SONIM TECHNOLOGIES, INC. Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, as amended, for the year endedDecember 31, 2021 . Certain statements in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding our business strategies, growth prospects, operating and financial performance, plans, estimates and projections. These statements are based on management's current expectations and beliefs and on information currently available to us. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements, including but not limited to:
? We are not in compliance with the listing standards of the
and as a result our common stock may become delisted;
? We may not be able to continue to develop solutions to address user needs
effectively, including our next generation products, which would materially
adversely affect our liquidity and our ability to continue operations;
? We have not been profitable in recent years and may not achieve or maintain
profitability in the future;
? We rely on our channel partners to generate a substantial majority of our
revenues;
? A small number of customers account for a significant portion of our revenue;
? We are materially dependent on some customer relationships that are
characterized by product award letters and the loss of such relationships
could harm our business and operating results;
? We continue to restructure and transform our business and there is no
guarantee that our restructuring or transformation will be successful or
achieve the desired results;
? Our quarterly results may vary significantly from period to period;
? We rely primarily on third-party contract manufacturers and partners;
? If our products contain defects or errors, we could incur significantunexpected expenses, experience product returns and lost sales, experience
product recalls, suffer damage to our brand and reputation, and be subject to
product liability or other claims;
16
? We are required to undergo a lengthy customization and certification process
for each wireless carrier customer;
? Our dependence on third-party suppliers for key components of our products
could delay shipment of our products and reduce our sales;
? We are dependent on the continued services and performance of a concentrated
and limited group of senior management and other key personnel;
? We face risks related to health epidemics, pandemics and other outbreaks,
including the COVID-19 pandemic;
? Changes in laws and regulations concerning the use of telecommunication
bandwidth could increase our costs and adversely impact our business;
? If we are unable to successfully protect our intellectual property, our
competitive position may be harmed;? Others may claim that we infringe on their intellectual property rights, which
may result in costly and time-consuming litigation and could delay or
otherwise impair the development and commercialization of our products;
? We have identified one material weakness in our internal control over
financial reporting which, if not remediated, could result in material
misstatements in our financial statements;
The above is not a complete list of factors or events that could cause actual
results to differ from our expectations, and we cannot predict all of them.
Although we believe that we have a reasonable basis for each forward-looking
statement contained in this report, we caution you that these statements are
based on a combination of facts and factors currently known by us and our
projections of the future, about which we cannot be certain. You should review
the "Risk Factors" contained in Part I, Item 1A. of our Annual Report on Form
10-K, for the year ended December 31, 2021 , and Part II, Item 1A of this
Quarterly Report on Form 10-Q for a discussion of factors that could cause
actual results to differ materially from the results described in or implied by
the forward-looking statements contained in the following discussion and
analysis and elsewhere in this Quarterly Report on Form 10-Q. As a result of
these factors, we cannot assure you that the forward-looking statements in this
report will prove to be accurate. Furthermore, if the forward-looking statements
prove to be inaccurate, the inaccuracy may be material. In light of the
significant uncertainties in these forward-looking statements, you should not
regard these statements as a representation or warranty by us or any other
person that we will achieve our objectives and plans in any specified time
frame, or at all. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.
Company Overview
We are a leading provider of rugged and consumer durable mobile devices
including phones and accessories designed to provide extra protection for users
that demand more durability in their work and everyday lives. We currently have
device placements in the three largest wireless carriers in the United States -
ATT, Verizon and T-Mobile - as well as the three largest wireless carriers in
Canada - Bell, Telus and Rogers. While we primarily sell through the wireless
carrier channel, we also sell through distribution channels in North America and
Europe . Our devices and accessories connect users with voice, data, workflow and
lifestyle applications that enhance the user experience while providing an extra
level of protection. In the third quarter we expanded our product line to
tablets targeted for the Asia market as we start to broaden our portfolio.Factors Affecting Our Results of Operations
We believe that the growth and future success of our business depend on many factors. While these factors present significant opportunities for our business, they also pose important challenges that we must successfully address in order to improve our results of operations. Research and Development We believe that our performance is significantly dependent on the investments we make in research and development and that we must continue to develop and introduce innovative and high quality, new products on a two to three-year cycle. Our partnerships with ODMs are expected to enable us to shift between different types and numbers of devices under development without the need to adjust the size of our internal team. While the hardware design of our devices is generally the same for all wireless carriers, each device must be configured to conform to the requirements of each wireless carrier's network, resulting in higher development expenses as the number of wireless carriers we sell through increases. In addition to the design and configuration costs, each device must undergo a multi-month technical approval process at each carrier before it can be certified to be stocked at such carrier. The approval process for each device for each carrier has historically cost between$1-2 million . Prior to commencement of development of a product for certification, we generally do not receive any purchase orders or commitments. Following a carrier's review of product concepts, we may receive a product award letter from that carrier to move forward with the development and certification process, at which time we may begin receiving advance purchase orders or commitments. Since the timing of when we seek technical approval with our wireless carriers tends to be cyclical in nature, quarter-over-quarter expenditures may vary significantly depending on the number of approvals in process during the quarter. If we fail to innovate and enhance our product offerings, our brand, market position and revenues may be adversely affected. If our research and development efforts are not successful, we will not recover these investments that we make. 17 New Customer Acquisitions We are focused on expanding our portfolio to service not only enterprise and public sector customers, but individual consumers as well. We have invested, and expect to continue to invest, in our sales and marketing efforts to expand into the consumer space and drive new customer acquisitions. As a result, we expect our sales and marketing costs to increase as we expand our customer reach and further evolve the Sonim brand. Sales and marketing investments will often occur in advance of any sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our sales and marketing resources.
New Product Introduction and Seasonality
We have historically experienced lower net revenue in the quarters leading up to new product introductions, as the revenue decline of legacy products does not perfectly match the revenue ramp up of new products. New product introductions can significantly impact net revenue, gross profit and operating expenses. The timing of product introductions can also impact our net revenue as our wireless carrier customers prepare for a new product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net revenue can also be affected when consumers and distributors anticipate a new product introduction. However, neither historical seasonal patterns nor historical patterns of product or service introductions should be considered reliable indicators of our future pattern of product or service introductions, future net sales or financial performance. Recent Developments
Agreement with
OnApril 13, 2022 , we entered into a Subscription Agreement (the "Subscription Agreement") withAJP Holding Company, LLC , aDelaware limited liability company ("AJP"), pursuant to which AJP has agreed to purchase fromSonim an aggregate of 20,833,333 shares of our common stock for a purchase price of$17,500,000 (the "Purchased Shares"). Additionally, pursuant to the Subscription Agreement, onApril 13, 2022 ,Peter Liu , who had served asSonim's Executive VP for Global Operations and Engineering sinceSeptember 2010 , was appointed Chief Executive Officer ofSonim . Pursuant to the terms and conditions set forth in the Subscription Agreement, onJuly 13, 2022 , 14,880,952 shares of our common stock (the "Initial Shares") were issued in consideration for an aggregate purchase price of$12,500,000 ("First Closing"), of which 952,381 shares were issued toMr. Liu . Concurrent with the First Closing, all members of our board of directors (the "Board"), other than two Continuing Directors (as defined in the Subscription Agreement) resigned and three new members were appointed by the remaining members of our Board. In connection with the First Closing,Robert Tirva , then Company's Chief Financial Officer and President, resigned and is eligible forone million dollars in severance payments over the next twenty months. Additionally, onJuly 13, 2022 , the Board appointedClay Crolius as Chief Financial Officer of the Company. Shortly thereafter, onJuly 14, 2022 , the Board convened and expanded its size to seven directors having appointed two more members including one independent director. The second closing pursuant to the Subscription Agreement was consummated onAugust 8, 2022 . Accordingly, the Company issued 5,952,381 shares of common stock in consideration for an aggregate purchase price of$5,000,000 , provided that 417,500 have been issued to two assignees of AJP. Liquidity and Going Concern The Company's condensed consolidated financial statements account for the continuation of our business as a going concern. The Company is subject to the risks and uncertainties associated with the development and release of new products. The Company's principal sources of liquidity as ofSeptember 30, 2022 , consist of existing cash and cash equivalents totaling$15,474 .The Company had a net loss for the three months endedSeptember 30, 2022 of$1,608 and the company may need significant cash to expand their product line into the durable consumer market for research and development expenses and marketing. There are significant costs associated with new product development and there is a need for sales volume of the new model of our rugged product for the consumer market to produce cash for further growth. If the sales of the new product fall short of our expectations, then the Company may need additional cash to meet its growth objectives. This raises substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.
18 To alleviate a potential lack of liquidity, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds or through obtaining credit from government or financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. Beginning with the filing of our Form 10-K for the period endedDecember 31, 2021 , we have been subject to limitations under the applicable rules of Form S-3, which constrained our ability to secure capital pursuant to our existing ATM program or other registered offerings pursuant to our effective Form S-3. These rules limit the size of primary securities offerings conducted by issuers with a public float of less than$75 million to no more than one-third of their public float in any 12-month period. As ofOctober 31, 2022 , the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately$9.5 million , which was calculated based on approximately 20,311,913 shares of our outstanding common stock held by non-affiliates at a price of$0.47 per share, the closing price of our common stock onOctober 10, 2022 . As such, we will be restricted from selling more than$3.1 million of securities pursuant to a shelf registration statement in any twelve-month period, so long as the aggregate market value of our common stock held by non-affiliates is less than$75.0 million .
Next Generation Ruggedized Mobile Phones
During the three months endedSeptember 30, 2022 , we prioritized spending on research and development of our new products, including our 5G enabled smartphone. This device will utilize new processors for increased performance and provide expanded network support for additional and new carriers inthe United States , as well as inEurope . They will also include new features and support usability requirements based on feedback from our current customers. We expect to launch the new smartphone in the fourth quarter of 2022.
Expansion into the Consumer Durable Space
The Company plans on expanding from its core market in ultra-rugged mobile devices into the larger and faster growing consumer durable 5G market. This strategy is expected to drive revenue growth and increase operating efficiency as we adapt our core competency in ruggedization into the consumer space.
Nasdaq Minimum Bid Price Delinquency and Reverse Stock Split
OnFebruary 16, 2022 , we received a deficiency letter from theListing Qualifications Department (the "Staff") ofThe Nasdaq Stock Market, LLC ("Nasdaq") notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below$1.00 per share, which is the minimum closing price required to maintain continued listing on theNasdaq Stock Market under Nasdaq Listing Rule 5450(a)(1) (the "Minimum Bid Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or untilAugust 15, 2022 , in which to regain compliance. We requested and received an additional 180-day period to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least$1.00 per share for a minimum of ten consecutive business days during this 180-day period. We intend to actively monitor the closing bid price of our common stock and are evaluating available options to regain compliance with the Minimum Bid Requirement, including by effecting a reverse stock split. OnOctober 26, 2022 , our stockholders approved an amendment to the Company's amended and restated certificate of incorporation, as amended that would effect a reverse stock split whereby a number of outstanding shares of our common stock between and including two (2) and fifteen (15), such number consisting only of whole shares, will be combined into one share of our common stock. The effectiveness of the reverse stock split or the abandonment of the reverse stock split will be determined by the Board in its discretion. If the Board chooses to effect the reverse stock split, it will set the timing and specific ratio from the range approved by
the stockholders. Results of Operations The following tables present key components of our results of operations for the three and nine months endedSeptember 30, 2022 , compared to results for the same period in 2021: Three Months Ended September 30, Nine Months Ended September 30, Increase Increase 2022 2021 (Decrease) % 2022 2021 (Decrease) % Net revenues$ 20,497 $ 14,445 $ 6,052 42 %$ 45,710 $ 38,639 $ 7,071 18 % Cost of revenues 17,181 12,661 4,520 36 % 38,019 31,738 6,281 20 % Gross profit 3,316 1,784 1,532 86 % 7,691 6,901 790 11 % Operating expenses 5,245 12,507 (7,262 )
(58 %) 20,922 33,160 (12,238 ) (37 %) Loss from operations (1,929 ) (10,723 ) 8,794 82 % (13,231 ) (26,259 ) 13,028 50 % Interest and other expense, net
393 (126 ) 519 412 % 387 (419 ) 806 192 %
Loss before income taxes (1,536 ) (10,849 ) 9,313 86 % (12,844 ) (26,678 ) 13,834 52 % Income tax expense
(72 ) (90 ) (18 ) (20 %) (201 ) (227 ) (26 ) 11 %
Net loss $ (1,608 ) $ (10,939 ) $ 9,331 85 %$ (13,045 ) $ (26,905 ) $ 13,860 52 % Net Revenues For the three months endedSeptember 30, 2022 , net revenues were at$20.5 million , as compared to$14.4 million for the three months endedSeptember 30, 2021 . Approximately 68% of net revenues for the third quarter of 2022 were from tablets that were developed specifically for a customer. When our new smartphone launches in the fourth quarter, we expect the percentage of revenue from tablets to decrease. Smartphone sales were lower in the third quarter of 2022 as the Company discontinued production and sale of its legacy smartphone product in anticipation of the launch of its new smartphone products in the fourth quarter of 2022. As a strategy to diversify our product offering and to lower business risk, we are leveraging our experience and competency in North American carrier certification and design capability and we developed and manufactured a tablet product as an ODM for a third party, which we deliver inAsia . The product is imported and sold into a major US carrier by our customer. In the third quarter, the Company recognized revenue for the tablet product line, and will continue the ODM business in parallel to our effort of expending our rugged cell phone business into the consumer durable market. For the nine months endedSeptember 30, 2022 , net revenues were$45.7 million compared to net revenues of$38.6 million for the nine months endedSeptember 30, 2021 , an increase of$7.1 million , or 18%. The increase was due to new tablet sales in the third quarter of 2022. Our customer agreements with channel partners set forth the terms pursuant to which our channel partners purchase our products for distribution on a purchase order basis. While these arrangements are typically long term, they generally do not contain any firm purchase volume commitments. As a result, our channel partners are not currently contractually obligated to purchase from us any minimum number of products. The lack of firm purchase volume commitments makes it difficult for us to forecast customer demand. While our channel partners provide us with demand forecasts under these sales arrangements, we are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts). Our sales arrangements also generally include technical performance standards for our mobile phones and accessories sold, which vary by channel partner. If a technical issue with any of our covered products exceeds certain preset failure thresholds for the relevant performance standards, the channel partner typically has the right to cease selling the product, cancel open purchase orders and levy certain monetary penalties. In addition, our channel partners retain sole discretion in which of their stocked products to offer their customers. 19 Gross Profit Gross profit for the three months endedSeptember 30, 2022 , was$3.3 million , as compared to$1.8 million for the three months endedSeptember 30, 2021 , an increase of$1.5 million or 86%. The increase in gross profit is a result of revenue volume growth in 2022 driven by new tablet sales. Gross profit for the nine months endedSeptember 30, 2022 , was$7.7 million , as compared to$6.9 million for the nine months endedSeptember 30, 2021 , an increase of$0.8 million or 11%. Higher tablet sales increased gross profit, but lower gross margin percentages on the tablets decreased the overall gross margin percentage in 2022.
Operating Expenses and Loss from Operations
Loss from operations for the three months endedSeptember 30, 2022 , was$1.9 million , as compared to$10.7 million for the three months endedSeptember 30, 2021 , an improvement of$8.8 million . This improvement was driven by a$5.6 million decrease in R&D because there was an out of period adjustment that decreased R&D by$1.0 million in 2022 and development projects were near completion in 2022 and software and testing costs were capitalized in 2022 instead of being expensed as R&D. Also, a$1.5 million improvement in gross profit combined with a$1.5 million decrease in sales and marketing expenses due to cost cutting in 2022 lowered operating expenses. Loss from operations for the nine months endedSeptember 30, 2022 , was$13.2 million , as compared to$26.3 million for the nine months endedSeptember 30, 2021 , an improvement of$13.1 million . This improvement was driven by a decrease in operating expenses of$12.2 million , and a$0.8 million improvement in gross profit.
Operating expenses are summarized as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 Change % Change 2022 2021 Change % Change
(in thousands, except %) (in thousands, except %)
Research and
development expense $ (135 ) $ 5,492 $ (5,627 ) (102 %)
1,511 3,087 (1,576 ) (51 %) 5,754 7,454 (1,700 ) (23 %)
General and
administrative
expense 3,633 2,961 672 23 % 7,623 7,603 20 0 %
Legal expense 236 967 (731 ) (76 %) 791 4,276 (3,485 ) (82 %)
Total Operating
Expenses $ 5,245 $ 12,507 $ (7,262 ) (58 %) $ 20,922 $ 33,160 $ (12,238 ) (37 %)
Research and Development.
Research and development expenses for the three months ended September 30, 2022 ,
were $(0.1) million , as compared to $5.5 million for the three months ended
September 30, 2021 , a decrease of $5.6 million , or 102%. The negative expense
was due to an out of period adjustment as $1.05 million in software costs that
should have been capitalized in the second quarter of 2022 were capitalized in
the third quarter of 2022 resulting in a decrease to research and development
costs of $1.05 million in the third quarter of 2022. Without this adjustment,
research and development costs in the third quarter would have been $0.9
million . The decrease from $5.6 million in the prior year was because
development projects were near completion in 2022 and software and testing costs
were capitalized in 2022 instead of being expensed as R&D. In addition, there
were headcount reductions at both Sonim and outsourced operations of $1.2
million and development costs were down $2.1 million , driven by a surge in 2021
for the XP3Plus feature phone, that was launched at the end of the quarter.
Research and development expenses for the nine months ended September 30, 2022 ,
were $6.8 million , as compared to $13.8 million for the nine months ended
September 30, 2021 , a decrease of $7.1 million , or 51%. These expenses decreased
primarily because development projects were closer to completion in 2022 and
software and testing costs were capitalized in 2022. R&D expenses also decreased
due to headcount reductions at both Sonim and outsourced operations of $2.8 million and$1.1 million . Sales and Marketing.
Sales and marketing expenses for the three months endedSeptember 30, 2022 , were$1.5 million , as compared to$3.1 million for the three months endedSeptember 30, 2021 , a decrease of$1.6 million , or 51%. These expenses decreased due to a$0.7 million decrease in employee headcount related costs and higher new product demo units for the XP3Plus launch in 2021 of$0.9 million . Sales and marketing expenses for the nine months endedSeptember 30, 2022 , were$5.8 million , as compared to$7.5 million for the nine months endedSeptember 30, 2021 , a decrease of$1.7 million , or 23%. These expenses decreased due to a$0.8 million reduction in employee headcount related costs and new product demo units for the XP3Plus launch in 2021 of$ 0.9 million 20 General and Administrative. General and administrative expenses for the three months endedSeptember 30, 2022 , were$3.6 million , as compared to$3.0 million for the three months endedSeptember 30, 2021 , an increase of$0.7 million , or 26%. This increase was driven by$1.2 million severance accruals and$0.4 million for the acceleration of RSU vesting triggered by a change of control as a result of the AJP investment. General and administrative expenses for the nine months endedSeptember 30, 2022 , were$7.6 million , as compared to$7.6 million for the nine months endedSeptember 30, 2021 , an increase of$0.02 million , or .3%. Severance accruals of$1.2 million and the acceleration of RSU vesting of$0.4 million due to the change in control, were partially offset by headcount related savings. Legal expenses. Legal expenses for the three months endedSeptember 30, 2022 , were$0.2 million , as compared to$1.0 million for the three months endedSeptember 30, 2021 , a decrease of$0.7 million , or 82%. The decrease of$0.7 million in these expenses was primarily because there was less activity in 2022 on theSEC matter, which was$.7 million in 2021. Legal expenses for the nine months endedSeptember 30, 2022 , were$0.8 million , as compared to$4.3 million for the nine months endedSeptember 30, 2021 , a decrease of$3.5 million , or 83%. Legal expenses were higher for the nine months endedSeptember 30, 2021 , due to the costs related to theSEC matter of$3.5 million .
Interest and Other Expense, net
Interest and other expenses decreased by$0.5 million for the three months endedSeptember 30, 2022 , as compared to the three months endedSeptember 30, 2021 . This decrease was primarily due to a gain on a lease termination of$0.7 million , offset partially by exchange rates of$0.2 million and a loss on the sale of an asset of$0.1 million . Interest and other expenses decreased by$0.8 million for the nine months endedSeptember 30, 2022 , as compared to the nine months endedSeptember 30, 2021 . This decrease was primarily due to gain on a lease termination of$0.7 million and a benefit from exchange rates$0.3 million , offset partially by the loss on the sale of fixed asset of$0.1 million . Income Tax Expense
Income tax expense was
Income tax expense was
Liquidity and Capital Resources (dollars in thousands other than per share amounts)
The Company's condensed consolidated financial statements account for the continuation of our business as a going concern. The Company is subject to the risks and uncertainties associated with the development and release of new products. The Company's principal sources of liquidity as ofSeptember 30, 2022 , consist of existing cash and cash equivalents totaling$15,474 . The Company had current assets of$39,177 and current liabilities of$23,813 . The Company had a net loss for the three months endedSeptember 30, 2022 of$1,608 and the company may need significant cash to expand their product line into the durable consumer market for research and development expenses and marketing. There are significant costs associated with new product development and there is a need for sales volume of the new model of our rugged product for the consumer market to produce cash for further growth. If the sales of the new product fall short of our expectations, then the Company may need additional cash to meet its growth objectives. This raises substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these condensed consolidated financial statements. To alleviate a potential lack of liquidity, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds or through obtaining credit from government or financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. 21 Summary of Cash Flows Cash and cash equivalents as ofSeptember 30, 2022 , was$15.0 million , or$4.8 million higher than cash and cash equivalents of$10.2 million onSeptember 30, 2021 . The increase was from the net proceeds from the issuance of stock to an investor of$14.4 million , partially offset by operating losses. The following table summarizes our sources and uses of cash for the periods presented: Nine ended September 30, (in thousands) 2022 2021
Net cash used in operating activities$ (10,139 ) $ (20,912 ) Net cash used in investing activities (6 ) (20 ) Net cash provided by financing activities 14,384
8,978
Net increase (decrease) in cash and cash equivalents 4,241
(11,954 )
Cash flows from operating activities
For the nine months endedSeptember 30, 2022 , cash used in operating activities was$10 . million. The negative cash flow was primarily due to a net loss of$13.0 million and an increase in accounts receivable of$5.5 million due to large billings at quarter end. These uses were partially offset by lower prepaids of$3.4 million , higher accounts payable of$3.0 million , and lower inventory of$1.5 million . For the nine months endedSeptember 30, 2021 , cash used in operating activities was$20.9 million , primarily attributable to a net loss of$26.9 million and by changes in our non-trade receivables of$2.4 million and other assets of$1.1 million . These were partially offset by an increase to accounts payable of$3.6 million ,$1.6 million in depreciation and amortization, and$0.8 million in stock-based compensation expense.
Cash flows from investing activities
For the nine months ended
Cash flows from financing activities
For the nine months endedSeptember 30, 2022 , cash provided by financing activities was$14.4 million due to amounts received from AJP of$17.5 million , less$3.1 million in costs (see Note 7). The first closing of the subscription agreement was completed onJuly 13, 2022 and the second closing was completed onAugust 8, 2022 .
For the nine months ended
Material Cash Requirements
There have been no material changes to our material cash requirements from those
disclosed in our Annual Report on Form 10-K for the year ended
Critical Accounting Estimates
The preparation of these unaudited consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, 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.
Recently Issued Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements.
Segment Information
We have one business activity and operate in one reportable segment.
22 JOBS Act
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or 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 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. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least$1.235 billion , (iii) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Security Exchange Act of 1934, as amended (the "Exchange Act"),, which would occur if the market value of our common stock held by non-affiliates exceeded$700 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our prospectuses and in our periodic reports and proxy statements.
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