Inari Medical(NARI) - 2023 Q2 - Quarterly Report

FORM 10-Q General Information This section details Inari Medical, Inc.'s Form 10-Q filing, Nasdaq listing, and outstanding common stock - Inari Medical, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2023. The company is incorporated in Delaware and its common stock is traded on The Nasdaq Global Select Market under the symbol NARI[2] Filer Status Summary | Filer Status | Status | | :------------- | :----- | | Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ | - As of July 28, 2023, the registrant had 57,352,371 shares of common stock outstanding[3] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section cautions investors about forward-looking statements, which are subject to risks and uncertainties and may not be updated publicly - This Quarterly Report contains forward-looking statements covered by safe harbor provisions, identifiable by terms such as 'may,' 'will,' 'expect,' and 'plan.' These statements relate to the company's business model, strategic plans, macroeconomic impact, industry trends, and future operations[7] - Forward-looking statements are predictions based on current expectations and projections, subject to known and unknown risks and uncertainties that may cause actual results to differ materially. These risks are discussed in the Annual Report on Form 10-K for the year ended December 31, 2022[8] - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law, and investors are cautioned not to unduly rely on these statements[9] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets Summary Data | (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Assets | | | | Total current assets | $444,617 | $422,905 | | Total assets | $524,968 | $504,152 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $58,238 | $56,174 | | Total liabilities | $89,323 | $87,150 | | Total stockholders' equity | $435,645 | $417,002 | | Total liabilities and stockholders' equity | $524,968 | $504,152 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section presents the company's financial performance, including revenue, gross profit, operating loss, and net income or loss Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Summary Data | (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $119,005 | $92,744 | $235,172 | $179,496 | | Gross profit | $105,161 | $82,397 | $207,587 | $159,182 | | Loss from operations | $(1,510) | $(9,328) | $(6,848) | $(12,410) | | Income (loss) before income taxes | $3,024 | $(8,935) | $1,830 | $(12,064) | | Net income (loss) | $2,085 | $(10,187) | $(133) | $(13,316) | | Basic Net income (loss) per share | $0.04 | $(0.19) | $(0.00) | $(0.26) | | Diluted Net income (loss) per share | $0.04 | $(0.19) | $(0.00) | $(0.26) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity Summary Data | (in thousands, except share data) | Balance, Dec 31, 2022 | Balance, June 30, 2023 | | :-------------------------------- | :-------------------- | :--------------------- | | Common Stock (Shares) | 54,021,656 | 57,266,455 | | Common Stock (Amount) | $54 | $57 | | Additional Paid In Capital | $462,949 | $483,752 | | Accumulated Other Comprehensive Income (Loss) | $849 | $(1,181) | | Accumulated Deficit | $(46,850) | $(46,983) | | Total Stockholders' Equity | $417,002 | $435,645 | Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary Data | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $7,747 | $(12,161) | | Net cash used in investing activities | $(10,123) | $(175,371) | | Net cash provided by financing activities | $114 | $174,947 | | Effect of foreign exchange rate changes on cash and cash equivalents | $(123) | $(443) | | Net decrease in cash and cash equivalents | $(2,385) | $(13,028) | | Cash and cash equivalents end of period | $57,837 | $79,724 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. ORGANIZATION Inari Medical, Inc. is headquartered in Irvine, California, specializing in minimally invasive, catheter-based mechanical thrombectomy systems - The Company purpose builds minimally invasive, novel, catheter-based mechanical thrombectomy systems for the unique characteristics of specific disease states[25] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the company's accounting policies, including U.S. GAAP basis, management estimates, and revenue recognition, with disaggregation by product and geography - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, are unaudited, and include all adjustments of a normal and recurring nature for fair presentation[26][27] - Significant estimates include collectability of receivables, inventory valuation, operating lease ROU assets and liabilities, fair value of stock options, and recoverability of net deferred tax assets[28] Revenue Disaggregation Summary Data | Revenue Disaggregation | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | ClotTriever and other systems | 34 % | 33 % | 34 % | 32 % | | FlowTriever system | 66 % | 67 % | 66 % | 68 % | | Geographic Area (in thousands) | | | | | | United States | $113,802 | $90,933 | $225,648 | $175,987 | | International | $5,203 | $1,811 | $9,524 | $3,509 | | Total revenue | $119,005 | $92,744 | $235,172 | $179,496 | 3. FAIR VALUE MEASUREMENTS The company's financial assets, primarily debt securities, are measured at fair value on a recurring basis within the fair value hierarchy Fair Value Measurements (June 30, 2023) Summary Data | (in thousands) | Level 1 (June 30, 2023) | Level 2 (June 30, 2023) | Level 3 (June 30, 2023) | Aggregate Fair Value (June 30, 2023) | | :--------------- | :---------------------- | :---------------------- | :---------------------- | :----------------------------------- | | Money market mutual funds | $20,450 | $— | $— | $20,450 | | Corporate debt securities and commercial paper | $— | $2,992 | $— | $2,992 | | U.S. Treasury securities | $181,987 | $— | $— | $181,987 | | U.S. Government agencies | $— | $52,500 | $— | $52,500 | | Corporate debt securities and commercial paper | $— | $45,209 | $— | $45,209 | | Total assets | $202,437 | $100,701 | $— | $303,138 | Fair Value Measurements (December 31, 2022) Summary Data | (in thousands) | Level 1 (December 31, 2022) | Level 2 (December 31, 2022) | Level 3 (December 31, 2022) | Aggregate Fair Value (December 31, 2022) | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :--------------------------------------- | | Money market mutual funds | $20,329 | $— | $— | $20,329 | | U.S. Treasury securities | $172,088 | $— | $— | $172,088 | | U.S. Government agencies | $— | $47,131 | $— | $47,131 | | Corporate debt securities and commercial paper | $— | $46,960 | $— | $46,960 | | Total assets | $192,417 | $94,091 | $— | $286,508 | 4. CASH EQUIVALENTS AND INVESTMENTS This note summarizes the company's cash equivalents and debt securities investments, detailing amortized cost, unrealized gains/losses, and fair value Cash Equivalents and Investments (June 30, 2023) Summary Data | (in thousands) | Amortized Cost Basis (June 30, 2023) | Unrealized Gain (June 30, 2023) | Unrealized Loss (June 30, 2023) | Fair Value (June 30, 2023) | | :--------------- | :----------------------------------- | :------------------------------ | :------------------------------ | :------------------------- | | Money market mutual funds | $20,450 | $— | $— | $20,450 | | Corporate debt securities and commercial paper | $2,993 | $— | $(1) | $2,992 | | U.S. Treasury securities | $181,921 | $137 | $(71) | $181,987 | | U.S. Government agencies | $52,550 | $37 | $(87) | $52,500 | | Corporate debt securities and commercial paper | $45,197 | $55 | $(43) | $45,209 | | Total assets | $303,111 | $229 | $(202) | $303,138 | Cash Equivalents and Investments (December 31, 2022) Summary Data | (in thousands) | Amortized Cost Basis (December 31, 2022) | Unrealized Gain (December 31, 2022) | Unrealized Loss (December 31, 2022) | Fair Value (December 31, 2022) | | :--------------- | :--------------------------------------- | :---------------------------------- | :---------------------------------- | :----------------------------- | | Money market mutual funds | $20,329 | $— | $— | $20,329 | | U.S. Treasury securities | $171,006 | $1,120 | $(38) | $172,088 | | U.S. Government agencies | $46,777 | $354 | $— | $47,131 | | Corporate debt securities and commercial paper | $46,576 | $397 | $(13) | $46,960 | | Total assets | $284,688 | $1,871 | $(51) | $286,508 | 5. INVENTORIES, NET This note details the composition of the company's inventories, net of reserves, broken down into raw materials, work-in-process, and finished goods Inventories, Net Summary Data | (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Raw materials | $13,893 | $13,943 | | Work-in-process | $4,130 | $3,396 | | Finished goods | $20,961 | $15,242 | | Total inventories, net | $38,984 | $32,581 | 6. PROPERTY AND EQUIPMENT, NET This note provides a breakdown of property and equipment, gross and net of depreciation, and details depreciation expense Property and Equipment, Net Summary Data | (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Manufacturing equipment | $15,464 | $13,585 | | Leasehold improvements | $5,248 | $5,040 | | Computer hardware | $5,219 | $5,123 | | Furniture and fixtures | $4,336 | $4,119 | | Assets in progress | $1,779 | $2,516 | | Capitalized software | $317 | $— | | Computer software | $— | $100 | | Total property and equipment, gross | $32,363 | $30,483 | | Accumulated depreciation | $(11,300) | $(8,828) | | Total property and equipment, net | $21,063 | $21,655 | - Depreciation expense for the three months ended June 30, 2023, was $1,132,000 in operating expenses and $274,000 in cost of goods sold[48][51] - For the six months ended June 30, 2023, it was $2,226,000 in operating expenses and $528,000 in cost of goods sold[48][51] 7. COMMITMENTS AND CONTINGENCIES This note details operating lease liabilities, indemnification agreements, legal proceedings, licensed technology, and a self-insured health plan - As of June 30, 2023, aggregate operating lease ROU assets were $49.9 million and lease liabilities were $32.7 million, with a weighted average remaining lease term of 18.5 years and a weighted average incremental borrowing rate of 6.05%[53][54] Lease Liabilities Summary Data | Year ending December 31: | Amount (in thousands) | | :----------------------- | :-------------------- | | Remainder of 2023 | $1,747 | | 2024 | $3,554 | | 2025 | $3,041 | | 2026 | $2,920 | | 2027 | $2,985 | | Thereafter | $38,544 | | Total lease payments | $52,791 | | Less imputed interest | $(20,123) | | Total lease liabilities | $32,668 | - The sublicense agreement with Inceptus Medical, LLC was terminated in June 2023, eliminating ongoing administration and royalty fees starting July 2023[62] - The Company implemented a self-insurance program for employee health benefits as of January 1, 2023, with a liability of $1.7 million as of June 30, 2023[64][66] 8. CONCENTRATIONS This note addresses concentrations of revenue and purchases, noting no single customer or vendor exceeded 10% and cash is held across multiple institutions - No single customer accounted for more than 10% of the Company's revenue or accounts receivable for the three and six months ended June 30, 2023 and 2022[67] - No vendor accounted for more than 10% of the Company's purchases or accounts payable for the three and six months ended June 30, 2023 and 2022[68] - The Company maintains cash and cash equivalents at multiple financial institutions in excess of current FDIC insurance limits[69] 9. RELATED PARTY This note discloses transactions with MRI The Hoffman Group, a recruiting services company owned by a former CEO's brother Payments to MRI Summary Data | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Payments to MRI | $50 | $118 | $80 | $192 | 10. CREDIT FACILITY This note details the amended senior secured revolving credit facility, including increased borrowing capacity, interest rates, and the LC subline facility - The Amended Credit Agreement with Bank of America increased borrowing capacity to $40.0 million and the optional accordion to $120.0 million, maturing on December 16, 2027[71] - As of June 30, 2023, approximately $38.0 million was available to borrow, with no principal amount outstanding[71][77] - The LC Facility limit was increased to $10.0 million in February 2023, with $2.0 million in letters of credit outstanding as of June 30, 2023[73][75] 11. STOCKHOLDER'S EQUITY This note provides information on common stock issuances, including a public offering, and details accumulated other comprehensive income (loss) components - In March 2022, the Company completed a public offering of 2,300,000 shares of common stock, generating net proceeds of approximately $174.4 million[78] Accumulated Other Comprehensive Income (Loss) Summary Data | (in millions) | June 30, 2023 | December 31, 2022 | | :-------------- | :------------ | :---------------- | | Foreign currency translation adjustments | $(1.1) | $(1.0) | | Unrealized loss (gain) on investments | $(0.1) | $1.8 | | Total Accumulated Other Comprehensive Income (Loss) | $(1.2) | $0.8 | 12. EQUITY INCENTIVE PLANS This note details the company's equity incentive plans, including RSUs, stock options, ESPP, valuation assumptions, and stock-based compensation expense - The 2011 Plan RSUs fully vested in March 2023, with a total fair value of $170.6 million vested for the six months ended June 30, 2023[84][86] 2020 Plan RSU Activity Summary Data | 2020 Plan RSU Activity | Number of Awards (June 30, 2023) | Weighted Average Fair Value (June 30, 2023) | | :--------------------- | :------------------------------- | :------------------------------------------ | | Outstanding, December 31, 2022 | 999,215 | $79.16 | | Granted | 680,003 | $57.82 | | Vested | (224,887) | $75.59 | | Cancelled | (57,816) | $76.96 | | Outstanding, June 30, 2023 | 1,396,515 | $69.44 | Stock-based Compensation Expense (in thousands) Summary Data | Stock-based Compensation Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $420 | $375 | $839 | $740 | | Research and development | $1,697 | $1,113 | $3,393 | $2,092 | | Selling, general and administrative | $8,236 | $5,676 | $16,460 | $10,887 | | Total compensation cost | $10,353 | $7,164 | $20,692 | $13,719 | 13. INCOME TAXES This note outlines the provision for income taxes, effective tax rate factors, R&D cost capitalization impact, and valuation allowance against deferred tax assets Income Taxes Summary Data | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income (loss) before income taxes | $3,024 | $(8,935) | $1,830 | $(12,064) | | Provision for income taxes | $939 | $1,252 | $1,963 | $1,252 | | Net income (loss) | $2,085 | $(10,187) | $(133) | $(13,316) | | Provision for income taxes as a percentage of income (loss) before income taxes | 31.1% | (14.0%) | 107.3% | (10.4%) | - The company maintains a full valuation allowance against its net deferred tax assets, totaling $30.3 million as of December 31, 2022, as realization is not considered more likely than not[100] - The Tax Cuts and Jobs Act requires certain R&D costs to be capitalized and amortized over five years, impacting U.S. federal and state tax expense and cash taxes for the year ending December 31, 2023[99] 14. RETIREMENT PLAN This note describes the Inari Medical, Inc. 401(k) Plan, including employee eligibility, contribution types, company matching policy, and associated expenses - The Company contributes a $1.00 match for every $1.00 contributed by a participating employee up to the greater of $3,000 or 4% of eligible compensation, with immediate vesting[103] Matching Contribution Expense Summary Data | (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Matching contribution expense | $2.2 | $2.7 | $4.9 | $4.4 | 15. NET INCOME (LOSS) PER SHARE This note details the calculation of basic and diluted net income (loss) per share, including the weighted average common shares outstanding and the treatment of potentially dilutive securities Net Income (Loss) Per Share Summary Data | (in thousands, except per share amounts) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $2,085 | $(10,187) | $(133) | $(13,316) | | Weighted average common shares outstanding - basic | 57,207,902 | 53,183,767 | 55,988,736 | 52,075,399 | | Weighted average common shares outstanding - diluted | 58,496,350 | 53,183,767 | 55,988,736 | 52,075,399 | | Net income (loss) per share: Basic | $0.04 | $(0.19) | $(0.00) | $(0.26) | | Net income (loss) per share: Diluted | $0.04 | $(0.19) | $(0.00) | $(0.26) | - Potentially dilutive common stock equivalents (stock options, RSUs, ESPP) were excluded from diluted EPS calculation when the company was in a net loss position, as their inclusion would be anti-dilutive[104][105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting business overview, revenue drivers, and financial performance OVERVIEW Inari Medical improves lives through innovative, minimally invasive, catheter-based mechanical thrombectomy systems for venous thromboembolism (VTE), reporting net income for Q2 2023 and strong liquidity - Inari Medical's mission is to establish its treatments as the standard of care for venous thromboembolism (VTE) and beyond, leveraging solutions like ClotTriever (DVT) and FlowTriever (PE, clot in transit)[107][108] - New products released during Q2 2023 include the RevCore thrombectomy catheter (venous stent thrombosis), Triever 16 Curve catheter (PE and venous thrombus removal), and ClotTriever Bold catheter (DVT and acute/chronic clots)[108] Financial Metric Summary Data | Financial Metric (in millions) | June 30, 2023 | | :----------------------------- | :------------ | | Cash, cash equivalents, and short-term investments | $337.5 | | Long-term debt outstanding | $0 | | Accumulated deficit | $(47.0) | | Q2 2023 Revenue | $119.0 | | Q2 2023 Net income | $2.1 | | H1 2023 Revenue | $235.2 | | H1 2023 Net loss | $(0.1) | Revenue The company's revenue primarily stems from direct sales of ClotTriever and FlowTriever systems to U.S. hospitals, driven by sales expansion and new product introductions - Revenue is primarily derived from the sale of ClotTriever and FlowTriever systems directly to hospitals, mainly in the United States[112] - Expected revenue growth is attributed to expanding sales territories, opening new accounts, achieving deeper penetration in existing accounts, and introducing new products[112] Product System Revenue Disaggregation Summary Data | Product System | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | ClotTriever and other systems | 34 % | 33 % | 34 % | 32 % | | FlowTriever system | 66 % | 67 % | 66 % | 68 % | RESULTS OF OPERATIONS This section compares the company's financial performance for the three and six months ended June 30, 2023 and 2022, analyzing revenue, costs, gross margin, and operating expenses Comparison of the three months ended June 30, 2023 and 2022 For Q2 2023, revenue increased by 28.3% to $119.0 million, with a net income of $2.1 million, significantly improving from a prior-year net loss due to higher interest income Financial Performance (Three Months Ended June 30) Summary Data | (dollars in thousands) | 2023 | % of Revenue | 2022 | % of Revenue | Change $ | | :--------------------- | :--- | :----------- | :--- | :----------- | :------- | | Revenue | $119,005 | 100.0 % | $92,744 | 100.0 % | $26,261 | | Cost of goods sold | $13,844 | 11.6 % | $10,347 | 11.2 % | $3,497 | | Gross profit | $105,161 | 88.4 % | $82,397 | 88.8 % | $22,764 | | Research and development | $21,085 | 17.7 % | $18,569 | 20.0 % | $2,516 | | Selling, general and administrative | $85,586 | 71.9 % | $73,156 | 78.9 % | $12,430 | | Loss from operations | $(1,510) | (1.2)% | $(9,328) | (10.1)% | $7,818 | | Interest income | $4,552 | 3.8 % | $214 | 0.2 % | $4,338 | | Net income (loss) | $2,085 | 1.8 % | $(10,187) | (11.0)% | $12,272 | - Revenue increased by $26.3 million, or 28.3%, primarily due to increased product sales, expanded sales territories, new accounts, and new product introductions[114] - Gross margin decreased slightly to 88.4% from 88.8%, mainly due to increased costs associated with new FlowTriever system components, partially offset by manufacturing efficiencies[116] - Interest income significantly increased by $4.3 million to $4.6 million, driven by higher interest rates and an increased average balance of short-term investments[119] Comparison of the six months ended June 30, 2023 and 2022 For H1 2023, revenue grew by 31.0% to $235.2 million, and the net loss narrowed significantly to $0.1 million, largely benefiting from increased interest income Financial Performance (Six Months Ended June 30) Summary Data | (dollars in thousands) | 2023 | % of Revenue | 2022 | % of Revenue | Change $ | | :--------------------- | :--- | :----------- | :--- | :----------- | :------- | | Revenue | $235,172 | 100.0 % | $179,496 | 100.0 % | $55,676 | | Cost of goods sold | $27,585 | 11.7 % | $20,314 | 11.3 % | $7,271 | | Gross profit | $207,587 | 88.3 % | $159,182 | 88.7 % | $48,405 | | Research and development | $43,149 | 18.3 % | $34,704 | 19.3 % | $8,445 | | Selling, general and administrative | $171,286 | 72.8 % | $136,888 | 76.3 % | $34,398 | | Loss from operations | $(6,848) | (2.8 %) | $(12,410) | (6.9 %) | $5,562 | | Interest income | $8,697 | 3.7 % | $264 | 0.1 % | $8,433 | | Net loss | $(133) | (0.1 %) | $(13,316) | (7.4 %) | $13,183 | - Revenue increased by $55.7 million, or 31.0%, primarily due to increased product sales, expanded sales territories, new accounts, and new product introductions[123] - R&D expenses increased by $8.4 million, or 24.3%, driven by higher personnel-related expenses, material and supplies, clinical and regulatory expenses, and software costs to support growth drivers[126] - SG&A expenses increased by $34.4 million, or 25.1%, mainly due to increased personnel-related expenses (headcount and commissions) and higher travel expenses[127] - Interest income significantly increased by $8.4 million to $8.7 million, primarily due to higher interest rates and an increased average balance of short-term investments[128] LIQUIDITY AND CAPITAL RESOURCES The company's capital sources include equity offerings and product revenue, with $337.5 million in liquidity and no outstanding debt as of June 30, 2023, anticipating sufficient funds for the next 12 months - As of June 30, 2023, the company had $57.8 million in cash and cash equivalents and $279.7 million in short-term investments, totaling $337.5 million in liquidity[131] - The company had no principal outstanding under its Amended Credit Agreement and approximately $38.0 million available to borrow as of June 30, 2023[132] - Management anticipates that current liquidity will be sufficient to fund operating expenses and cash requirements for at least the next 12 months[134] - Primary short-term capital needs include supporting commercialization efforts, advancing R&D, and potential facility expansion[134] CASH FLOWS This section summarizes the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022, detailing significant changes Net cash provided by (used in) operating activities Net cash provided by operating activities was $7.7 million for H1 2023, a significant improvement from a $12.2 million use of cash in the prior year, driven by reduced net loss and non-cash charges - Net cash provided by operating activities was $7.7 million for the six months ended June 30, 2023, compared to net cash used of $12.2 million in the prior year[137][138] - The improvement was driven by a reduced net loss and non-cash charges of $17.8 million (including share-based compensation, amortization, and depreciation), partially offset by a $9.9 million decrease in net operating assets[137] Net cash used in investing activities Net cash used in investing activities was $10.1 million for H1 2023, a substantial decrease from $175.4 million in the prior year, mainly due to higher marketable securities maturities offsetting purchases - Net cash used in investing activities was $10.1 million for the six months ended June 30, 2023, significantly lower than $175.4 million in the prior year[139][140] - This was primarily due to $284.2 million in purchases of short-term investments, $2.2 million in property and equipment, and $0.6 million in other investments, largely offset by $276.8 million in maturities of short-term investments[139] Net cash provided by financing activities Net cash provided by financing activities was $0.1 million for H1 2023, a significant decrease from $174.9 million in the prior year, which included substantial public offering proceeds - Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2023, a decrease from $174.9 million in the prior year[141][143] - The 2023 financing cash flow consisted of $4.2 million from ESPP and $0.4 million from stock option exercises, offset by $4.5 million in tax payments for vested RSUs[141][142] - The 2022 financing cash flow included $174.4 million net proceeds from a public offering[143] CRITICAL ACCOUNTING POLICIES ESTIMATES There have been no significant changes in the company's critical accounting policies during the six months ended June 30, 2023 - No significant changes in critical accounting policies during the six months ended June 30, 2023[144] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's quantitative and qualitative disclosures about market risk - No material changes to quantitative and qualitative disclosures about market risk[145] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting Evaluation of disclosure controls and procedures Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance for timely and accurate reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023, providing reasonable assurance for timely and accurate reporting[145] Changes in internal control over financial reporting There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting during the quarter ended June 30, 2023[146] PART II. OTHER INFORMATION This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity security sales Item 1. LEGAL PROCEEDINGS The company is not subject to any material legal proceedings - The Company is not subject to any material legal proceedings[148] Item 1A. RISK FACTORS There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[149] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report - None[150] Item 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report - None[151] Item 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not applicable[152] Item 5. OTHER INFORMATION This section updates on RSU distributions and tax arrangements for officers and directors, with no new trading plans - Certain RSUs vested in March 2023 will be distributed in installments, with tax obligations for Mr. Hykes and Dr. Tu to be covered by the sale of approximately 37,000 and 25,000 shares, respectively, for the August 2023 distribution[153] - Mr. Bill Hoffman will wire sufficient funds to cover his tax obligations for the remaining RSU distributions, so the company will not sell shares on his behalf[153] - No officer or director has entered into, modified, or terminated a trading plan pursuant to 10(b)(5)-1(c) or any other non-rule 10b5-1 trading plan[154] Item 6. EXHIBITS This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate governance and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Certifications of Principal Executive and Financial Officers (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[157] SIGNATURES This section confirms the report's official signing by the Chief Executive Officer and Chief Financial Officer - The report was signed on August 2, 2023, by Andrew Hykes, Chief Executive Officer and President (Principal Executive Officer), and Mitchell Hill, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)[161]