SOLITON, INC. References in this Form 10-Q to "we," "us," "its," "our" or the "Company" are toSoliton, Inc. ("Soliton"), as appropriate to the context. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See our Annual Report on Form 10-K for the year endedDecember 31, 2020 filed with theSEC onMarch 4, 2021 (the "2020 Annual Report on Form 10-K"), under "Risk Factors", available on theSecurity and Exchange Commission's ("SEC") EDGAR website at www.sec.gov, for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under "Risk Factors" and elsewhere in this Form 10-Q. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS We make forward-looking statements under the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other sections of this Form 10-Q. In some cases, you can identify these statements by forward-looking words such as "may," "might," "should," "would," "could," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential" or "continue," and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under "Risk Factors" as discussed in our 2020 Annual Report on Form 10-K and in other filings made by us from time to time with theSEC . While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this Form 10-Q may describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this Form 10-Q to conform our prior statements to actual results or revised expectations, and we do not intend to do so. Forward-looking statements include, but are not limited to, statements about: •our ability to obtain additional funding to commercialize our Rapid Acoustic Pulse ("RAP") device for tattoo removal and cellulite reduction, to develop the RAP device for other indications and develop our dermatological technologies; •the timing of our national rollout, which we expect to occur in mid-2022 and is subject to the successful completion of our initial limited launch; •the success of our future clinical trials; •compliance with obligations under our intellectual property license withThe University of Texas M.D. Anderson Cancer Center ("MD Anderson"); •market acceptance of the RAP device; •competition from existing products or new products that may emerge; 17 -------------------------------------------------------------------------------- Table of Contents •our sales and marketing capabilities; •potential product liability claims; •our dependency on third-party manufacturers to supply or manufacture our products; •our ability to obtain all parts required to manufacture the RAP device, handpiece and cartridge; •our ability to establish or maintain collaborations, licensing or other arrangements; •our ability and third parties' abilities to protect intellectual property rights; •our ability to adequately support future growth; •our ability to attract and retain key personnel to manage our business effectively; •risks associated with our identification of material weaknesses in our control over financial reporting; •natural disasters affecting us, our primary manufacturer or our suppliers; •our ability to establish relationships with health care professionals and organizations; •market and economic uncertainty caused by the COVID-19 outbreak; •general economic uncertainty that adversely affects spending on cosmetic procedures; •volatility in the market price of our stock; •potential dilution to current stockholders from the issuance of equity awards; and •our estimates regarding expenses, future revenues, capital requirements and needs for additional financing. •Risks associated with theMay 8, 2021 Agreement and Plan of Merger (the "Merger Agreement") with AbbVie Inc. ("AbbVie") andScout Merger Sub, Inc. , a wholly owned subsidiary of AbbVie ("Merger Sub"), under which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of AbbVie (the "Merger"), including: •the risk that the proposed Merger may not be completed in a timely manner or at all; •the failure to satisfy any of the conditions to the consummation of the proposed Merger, including the receipt of certain governmental and regulatory approvals; •the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; and •the outcome of any legal proceedings that have been or may be instituted against the Company related to the Merger Agreement or the proposed Merger. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-Q in the case of forward-looking statements contained in this Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Therefore, you should not rely on any of the forward-looking statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Overview
We are a medical technology company focused on developing and commercializing products utilizing our proprietary designed acoustic shockwave technology platform referred to as RAP. We are an early-stage commercial company with our
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first products recently launching for the removal of tattoos and the reduction
of cellulite. Our RAP device uses rapid pulses of designed acoustic shockwaves
to disrupt cellular structures in the dermal and subdermal tissue. The
uniqueness of our designed shockwave allows us to target the differential in
stiffness between cellular structures and physically change those structures
non-invasively which we believe represents a platform technology potentially
useful in tattoo removal and cellulite treatment, for which we have received FDA
clearance and fibrotic scar treatment, which has not yet received FDA clearance.
We believe the high repetition rate, rapid rise and fall of the wave, and
significant peak pressure delivered in a non-focused manner make our shockwave
significantly different from other available shockwave technologies.
Importantly, our technology allows the disruption of targeted structures within
the skin with only minimal discomfort and without additional treatment-related
downtime for tattoo removal or any downtime for cellulite treatment.
We received clearance for our initial device from the U.S. Food and Drug
Administration ("FDA") on May 24, 2019 allowing our device to be used as an
accessory to the 1064 nm Q-switched laser for black ink tattoo removal on
patients with skin tones on the Fitzpatrick Skin Type scale between I and III.
When used in conjunction with existing lasers for tattoo removal, our technology
allows a doctor to treat a patient multiple times in a single office visit and
significantly reduces the number of office visits required to remove a tattoo,
allowing a dramatic acceleration of the tattoo removal process. In January 2021 ,
we received additional clearance from the FDA for temporary improvement in the
appearance of cellulite. Used on a stand-alone basis, our technology generates,
on average, an approximate 30% reduction in the cellulite severity score ("CSS")
for subjects in a single treatment without breaking the skin. RAP cellulite
treatments cause only minimal discomfort, do not require anesthesia and do not
result in any significant treatment-related side effects or patient downtime.
We launched our RAP device for tattoo removal and cellulite reduction in
September 2021 , initiating the first shipments into select cosmetic dermatology
and plastic surgery offices. We expect to continue to place devices and train
accounts during the fourth quarter of 2021. We experienced delays in our launch
timing due to the focus of our resources being divided between the launch and
managing the Merger. Further, we had certain delays in the manufacturing and
final test process of the initial devices driven primarily by the impact of
COVID-19 on our software development team based in India and certain suppliers'
ability to provide timely components. We generate revenue from both the initial
sale of the device and from the recurring sales of disposable cartridges that
are required by the device to deliver the various therapies. We refer to this as
our "razor and blade" recurring revenue model. Cartridges are designed to be
specific to the intended procedure and each treatment session requires one or
more cartridges. One tattoo cartridge can facilitate up to four standard laser
treatment passes in a single office visit for the average-sized tattoo (about
the size of a deck of playing cards). Therefore, a patient with an average-sized
tattoo that requires three office visits will require the use of three
cartridges. One cellulite cartridge will treat one leg and buttocks area in a
single session for an average patient. As such, most cellulite patients will
require two cartridges for their initial treatment of both legs and buttocks. We
anticipate that patients may benefit from a second maintenance treatment using a
single cartridge across the full treatment area, but have not yet demonstrated
this in clinical trials. We intend to begin a multi-site study in the fourth
quarter of 2021, which will study the effect of multiple treatments in subjects
with cellulite.
We also have ongoing clinical programs in several indications, which, if
successful, will allow us to expand commercialization of our products into
additional markets. As a stand-alone device, we believe RAP has the potential to
reduce the effects of fibrosis and stimulate beneficial fibroblast behavior.
This capability enables the targeting of fibrotic (keloid and hypertrophic)
scars, as well as smoothing and tightening skin. Importantly, we are planning to
initiate a collaborative study with the Navy of our RAP device in the treatment
of keloid and hypertrophic scars in 2021. Further before the end of 2021, we
plan to initiate additional clinical work in tattoo removal with multi-colored
ink tattoos and to demonstrate the effect of multiple treatments in the
improvement in the appearance of cellulite. We announced results from a study in
mice demonstrating the ability of RAP to significantly reduce liver fibrosis,
further validating the scientific basis for RAP's mechanism of action and
potentially widening the range of indications for which RAP may be suitable. Our
technology has not been cleared by the FDA for the treatment of scars or
fibrosis.
Commercial upgrades to our Generation 2.0 device to improve usability were
subsequently approved through a Special 510(k) in March 2020 . This improved
device was utilized in our recently completed pivotal cellulite trial, the data
from which was included in the 510(k) pre-market application of our Generation
2.0 device for the temporary reduction in the appearance of cellulite filed on
June 30, 2020 and approved in January of 2021. Further commercial upgrades to
our Generation 2.0 device were approved through a Special 510(k) in April of
2021, clearing the regulatory path to the launch of our first commercial
devices. We filed a 510(k) pre-market application with the FDA August 9, 2021 ,
seeking to extend our claims to include the long-term improvement in the
appearance of cellulite. On November 5, 2021 , the FDA cleared this application.
We also intend to secure regulatory approval in international markets and are
currently developing a regulatory strategy for these markets.
Our ongoing research and development activities are primarily focused on
optimizing the commercial device and cartridge design for tattoo removal and
cellulite reduction and then developing our system and treatment head for
additional indications. In addition to these development activities, we are
exploring additional uses of RAP technology for the dermatology, plastic surgery
and aesthetic markets.
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The medical technology and aesthetic product markets are highly competitive and
dynamic, and are characterized by rapid and substantial technological
development and product innovations. We compete with many other technologies for
consumer demand. Further, the aesthetic industry in which we operate is
particularly vulnerable to economic trends. The decision to undergo a RESONIC
procedure is driven by consumer demand. Procedures performed using our systems
are elective procedures, the cost of which must be borne by the patient, and are
not reimbursable through government or private health insurance. In times of
economic uncertainty or recession, individuals often reduce the amount of money
that they spend on discretionary items, including aesthetic procedures. The
general economic difficulties being experienced and the lack of availability of
consumer credit for some of our customers' patients could adversely affect the
markets in which we operate.
Recent Developments
On November 5, 2021 , the FDA cleared the 510(k) application we submitted on
August 9, 2021 for long-term improvement in the appearance of cellulite. The
results from our 52-week follow-up visit in our pivotal cellulite study were
provided to the FDA to support this application. At 52 weeks, all participants
found their treatment areas to appear improved compared to the pre-treatment
photos and 97.6% of participants found there was good improvement in the
appearance of cellulite.
Agreement and Plan of Merger
OnMay 8, 2021 , we entered into the Merger Agreement with AbbVie and Merger Sub, under which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of AbbVie. Upon the closing of the Merger, each outstanding share of our common stock, other than shares owned by us, AbbVie or Merger Sub (which will be cancelled) and shares with respect to which appraisal rights are properly exercised and not withdrawn underDelaware law, will automatically be converted into the right to receive$22.60 in cash, without interest (the "Merger Consideration"). Each stock option outstanding and unexercised immediately prior to the effective time of the Merger (the "Effective Time") will be converted into the right to receive a cash payment, without interest, in an amount equal to the excess of the Merger Consideration over the per share exercise price that would be due in cash upon exercise of such stock option. Each restricted stock unit award outstanding immediately prior to the Effective Time will be converted into the right to receive a cash payment, without interest, in an amount equal to the Merger Consideration. Each warrant to purchase our common stock outstanding and unexercised immediately prior to the Effective Time will be converted into the right to receive a cash payment, without interest, in an amount equal to the excess of (i) the number of shares of common stock subject to the warrant, multiplied by the Merger Consideration over (ii) the number of shares of common stock subject to the warrant, multiplied by the per share exercise price of such warrant. The consummation of the Merger is subject to certain customary closing conditions, including (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of our common stock, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii) that no judgment or law is in effect that enjoins, makes illegal or otherwise prohibits the consummation of the Merger. Moreover, each party's obligations to consummate the Merger are subject to certain other conditions, including (a) the accuracy of the other party's representations and warranties (subject to certain materiality exceptions), (b) the other party's compliance in all material respects with its obligations under the Merger Agreement, and (c) in the case of AbbVie and Merger Sub only, (i) the absence of any pending claim, proceeding or other action by a governmental authority that seeks to prevent, prohibit or make illegal the consummation of the Merger or materially limit AbbVie's ability to own, control, direct, manage or operate us and (ii) the absence of any effect, change, event, development or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) that is continuing. Subject to the satisfaction of the closing conditions, closing of the Merger is expected to occur in the second half of 2021. The Merger Agreement contains representations and warranties and covenants of the parties customary for a transaction of this nature. Until the earlier of the termination of the Merger Agreement and the Effective Time, we have agreed to operate our business in the ordinary course of business in all material respects and have agreed to certain other operating covenants and to not take certain specified actions prior to the consummation of the Merger, as set forth more fully in the Merger Agreement. The Merger Agreement contains certain termination rights for us and AbbVie, including, among others, the right of (1) the Company to terminate the Merger Agreement in order to enter into an agreement providing for a Superior Proposal (subject to 20 -------------------------------------------------------------------------------- Table of Contents our compliance with certain obligations under the Merger Agreement related to such Superior Proposal and such termination) and (2) AbbVie to terminate the Merger Agreement if the Board changes its recommendation with respect to the Merger Agreement. The Merger Agreement also provides that under specified circumstances, including in the event of termination as described in (1) or (2) above, we will be required to pay AbbVie a termination fee of$18.6 million . In connection with a termination of the Merger Agreement under specified circumstances involving failure to obtain clearance under the HSR Act to consummate the Merger (or failure to remove certain legal restraints, or to resolve certain pending claims or proceedings, arising under antitrust laws with respect to the Merger) within six months from the date of the Merger Agreement, subject to two extensions of three months each (provided other closing conditions are satisfied), or involving a non-appealable legal restraint of the Merger arising under antitrust laws, AbbVie may be required to pay us a reverse termination fee ("Additional Payments") of up to$20.0 million . As ofNovember 12, 2021 , AbbVie had paid us Additional Payments of$17.5 million and had exercised its right to extend the period to consummate the Merger by three months toFebruary 8, 2022 .
On
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") Filing
The Merger is subject to the requirements of the HSR Act, which provides that the Merger may not be completed until the applicable waiting period under the HSR Act is terminated or expires. OnJune 2, 2021 , the Company and AbbVie filed the requisite notification and report forms under the HSR Act with theAntitrust Division of theDepartment of Justice and theFederal Trade Commission (the "FTC"). Following informal discussions with the staff at theFTC , AbbVie and the Company have agreed to voluntarily provide theFTC with additional time in which to review the Merger. OnJuly 2, 2021 , AbbVie, as the acquiring party, voluntarily withdrew its pre-merger notification and report form under the HSR Act. In accordance with the regulations under the HSR Act, AbbVie resubmitted its HSR Act filing onJuly 7, 2021 , commencing a new 30-day waiting period under the HSR Act, which expired at11:59 p.m. ET onAugust 6, 2021 . Withdrawing and refiling pre-merger notifications is a standard procedure in order to provide additional time for antitrust review of certain transactions. The Company and AbbVie continue to work cooperatively with theFTC staff in their review of the proposed transaction and continue to expect to complete the transaction in the second half of 2021, subject to the satisfaction or permitted waiver of the conditions to closing. OnAugust 6, 2021 , the Company and AbbVie each received a request for additional information and documentary material (the "Second Request") from theFTC in connection with theFTC's review of the transactions contemplated by the Merger Agreement. The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after the Company and AbbVie have certified substantial compliance with the Second Request, unless that period is extended voluntarily by the parties or terminated sooner by theFTC . The Company and AbbVie continue to work cooperatively with theFTC staff in its review of the proposed transaction and continue to expect to complete the transaction in the fourth quarter of 2021, subject to the satisfaction or permitted waiver of the conditions to closing.
As of
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Results of Operations for the Three and Nine Months Ended
Revenue
We generate revenue primarily from sales of our RESONIC system and from sales of consumables to our customers. We initiated the initial launch of the RESONIC technology inSeptember 2021 . We generated revenue of$0.4 million for each of the three and nine months endedSeptember 30, 2021 , compared to zero for each of the same prior year periods. A majority of these devices placed in the period had terms which allowed the practice to pay for the device in installments. As we have no historical perspective with which to estimate probability of collection, we have deferred the revenue recognition on the unpaid balances. As ofSeptember 30, 2021 ,$0.3 million in revenue for the devices placed in service had not yet been recognized.
Revenue (in thousands, except for percentages):
Three Months Ended September 30, Nine Months Ended September 30,
Change Change Change Change
2021 2020 ($) (%) 2021 2020 ($) (%)
Revenue:
System $ 356 $ - $ 356 100.0 % $ 356 $ - $ 356 100.0 %
Consumable 14 - 14 100.0 % 14 - 14 100.0 %
Total revenue $ 370 $ - $ 370 100.0 % $ 370 $ - $ 370 100.0 %
Overall, we experienced an increase in revenue solely as a result the initiation
of our limited launch in
Our business plan focuses near-term on placing the remaining planned systems at customers during our limited launch and properly supporting these key accounts through the limited launch period. We plan to use the patient experience and physician support garnered during the limited launch to execute a national roll-out beginning in mid-2022. As we gain broader distribution, we will focus on increasing our consumable revenue by driving demand for cellulite and tattoo removal procedures through targeted marketing programs. We anticipate that as we continue to implement our business plan and expand our installed base our consumable revenue will increase as a percentage of our total revenue. System revenue. Sales of our RESONIC system include the RESONIC control unit and RESONIC handpiece. Our standard terms do not allow for trial or evaluation periods, rights of return, or refund payments contingent upon the customer obtaining financing or other terms that could impact the customer's obligation. System revenue, including installation revenue, increased by$0.4 million for the three and nine months endedSeptember 30, 2021 , as compared to the same periods in 2020. This increase is attributable to the initiation of our commercial launch inSeptember 2021 . System revenue represented 96.2% of our total revenue for the three and nine months endedSeptember 30, 2021 , respectively. Consumable revenue. We generate consumable revenue through sales of cases of consumable treatment cartridges, each of which includes our consumable cartridges and gel pads, which are used by our customer during treatments. Our average selling price for cartridges is influenced by procedure type mix between tattoo and cellulite and was significantly impacted by the cartridges initially provided at no cost to accounts purchasing the device. Consumable revenue increased by$14.0 thousand for the three and nine months endedSeptember 30, 2021 , as compared to the same periods in 2020. The increase in consumable revenue was due to the initiation of our commercial launch inSeptember 2021 . Consumable revenue accounted for 3.8% of our total revenue for the three and nine months endedSeptember 30, 2021 , respectively. 22 -------------------------------------------------------------------------------- Table of Contents Cost of Revenue and Gross Profit (in thousands, except for percentages): Three Months Ended September 30, Nine Months Ended September 30, Change Change Change Change 2021 2020 ($) (%) 2021 2020 ($) (%) Cost of revenue: System$ 327 $ -$ 327 100.0 %$ 327 $ -$ 327 100.0 % Consumable 17 - 17 100.0 % 17 - 17 100.0 % Total cost of revenue$ 344 $ -$ 344 100.0 %$ 344 $ -$ 344 100.0 % % of total revenue 93.0 % 93.0 % Gross profit (loss): System $ 29 $ -$ 29 100.0 % $ 29 $ -$ 29 100.0 % Consumable (3) - (3) 100.0 % (3) - (3) 100.0 % Total gross profit $ 26 $ -$ 26 100.0 % $ 26 $ -$ 26 100.0 % Gross profit % 7.0 % 7.0 % Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, material costs and revenue levels. The gross profit as a percentage of revenue for the three and nine months endedSeptember 30, 2021 increased compared to the same period in 2020 due entirely to the fact that no gross margin had been recognized prior to the initiation of our initial launch inSeptember 2021 . Gross profit for the three and nine months endedSeptember 30, 2021 was negatively impacted by higher than expected shipping costs to expedite devices to accounts and significant material scrap costs experienced during the initiation of product manufacturing.
Operating Expenses (in thousands, except for percentages):
Three Months Ended September 30, Nine Months Ended September 30,
Change Change Change Change
2021 2020 ($) (%) 2021 2020 ($) (%)
Operating expenses
Research and development $ 1,179 $ 1,143 $ 36 3.15 % $ 4,231 $ 3,437 $ 794 23.10 %
Sales and marketing 1,114 474 640 135.02 % 2,993 560 2,433 434.46 %
Depreciation 219 87 132 151.72 % 461 229 232 101.31 %
General and administrative 3,807 1,965 1,842 93.74 % 11,779 5,856 5,923 101.14 %
Total operating expenses $ 6,319 $ 3,669 $ 2,650 72.23 % $ 19,464 $ 10,082 $ 9,382 93.06 %
Three months ended
Research and development. Research and development expenses increased by less than$0.1 million compared to the same period in 2020, mainly due to increases in salaries and related costs of$0.1 million and engineering related costs of$0.2 million offset by decreases in expenses for animal research of$0.2 million , clinical trials and licenses and other IP of$0.1 million . Sales and marketing. Sales and marketing expenses increased by$0.6 million compared to the same period in 2020, largely attributed to increases in expenses for salaries and related costs (including stock-based compensation) of$0.6 million and marketing costs to support the launch of our products of$0.3 million offset by decreases in training and support expenses of$0.3 million . General and administrative. General and administrative expenses increased by$1.8 million compared to the same period in 2020. This increase was primarily due to increases in professional fees and expenses associated with the Merger of$0.8 million , stock-based compensation of$0.5 million , and salaries and related costs of$0.6 million offset by decreases in other expenses of$0.1 million . 23
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Table of Contents Nine months endedSeptember 30, 2021 : Research and development. Research and development expenses increased by$0.8 million compared to the same period in 2020, mainly due to increases in expenses for salaries and related costs of$0.4 million and engineering related costs of$0.4 million . Sales and marketing. Sales and marketing expenses increased by$2.4 million compared to the same period in 2020, largely attributed to increases in expenses for salaries and related costs (including stock-based compensation) of$1.6 million and marketing costs to support the launch of our products of$0.8 million . General and administrative. General and administrative expenses increased by$5.9 million compared to the same period in 2020. This increase was primarily due to increases in professional fees and expenses associated with the Merger of$3.4 million , stock-based compensation of$1.3 million , salaries and related costs of$1.1 million and other costs of$0.1 million . Liquidity and Capital Resources OnSeptember 30, 2021 , we had$21.7 million of cash and cash equivalents and$0.2 million in restricted cash supporting a letter of credit benefiting our contract manufacturer. We began to generate revenue in September of 2021 having completed the commercialization of our RAP units and initiated sales of the units and consumable cartridges. We expect to continue to invest in the commercial launch of our products and our research and development efforts to support our current initiatives. We estimate our current cash, cash equivalents and restricted cash resources of$21.9 million atSeptember 30, 2021 , which includes Additional Payments made by AbbVie of$6.0 million , and incremental Additional Payments and extension fee payments of$11.5 million because the Merger had not been consummated byNovember 8, 2021 , are sufficient to fund our operations for at least the next 12 months. We anticipate incurring operating losses for the next several years as we complete the development of our products, seek requested regulatory clearances to market such products and support the commercial launch of our products. These factors raise uncertainties about our ability to fund operations in future years. If we need to raise additional capital in order to continue to execute our business plan, including commercializing and generating revenues from products with existing regulatory clearances and obtaining additional regulatory clearance for our products currently under development, there is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to us. A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable. The COVID-19 global pandemic has resulted in travel restrictions and temporary shut-downs of non-essential businesses in many states inthe United States . We are able to remain open but have required our employees to work from home for a portion of the work week. We have experienced interruptions in our supply chain due to global part shortages, supply chain limitations, and labor shortages from COVID-19. Due to many uncertainties, we are unable to estimate the pandemic's financial impact or duration at this time. Summary of Cash Flows The following table summarizes our cash flows for the nine months endedSeptember 30, 2021 and 2020, respectively (in thousands):
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