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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, 2023

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 1, 2023, the registrant had 48,651,074 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 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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

 

 

 

PART II.

OTHER INFORMATION

32

 

 

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

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 for the fiscal period ended June 30, 2023 (this "Quarterly Report") 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 obtain and maintain sufficient reimbursement for our products;
our ability to enter into and compete in new markets;
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 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 impact of incidence of disease or other epidemics on our business, our customers' and suppliers' businesses, and on our industry and the economy;
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, 2022 filed with the Securities and Exchange Commission (the "SEC") on March 16, 2023 (the "2022 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 upon 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,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

154,515

 

 

$

185,000

 

Accounts receivable, net of allowance for credit losses of $1,037 and $1,024 at June 30, 2023 and December 31, 2022, respectively

 

 

18,103

 

 

 

15,148

 

Inventory, net

 

 

7,907

 

 

 

6,114

 

Prepaid expenses and other current assets

 

 

1,795

 

 

 

3,415

 

Total current assets

 

 

182,320

 

 

 

209,677

 

Property and equipment, net

 

 

1,477

 

 

 

1,571

 

Operating lease right-of-use assets

 

 

1,125

 

 

 

1,614

 

Other noncurrent assets

 

 

367

 

 

 

211

 

Total assets

 

$

185,289

 

 

$

213,073

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,947

 

 

$

2,688

 

Accrued compensation

 

 

5,720

 

 

 

7,352

 

Accrued and other current liabilities

 

 

5,386

 

 

 

7,777

 

Total current liabilities

 

 

14,053

 

 

 

17,817

 

Long-term debt

 

 

33,607

 

 

 

33,313

 

Other noncurrent liabilities

 

 

1,498

 

 

 

1,867

 

Total liabilities

 

 

49,158

 

 

 

52,997

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

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, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Common stock, par value of $0.001 per share; 200,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 48,649,343 and 48,298,138 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

49

 

 

 

48

 

Additional paid-in-capital

 

 

407,146

 

 

 

399,271

 

Accumulated deficit

 

 

(271,064

)

 

 

(239,243

)

Total stockholders’ equity

 

 

136,131

 

 

 

160,076

 

Total liabilities and stockholders’ equity

 

$

185,289

 

 

$

213,073

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

23,471

 

 

$

17,229

 

 

$

42,296

 

 

$

32,111

 

Cost of goods sold

 

 

3,381

 

 

 

2,736

 

 

 

6,429

 

 

 

5,768

 

Gross profit

 

 

20,090

 

 

 

14,493

 

 

 

35,867

 

 

 

26,343

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,221

 

 

 

5,926

 

 

 

9,890

 

 

 

11,573

 

Selling, general and administrative

 

 

30,056

 

 

 

31,431

 

 

 

58,731

 

 

 

59,826

 

Total operating expenses

 

 

35,277

 

 

 

37,357

 

 

 

68,621

 

 

 

71,399

 

Loss from operations

 

 

(15,187

)

 

 

(22,864

)

 

 

(32,754

)

 

 

(45,056

)

Interest expense

 

 

(1,349

)

 

 

(1,065

)

 

 

(2,625

)

 

 

(2,112

)

Other income, net

 

 

1,790

 

 

 

95

 

 

 

3,580

 

 

 

80

 

Loss before income taxes

 

 

(14,746

)

 

 

(23,834

)

 

 

(31,799

)

 

 

(47,088

)

Provision for income taxes

 

 

8

 

 

 

9

 

 

 

22

 

 

 

18

 

Net loss and comprehensive loss

 

$

(14,754

)

 

$

(23,843

)

 

$

(31,821

)

 

$

(47,106

)

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

 

$

(0.30

)

 

$

(0.50

)

 

$

(0.66

)

 

$

(0.99

)

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

 

 

48,536,310

 

 

 

47,701,451

 

 

 

48,471,153

 

 

 

47,635,840

 

 

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

 

 

6


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended June 30, 2023

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2023

 

 

48,450,378

 

 

$

48

 

 

$

402,638

 

 

$

(256,310

)

 

$

146,376

 

Issuance of common stock upon exercise of stock options

 

 

56,994

 

 

 

 

 

 

122

 

 

 

 

 

 

122

 

Issuance of common stock upon vesting of restricted stock units

 

 

63,437

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Withholding taxes on net share settlement of restricted stock units

 

 

 

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

Employee stock purchase plan purchases

 

 

78,534

 

 

 

 

 

 

661

 

 

 

 

 

 

661

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,742

 

 

 

 

 

 

3,742

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,754

)

 

 

(14,754

)

Balance at June 30, 2023

 

 

48,649,343

 

 

 

49

 

 

 

407,146

 

 

 

(271,064

)

 

 

136,131

 

 

 

 

 

Six Months Ended June 30, 2023

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

48,298,138

 

 

$

48

 

 

$

399,271

 

 

$

(239,243

)

 

$

160,076

 

Issuance of common stock upon exercise of stock options

 

 

103,202

 

 

 

 

 

 

171

 

 

 

 

 

 

171

 

Issuance of common stock upon vesting of restricted stock units

 

 

169,469

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Withholding taxes on net share settlement of restricted stock units

 

 

 

 

 

 

 

 

(222

)

 

 

 

 

 

(222

)

Employee stock purchase plan purchases

 

 

78,534

 

 

 

 

 

 

661

 

 

 

 

 

 

661

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,265

 

 

 

 

 

 

7,265

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,821

)

 

 

(31,821

)

Balance at June 30, 2023

 

 

48,649,343

 

 

 

49

 

 

 

407,146

 

 

 

(271,064

)

 

 

136,131

 

 

 

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

 

 

7


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended June 30, 2022

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

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

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

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.

 

8


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(31,821

)

 

$

(47,106

)

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

 

 

 

 

 

 

Depreciation

 

 

295

 

 

 

375

 

Accretion of debt discount and amortization of debt issuance costs

 

 

294

 

 

 

328

 

Stock-based compensation expense

 

 

7,265

 

 

 

6,506

 

Provision for credit losses

 

 

40

 

 

 

105

 

Provision for excess and obsolete inventories

 

 

208

 

 

 

118

 

Noncash operating lease expense

 

 

489

 

 

 

246

 

Loss on disposal of property and equipment

 

 

66

 

 

 

49

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(2,995

)

 

 

(1,870

)

Inventory

 

 

(2,001

)

 

 

(1,583

)

Prepaid expenses and other current assets

 

 

1,622

 

 

 

2,129

 

Other noncurrent assets

 

 

(156

)

 

 

(34

)

Accounts payable

 

 

190

 

 

 

(608

)

Accrued compensation

 

 

(1,632

)

 

 

299

 

Accrued and other current liabilities

 

 

(2,894

)

 

 

599

 

Other noncurrent liabilities

 

 

158

 

 

 

176

 

Net cash used in operating activities

 

 

(30,872

)

 

 

(40,271

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(223

)

 

 

(569

)

Net cash used in investing activities

 

 

(223

)

 

 

(569

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

171

 

 

 

250

 

Taxes paid on the net share settlement of restricted stock units

 

 

(222

)

 

 

 

Proceeds from employee stock purchase plan purchases

 

 

661

 

 

 

 

Net cash provided by financing activities

 

 

610

 

 

 

250

 

Net change in cash and cash equivalents

 

 

(30,485

)

 

 

(40,590

)

Cash and cash equivalents at beginning of period

 

 

185,000

 

 

 

260,687

 

Cash and cash equivalents at end of period

 

$

154,515

 

 

$

220,097

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

2,066

 

 

$

1,548

 

Supplemental noncash disclosure

 

 

 

 

 

 

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

 

$

147

 

 

$

279

 

 

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.

The Company's product portfolio aligns with its two reportable operating segments: Surgical Glaucoma and Dry Eye. The products for the Surgical Glaucoma segment feature the OMNI® Surgical System, which is an implant-free glaucoma surgery technology indicated to reduce intraocular pressure in adult patients with primary open-angle glaucoma, the world's leading cause of irreversible blindness, and the SION™ Surgical Instrument, a manually operated device used in ophthalmic surgical procedures to excise trabecular meshwork. The product portfolio for the Dry Eye segment consists of the TearCare® System ("TearCare") for ophthalmologists and optometrists. TearCare is a wearable eyelid technology for adult patients with evaporative dry eye disease due to meibomian gland dysfunction (MGD) when used in conjunction with manual expression of the meibomian glands, enabling clearance of gland obstructions by physicians to address the leading cause of dry eye disease.

Significant Risks and Uncertainties

Since inception, the Company has incurred losses and negative cash flows from operations. As of June 30, 2023, the Company had an accumulated deficit of $271.1 million and recorded a net loss of $31.8 million for the six months then ended and expects to incur additional losses in the future. 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, scale back its business and operations, or change its business strategy.

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 increased revenue, achieve improved 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.

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, 2023, as compared with those disclosed in the 2022 Form 10-K.

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, 2022 has been derived from the audited financial statements at that date. These interim condensed 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, 2022, which are contained in the 2022 Form 10-K . The Company's results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period.

 

10


 

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 expenses during the reporting period. The most significant estimates related to the provision for credit losses, inventory excess and obsolescence, the selection of useful lives of property and equipment, determination of the fair value of stock option grants, 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

Accounting Standards Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The guidance was effective for the Company beginning in the first quarter of 2023. The amendments in ASU 2016-13 were adopted with no material impact on the Company's consolidated financial statements.

Accounting Standards Not Yet Adopted

As of June 30, 2023, there are no significant ASUs 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.

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 $123.4 million of treasury bills as of June 30, 2023. 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.

 

11


 

 

 

 

June 30, 2023

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Aggregate Fair Value

 

U.S. treasury securities

 

$

123,396

 

 

$

42

 

 

$

 

 

$

123,438

 

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of June 30, 2023 and December 31, 2022, total debt of $33.6 million and $33.3 million is reported at amortized cost, respectively. This outstanding debt is classified as Level 2 as it is not actively traded. The amortized cost of the outstanding debt approximates the fair value.

The financial statements as of June 30, 2023 and December 31, 2022 do not include any assets or liabilities that are measured at fair value on a nonrecurring basis.

Note 4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Tools and equipment

 

$

1,879

 

 

$

2,173

 

Computer equipment and software

 

 

37

 

 

 

37

 

Furniture and fixtures

 

 

323

 

 

 

282

 

Leasehold improvements

 

 

38

 

 

 

38

 

Construction in process

 

 

507

 

 

 

475

 

 

 

2,784

 

 

 

3,005

 

Less: Accumulated depreciation

 

 

(1,307

)