sales and Gross Margin
Cost of sales increased$2.8 million , or 77%, to$6.5 million during the three months endedMarch 31, 2022 , compared to$3.7 million during the three months endedMarch 31, 2021 . The increase in cost of sales was primarily attributable to the growth in the number of units sold. 33 -------------------------------------------------------------------------------- Gross margin increased to 54% during the three months endedMarch 31, 2022 , compared to 49% for the three months endedMarch 31, 2021 . The increase in gross margin was primarily attributable to the growth in unit sales, which allowed us to spread the fixed portion of our manufacturing overhead costs over more production units. Additionally, we realized higher average selling prices inthe United States on both our AquaBeam Robotic System and our single-use disposable handpieces.
Research and Development Expenses
R&D expenses increased$0.5 million , or 11%, to$5.0 million during the three months endedMarch 31, 2022 , compared to$4.5 million during the three months endedMarch 31, 2021 . The increase in R&D expenses was primarily due to employee-related expenses of our R&D organization. These expenses support ongoing product improvements and the development of additional and next generation technologies.
Selling, General and Administrative Expenses
SG&A expenses increased$8.0 million , or 78%, to$18.4 million during the three months endedMarch 31, 2022 , compared to$10.3 million during the three months endedMarch 31, 2021 . The increase in SG&A expenses was primarily due to employee-related expenses of our sales and marketing organization and reimbursement and administrative organizations as we expanded our infrastructure to drive and support our growth in revenue.
Interest Expense
Interest expense was consistent during the three months ended
Interest and Other Income (Expense), Net
Interest and other income (expense), net, was consistent during the three months
ended
Liquidity and Capital Resources
Overview
We completed our IPO in
As ofMarch 31, 2022 , we had cash and cash equivalents of$284.3 million , an accumulated deficit of$278.7 million , and$50.0 million outstanding on our loan facility. We expect our expenses will increase for the foreseeable future, in particular as we continue to make substantial investments in sales and marketing, operations and research and development. Moreover, we expect to incur additional expenses as a result of operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of theSEC and those of any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses. Our future funding requirements will depend on many factors, including:
•the degree and rate of market acceptance of our products and Aquablation therapy;
•the scope and timing of investment in our sales force and expansion of our commercial organization;
•the impact on our business from the ongoing and global COVID-19 pandemic and the end of the COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease;
•the scope, rate of progress and cost of our current or future clinical trials and registries;
•the cost of our research and development activities;
•the cost and timing of additional regulatory clearances or approvals;
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•the costs associated with any product recall that may occur;
•the costs associated with the manufacturing of our products at increased production levels;
•the costs of attaining, defending and enforcing our intellectual property rights;
•whether we acquire third-party companies, products or technologies;
•the terms and timing of any other collaborative, licensing and other arrangements that we may establish;
•the emergence of competing technologies or other adverse market developments; and
•the rate at which we expand internationally.
Based on our operating plan, we currently believe that our existing cash and cash equivalents, anticipated revenue and available debt financing arrangements will be sufficient to meet our capital requirements and fund our operations through at least the next twelve months from the issuance date of the financial statements. We have based this estimate on assumptions that may prove to be wrong, and we may need to utilize additional available capital resources. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional public equity or debt securities or obtain an additional credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Additional financing may not be available at all, or in amounts or on terms unacceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our products.
Indebtedness
InSeptember 2019 , we entered into a loan facility for up to$75.0 million available in four installments. We borrowed$25.0 million inSeptember 2019 and an additional$25.0 million inMarch 2020 . The third installment is for$10.0 million and was originally available for draw throughMarch 31, 2021 contingent upon our achieving$20.0 million trailing six months revenue in any month beforeMarch 31, 2021 . The remaining$15.0 million was originally available for draw throughJune 30, 2021 contingent upon achieving$25.0 million in trailing six months revenue. InJanuary 2021 , the third installment was amended to be available for draw throughMarch 31, 2022 contingent upon our achieving$6.4 million trailing six months revenue prior toJune 30, 2021 , and the fourth installment was amended to be available for draw thoughJune 30, 2022 . The facility bears an interest rate of the greater of (i) 9.37% and (ii) 7.17% plus 30-day LIBOR. The facility includes customary negative covenants that, among other things, restrict our ability to incur indebtedness or enter into certain change of control transactions. It also contains customary events of default that would result in the termination of the commitments under the facility and permit the lender to accelerate payment on outstanding borrowings. As ofMarch 31, 2022 , we were in compliance with all covenants under the facility. The initial term of the facility is 60 months with interest-only payments, with the repayment of principal being amortized over a period of: 36 months, if we fail to achieve the revenue target for the third installment, 24 months if we achieve the revenue target for the third installment but have not raised at least$50.0 million in an initial public offering, or 12 months if we achieve the revenue target for the third installment and raise at least$50.0 million in an initial public offering. Upon completion of raising over$50.0 million in our IPO inSeptember 2021 , interest-only payments was extended an additional 12 months followed by 12 months amortization of principal and interest. We pledged substantially all of our assets as collateral for the loan. Commencing with the quarter endedJune 30, 2021 , we are required to achieve revenue for the previous six months ended equal to 70% of the forecast for the commensurate quarterly period. Additionally, in connection with the loan facility, we are obligated to pay a fee upon the earlier occurrence of a defined liquidity event, including but not limited to, a merger or sale of our assets or voting stock, or our achieving a$200.0 million trailing twelve months revenue target, in each case, bySeptember 2029 . The fee is calculated at the time of the liquidity event occurrence to be$1.0 million if only the first installment has been drawn,$2.0 million if 35 -------------------------------------------------------------------------------- the first two installments have been drawn,$2.4 million if the first three installments have been drawn, or$3.0 million if all four installments have been drawn, in each case, upon the occurrence of the liquidity event. As ofMarch 31, 2022 , we have drawn on the first two installments. As ofMarch 31, 2022 , we had$50.0 million outstanding under the loan facility.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended March 31, 2022 2021 (in thousands) Net cash (used in) provided by: Operating activities$ (18,231) $ (15,198) Investing activities (55) (39) Financing activities 1,291 1,225
Net increase in cash, cash equivalents and restricted cash
During the three months endedMarch 31, 2022 , net cash used in operating activities was$18.2 million , consisting primarily of a net loss of$17.2 million and an increase in net operating assets of$3.3 million , partially offset by non-cash charges of$2.3 million . The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities. The expansion of our commercialization resulted in an increase in accounts receivable and a decrease in accrued compensation. Non-cash charges consisted primarily of stock-based compensation and depreciation. During the three months endedMarch 31, 2021 , net cash used in operating activities was$15.2 million , consisting primarily of a net loss of$12.8 million and an increase in net operating assets of$3.6 million , partially offset by non-cash charges of$1.2 million . The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities. The expansion of our commercialization resulted in an increase in accounts receivable, inventory and decrease in accrued compensation, partially offset by an increase in accounts payable. Non-cash charges consisted primarily of depreciation and stock-based compensation.
During the three months endedMarch 31, 2022 , net cash used in investing activities was$0.1 million , consisting of purchases of property and equipment. During the three months endedMarch 31, 2021 , net cash used in investing activities was less than$0.1 million , consisting of purchases of property and equipment.
Net Cash Provided by Financing Activities
During the three months endedMarch 31, 2022 , net cash provided by financing activities was$1.3 million , consisting of proceeds from exercises of stock options. During the three months endedMarch 31, 2021 , net cash provided by financing activities was$1.2 million , consisting of proceeds from exercises of stock options.
Contractual Commitments and Contingencies
The information included in Note 9 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, such as structured finance, special purpose entities or variable interest entities.
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Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in our audited consolidated financial statements as of and for the year endedDecember 31, 2021 , and the notes thereto, which are included in our Annual Report on Form 10-K datedMarch 22, 2022 , or Annual Report, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report. There have been no material changes to our significant accounting policies during the three months endedMarch 31, 2022 .
JOBS Act Accounting Election and Smaller Reporting Company Status
We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 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 and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than$250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than$100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than$700.0 million measured on the last business day of our second fiscal quarter.
Recent Accounting Pronouncements
The information included in Note 2 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
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