10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number: 001-40587

 

SIGHT SCIENCES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

80-0625749

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4040 Campbell Ave, Suite 100

Menlo Park, CA

94025

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (877) 266-1144

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001

 

SGHT

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of August 4, 2022, the registrant had 47,826,239 shares of Common Stock, par value $0.001 outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

3

 

 

 

PART I.

FINANCIAL INFORMATION

5

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets (Unaudited)

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

6

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Unaudited)

7

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

9

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

 

 

 

PART II.

OTHER INFORMATION

34

 

 

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

 

Signatures

37

 

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “Sight Sciences,” “we,” “us” and “our” refer to Sight Sciences, Inc.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

estimates of our total addressable market, future revenue, expenses, capital requirements, and our needs for additional financing;
our ability to enter into and compete in new markets;
the impact of the COVID-19 pandemic on our business, our customers’ and suppliers’ businesses and the general economy;
our ability to compete effectively with existing competitors and new market entrants;
our ability to scale our infrastructure;
our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers;
our ability to establish and maintain intellectual property protection for our products or avoid claims of infringement;
potential effects of extensive government regulation;
our ability to obtain and maintain sufficient reimbursement for our products;
our abilities to protect and scale our intellectual property portfolio;
our ability to hire and retain key personnel;
our ability to obtain financing in future offerings;
the volatility of the trading price of our common stock;
our expectation regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”); and
our ability to maintain proper and effective internal controls.

Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on March 24, 2022 (the "2021 Form 10-K") and elsewhere in this Quarterly Report. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking

 

3


 

statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements in this Quarterly Report are based on information available to us as of the date of this Quarterly Report. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

 

 

4


 

PART 1. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SIGHT SCIENCES, INC.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

220,097

 

 

$

260,687

 

Accounts receivable, net

 

 

10,474

 

 

 

8,709

 

Inventory, net

 

 

4,940

 

 

 

3,475

 

Prepaid expenses and other current assets

 

 

2,035

 

 

 

4,164

 

Total current assets

 

 

237,546

 

 

 

277,035

 

Property and equipment, net

 

 

1,717

 

 

 

1,454

 

Operating lease right-of-use assets

 

 

1,250

 

 

 

1,495

 

Other noncurrent assets

 

 

236

 

 

 

202

 

Total assets

 

$

240,749

 

 

$

280,186

 

Liabilities, redeemable convertible preferred stock, and Stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,725

 

 

$

3,351

 

Accrued compensation

 

 

6,286

 

 

 

5,987

 

Accrued and other current liabilities

 

 

5,186

 

 

 

4,166

 

Total current liabilities

 

 

14,197

 

 

 

13,504

 

Long-term debt

 

 

32,984

 

 

 

32,656

 

Other noncurrent liabilities

 

 

1,809

 

 

 

1,919

 

Total liabilities

 

 

48,990

 

 

 

48,079

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Redeemable convertible preferred stock:

 

 

 

 

 

 

Convertible preferred stock par value of $0.001 per share; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock par value of $0.001 per share; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock par value of $0.001 per share; 200,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; 47,819,706 and 47,504,704 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

48

 

 

 

48

 

Additional paid-in-capital

 

 

391,818

 

 

 

385,060

 

Accumulated deficit

 

 

(200,107

)

 

 

(153,001

)

Total stockholders’ equity

 

 

191,759

 

 

 

232,107

 

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

 

$

240,749

 

 

$

280,186

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

17,229

 

 

$

12,535

 

 

$

32,111

 

 

$

21,170

 

Cost of goods sold

 

 

2,736

 

 

 

2,305

 

 

 

5,768

 

 

 

4,606

 

Gross profit

 

 

14,493

 

 

 

10,230

 

 

 

26,343

 

 

 

16,564

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,926

 

 

 

3,546

 

 

 

11,573

 

 

 

6,986

 

Selling, general and administrative

 

 

31,431

 

 

 

17,760

 

 

 

59,826

 

 

 

32,310

 

Total operating expenses

 

 

37,357

 

 

 

21,306

 

 

 

71,399

 

 

 

39,296

 

Loss from operations

 

 

(22,864

)

 

 

(11,076

)

 

 

(45,056

)

 

 

(22,732

)

Interest expense

 

 

(1,065

)

 

 

(1,082

)

 

 

(2,112

)

 

 

(2,166

)

Other income (expense), net

 

 

95

 

 

 

(5,435

)

 

 

80

 

 

 

(4,883

)

Loss before income taxes

 

 

(23,834

)

 

 

(17,593

)

 

 

(47,088

)

 

 

(29,781

)

Provision for income taxes

 

 

9

 

 

 

22

 

 

 

18

 

 

 

74

 

Net loss and comprehensive loss

 

$

(23,843

)

 

$

(17,615

)

 

$

(47,106

)

 

$

(29,855

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.50

)

 

$

(1.83

)

 

$

(0.99

)

 

$

(3.12

)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

 

47,701,451

 

 

 

9,610,408

 

 

 

47,635,840

 

 

 

9,564,096

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended June 30, 2022

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2022

 

 

 

 

$

 

 

 

47,590,348

 

 

$

48

 

 

$

388,127

 

 

$

(176,264

)

 

$

211,911

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

229,358

 

 

 

 

 

 

159

 

 

 

 

 

 

159

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,532

 

 

 

 

 

 

3,532

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,843

)

 

 

(23,843

)

Balance at June 30, 2022

 

 

 

 

 

 

 

 

47,819,706

 

 

 

48

 

 

 

391,818

 

 

 

(200,107

)

 

 

191,759

 

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

47,504,704

 

 

$

48

 

 

$

385,060

 

 

$

(153,001

)

 

$

232,107

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

315,002

 

 

 

 

 

 

252

 

 

 

 

 

 

252

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,506

 

 

 

 

 

 

6,506

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,106

)

 

 

(47,106

)

Balance at June 30, 2022

 

 

 

 

 

 

 

 

47,819,706

 

 

 

48

 

 

 

391,818

 

 

 

(200,107

)

 

 

191,759

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

7


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended June 30, 2021

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at March 31, 2021

 

 

12,767,202

 

 

$

117,331

 

 

 

9,526,044

 

 

$

9

 

 

$

1,471

 

 

$

(102,281

)

 

$

(100,801

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

205,988

 

 

 

 

 

 

196

 

 

 

 

 

 

196

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

931

 

 

 

 

 

 

931

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,615

)

 

 

(17,615

)

Balance at June 30, 2021

 

 

12,767,202

 

 

 

117,331

 

 

 

9,732,032

 

 

 

9

 

 

 

2,598

 

 

 

(119,896

)

 

 

(117,289

)

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

 

12,767,202

 

 

$

117,331

 

 

 

9,509,182

 

 

$

9

 

 

$

1,183

 

 

$

(90,041

)

 

$

(88,849

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

222,850

 

 

 

 

 

 

207

 

 

 

 

 

 

207

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,208

 

 

 

 

 

 

1,208

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,855

)

 

 

(29,855

)

Balance at June 30, 2021

 

 

12,767,202

 

 

 

117,331

 

 

 

9,732,032

 

 

 

9

 

 

 

2,598

 

 

 

(119,896

)

 

 

(117,289

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(47,106

)

 

$

(29,855

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

375

 

 

 

289

 

Accretion of debt discount and amortization of debt issuance costs

 

 

328

 

 

 

346

 

Stock-based compensation expense

 

 

6,506

 

 

 

1,208

 

Provision for doubtful accounts receivable

 

 

105

 

 

 

104

 

Provision for excess and obsolete inventories

 

 

118

 

 

 

276

 

Noncash operating lease expense

 

 

246

 

 

 

310

 

Change in fair value of redeemable convertible preferred stock warrant

 

 

 

 

 

4,872

 

Loss on disposal of property and equipment

 

 

49

 

 

 

74

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,870

)

 

 

(1,628

)

Inventory

 

 

(1,583

)

 

 

(255

)

Prepaid expenses and other current assets

 

 

2,129

 

 

 

(1,197

)

Other noncurrent assets

 

 

(34

)

 

 

(3,081

)

Accounts payable

 

 

(608

)

 

 

1,438

 

Accrued compensation

 

 

299

 

 

 

13

 

Accrued and other current liabilities

 

 

599

 

 

 

1,594

 

Other noncurrent liabilities

 

 

176

 

 

 

186

 

Net cash used in operating activities

 

 

(40,271

)

 

 

(25,306

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(569

)

 

 

(369

)

Net cash used in investing activities

 

 

(569

)

 

 

(369

)

Cash flows from financing activities

 

 

 

 

 

 

Payments of costs related to initial public offering

 

 

 

 

 

(471

)

Proceeds from exercise of common stock options

 

 

250

 

 

 

207

 

Net cash provided by (used in) financing activities

 

 

250

 

 

 

(264

)

Net change in cash and cash equivalents

 

 

(40,590

)

 

 

(25,939

)

Cash and cash equivalents at beginning of period

 

 

260,687

 

 

 

61,511

 

Cash and cash equivalents at end of period

 

$

220,097

 

 

$

35,572

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

1,548

 

 

$

1,548

 

Supplemental noncash disclosure

 

 

 

 

 

 

Acquisition of property and equipment included in accounts payable and accrued liabilities

 

$

279

 

 

$

181

 

Unpaid initial public offering costs in accounts payable and accrued liabilities

 

$

 

 

$

2,764

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

9


 

SIGHT SCIENCES, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 1. Company and Nature of Business

 

Description of Business

 

Sight Sciences, Inc. (the “Company”) was incorporated in the State of Delaware in 2010 and is headquartered in Menlo Park, California. The Company is an ophthalmic medical device company focused on the development and commercialization of surgical and nonsurgical technologies for the treatment of prevalent eye diseases.

Initial Public Offering

In July 2021, the Company closed its initial public offering (“IPO”) of its common stock in which the Company issued and sold 10,000,000 shares of its common stock, and sold an additional 1,500,000 shares of common stock upon the full exercise of the underwriters’ option to purchase additional shares of the Company's common stock. These sales occurred at the initial public offering price of $24.00 per share. The Company received net proceeds of approximately $252.2 million from the IPO, after deducting underwriting discounts and commissions of $19.3 million and offering costs of $4.5 million.

Immediately prior to the closing of the IPO, all then-outstanding shares of redeemable convertible preferred stock were converted into 25,534,404 shares of common stock. Further, all outstanding redeemable convertible preferred stock warrants were converted into warrants to purchase 659,028 shares of common stock, which resulted in the reclassification of the convertible preferred stock warrant liability to additional paid-in capital.

In connection with the Company’s IPO, in July 2021, the Company’s certificate of incorporation was amended and restated to provide for 200,000,000 authorized shares of common stock with a par value of $0.001 per share and 10,000,000 authorized shares of preferred stock with a par value of $0.001 per share.

Significant Risks and Uncertainties

Since inception, the Company has incurred losses and negative cash flows from operations. As of June 30, 2022, the Company had an accumulated deficit of $200.1 million and recorded a net loss of $47.1 million for the six months then ended and expects to incur future additional losses. If the Company’s revenue levels from its products are not sufficient or if the Company is unable to secure additional funding when desired, the Company may need to delay the development of its products and scale back its business and operations.

The Company believes that its existing sources of liquidity will satisfy its working capital and capital requirements for at least 12 months from the issuance of its financial statements. Any failure to generate sufficient revenues, achieve planned gross margins, or control operating costs could require the Company to raise additional capital through equity or debt financing. Such additional financing may not be available on acceptable terms, or at all, and could require the Company to modify, delay, or abandon some of its planned future expansion or expenditures or reduce some of its ongoing operating costs, which could harm its business, operating results, financial condition, and ability to achieve its intended business objectives.

The ongoing COVID-19 pandemic has impacted, and is expected to continue to impact, demand for the Company's products, which are used in procedures and therapies that are considered elective. COVID-19 may also, directly or indirectly, have an unfavorable impact on other areas of the Company's business including, but not limited to, supply chain, sales, third party manufacturing, research and development costs and clinical studies. The full effect of the COVID-19 pandemic on the Company's financial condition and results of operations remains highly uncertain and cannot be predicted with confidence, and will depend on certain developments, including the duration and severity of the COVID-19 pandemic and its potential variants. The impact on the Company's customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may continue to experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.

 

10


 

Note 2. Summary of Significant Accounting Policies

There have been no significant changes in the Company's significant accounting policies during the six months ended June 30, 2022, as compared with those disclosed in the 2021 Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (SEC) on March 24, 2022.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) applicable to interim periods and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited consolidated financial statements have been prepared on a basis consistent with the audited financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company's financial information contained herein. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date. These interim consolidated financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company's financial statements and accompanying notes for the fiscal year ended December 31, 2021, which are contained in the Company's 2021 Form 10-K filed with the SEC on March 24, 2022. The Company's results of operations for the three- and six-months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period.

The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expense during the reporting period. The most significant estimates related to inventory excess and obsolescence, the selection of useful lives of property and equipment, determination of the fair value of stock option grants, the fair value of the redeemable convertible preferred stock warrants, and provisions for income taxes and contingencies. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements. Actual results could differ from these estimates and such differences could be material to the Company’s financial position and results of operations.

New Accounting Pronouncements

During the three and six-month period ended June 30, 2022, there were no significant Accounting Standard Updates (ASU's) issued that were adopted. As of June 30, 2022, there are no significant ASU's issued and not yet adopted, that are expected to have a material impact on the Company's financial statements and related disclosures.

Note 3. Fair Value Measurements

The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

11


 

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair value measurement in its entirety is based on the lowest-level input that is significant to the fair value measurement in its entirety.

The Company's cash and cash equivalents included $174.7 million of treasury bills as of June 30, 2022. These securities are classified as held-to-maturity and all have been purchased with original maturities of 90 days or less. Held-to-maturity debt securities are recorded at amortized cost in the financial statements.

 

 

 

June 30, 2022

 

 

 

Amortized Cost

 

 

Unrealized Gains