The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and the related notes and other financial information
included in this Quarterly Report and our audited financial statements and
related notes as disclosed in our 2021 Form 10-K .

Overview

 Sight Sciences' mission is to transform ophthalmology and optometry through the
development and commercialization of proprietary devices that target the
underlying causes of the world's most prevalent eye diseases. We are passionate
about improving patients' lives. Our objective is to develop and market products
for use in new treatment paradigms and to create an interventional mindset in
eyecare whereby our products may be used in procedures which supplant
conventional outdated approaches. Our business philosophy is grounded in the
following principles: 

comprehensively understand disease physiology,

develop products that are intended to restore natural physiological
functionality to diseased eyes;

develop and market products that achieve superior effectiveness versus current
treatment paradigms while minimizing complications or side effects,

provide intuitive, patient friendly solutions to ophthalmologists and
optometrists; and

deliver compelling economic value to all stakeholders, including patients,
providers and third-party payors such as Medicare and commercial insurers

 Our initial product development has focused on the treatment of two of the
world's most prevalent and underserved eye diseases, glaucoma and dry eye
disease. We have commercialized products in each of our two reportable segments;
Surgical Glaucoma and Dry Eye. Our Surgical Glaucoma segment consists of sales
of the OMNI® Surgical System ("OMNI") and SIONTM Surgical Instrument ("SION"),
while our Dry Eye segment includes sales of the TearCare® System ("TearCare"),
and related components and accessories. Each product is primarily sold through a
highly-involved direct sales model that offers intensive education, training and
customer service. We believe this philosophy and model not only enables us to
differentiate our products and our overall company from competitors, but also to
expand our addressable market by educating Eye Care Professionals ("ECPs"),
patients and other stakeholders on our products and evolving treatment
paradigms. Outside of the U.S., we have historically sold OMNI primarily through
a network of distributors, although we began employing a small direct sales
force outside of the United States in 2021. We sell OMNI and SION to facilities where ophthalmic surgeons perform outpatient
procedures, mainly ambulatory surgery centers ("ASCs") and hospital outpatient
departments ("HOPDs"), which are typically reimbursed by Medicare or private
payors for procedures using our products. We sell TearCare to optometrist and
ophthalmologist practices. Currently, there is no meaningful reimbursement
coverage by Medicare or private payors for meibomian gland disease ("MGD")
procedures, including TearCare, and patients typically pay out-of-pocket for
TearCare. We are continuing our controlled commercial launch and are focused on
our comprehensive, clinical data-driven long-term market development plan that
aims to improve awareness and patient access to TearCare. We have dedicated
meaningful resources to execute our commercial strategy and we continue to
expand our sales organization through additional sales representatives and
territories. The overall success of our approach to eyecare to date is evidenced
by the over 130,000 estimated uses of OMNI and its direct predicates in over
1,500 hospitals and ASCs in the U.S. and Europe, and over 20,000 estimated uses
of TearCare in over 850 eyecare facilities in the U.S. through September 30,
2022. We currently operate no manufacturing facilities and instead contract with third
parties for our production requirements. We believe our suppliers will be able
to meet our current and anticipated manufacturing needs across all our products.
We plan to continue to utilize third party contract manufacturers for our
products and any related components. 25
-------------------------------------------------------------------------------- Our gross margin in our Surgical Glaucoma segment for the three months ended
September 30, 2022 and 2021 was 88.7% and 87.0%, respectively. In 2021, we
shifted our primary production of OMNI from a U.S.-based third-party contract
manufacturer, to a lower cost, higher volume contract manufacturer in Asia. We
are in the process of supplementing this OMNI production capacity with a
U.S.-based contract manufacturer. These cost optimization initiatives
contributed to the increase in gross margins in our Surgical Glaucoma segment.
Our gross margin in our Dry Eye segment for the three months ended September 30,
2022 and 2021 was 37.9% and 32.7%, respectively. The TearCare System includes
the SmartHub component, which is typically only sold in initial purchase orders,
and single-use SmartLids which are sold as part of initial purchase orders and
through repeat orders as the ECP performs procedures over time. Given the
earlier stage of TearCare's commercial development, we expect our Dry Eye
segment's gross margins to be lower than our Surgical Glaucoma segment's gross
margins for the near and medium-term due to the allocation of fixed labor and
overhead costs to the segment's cost of goods sold. We believe in the importance of continued strategic investment in initiatives
that: further demonstrate our products' clinical effectiveness and safety to
potential customers, patients, payors and regulators; enhance our commercial
capabilities, including resources dedicated to sales, marketing and education;
ensure the broadest possible patient access to the treatment alternatives that
our products are cleared to offer; enhance and improve upon our existing product
technologies; and allow us to innovate new products, devices or drugs, in
glaucoma and ocular surface disease or in new eye disease areas. As a result, we
intend to continue to invest in clinical studies, sales and marketing, education
initiatives, market access, and product development. Because of these and other
factors, we expect to continue to incur net losses for at least the next several
fiscal years. Moreover, we expect to incur expenses as a result of operating as
a public company, including expenses related to compliance with the rules and
regulations of the SEC and those of the Nasdaq Stock Market, additional
insurance expenses, investor relations activities and other administrative and
professional services. As a result of these and other factors, we may require
and seek additional debt and equity financing to fund our operations and planned
growth. To date, our primary sources of capital has been private placements of
redeemable convertible preferred stock, debt financing agreements, the sale of
common stock in our initial public offering ("IPO"), and revenue from the sale
of our products. In July 2021, we completed our IPO, receiving net proceeds of
$252.2 million. As of September 30, 2022, we had an outstanding term loan
balance of $35.0 million (excluding debt discount and amortized debt issuance
costs), cash and cash equivalents of $199.8 million and an accumulated deficit
of $222.3 million. Impact of COVID-19 The global COVID-19 pandemic has impacted and may in the future impact demand
for our products, which are used in procedures and therapies that are considered
elective. Future surges of COVID-19 may result in governmental restrictions
being re-implemented to reduce the spread of COVID-19 or patients and healthcare
providers otherwise postponing elective eyecare procedures. Any future impact of the COVID-19 pandemic will depend on future developments
that are 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. Among other things, the COVID-19
pandemic could disrupt the operations of our third-party manufacturers and other
suppliers. We are working closely with our manufacturing partners and suppliers
to help ensure that we are able to source key components and maintain
appropriate inventory levels to meet customer demand. Nevertheless, as occurred
in earlier stages of the COVID-19 pandemic, we may, among other things,
experience reduced customer demand or constrained supply that could materially
adversely impact our business, results of operations, liquidity and cash flows
in future periods. 

Factors Affecting our Business and Results of Operations

 We believe there are several important factors that have impacted and that will
continue to impact our business and results of operations. There have been no
material changes to such factors from those described in our 2021 Form 10-K
under the heading "Factors Affecting our Business and Results of Operations." 26
--------------------------------------------------------------------------------

Components of our Results of Operations

Revenue

 We currently derive the majority of our U.S. revenue from the sale of OMNI to
ASCs and HOPDs and TearCare to ophthalmology and optometry practices. During the
nine months ended September 30, 2022 and 2021, the revenues from our Surgical
Glaucoma segment accounted for over 90% of our total revenues. Substantially all
of our revenues for both periods were generated from sales within the U.S. Our
Surgical Glaucoma customers place orders based on their expected procedure
volume and reorder as needed, typically on a biweekly, monthly or bimonthly
basis. Our TearCare customers typically purchase a TearCare System which
consists of one or more SmartHubs, multiple single-use SmartLids and other
accessories. After utilizing their initial inventory, customers can reorder
SmartLids as needed. No single customer accounted for 10% or more of our revenue
for the nine months ended September 30, 2022 and 2021. 

The growth in our revenue is driven by the demand for elective surgery and
treatment utilizing our products. Such demand is often lower during summer
months because of ECP vacations and in winter months in certain parts of the
world because of fewer business or surgery days due to holidays and adverse
weather conditions.

Cost of Goods Sold and Gross Margin

 Our products are produced by third-party manufacturers. Our cost of goods sold
consists primarily of amounts paid for our products to third-party
manufacturers, and our manufacturing overhead costs, which consist primarily of
personnel expenses, including salaries, benefits and stock-based compensation,
and reserves for excess, obsolete and non-sellable inventory. Cost of goods sold
also includes depreciation expenses for production equipment which we provide to
our third-party manufacturers and certain direct costs, such as shipping and
handling costs. We calculate gross margin as gross profit divided by revenue. Our gross margin
has been and will continue to be affected by a variety of factors, including
differences in segment gross margins, changes in average selling prices, product
sales mix, production and ordering volumes, manufacturing costs, product yields,
and headcount. In general, we expect our gross margins to increase over the
long-term to the extent our production and ordering volumes increase and to the
extent we spread the fixed portion of our overhead costs over a larger number of
units produced. We intend to use our design, engineering and manufacturing
know-how and capabilities to further advance and improve the efficiency of our
suppliers' manufacturing processes, which we believe will reduce costs and
increase our gross margins. Our gross margins could fluctuate from quarter to
quarter as we transition to new suppliers, introduce new products and adopt new
manufacturing processes and technologies. 

Research and Development Expenses

 Research and development ("R&D") expenses consist primarily of engineering,
product development, clinical studies to develop and support our products,
including clinical trial design, clinical trial site initiation and study costs,
internal and external costs associated with our regulatory compliance and
quality assurance functions, medical affairs, cost of products used for clinical
trials and other costs associated with products and technologies - either new or
enhancements of existing platforms - that are in development. These expenses
also include personnel expenses, including salaries, benefits and stock-based
compensation, supplies, consulting, prototyping, testing, materials, travel
expenses, depreciation expenses for equipment and an allocation of IT and
facility overhead expenses. Our R&D expenses as a percentage of revenue may vary
over time depending on the level and timing of new product development efforts,
as well as clinical development, clinical trial and other related activities. We
expect our R&D expenses to increase for the next several years as we continue to
invest in our active clinical trial program, develop new products and improve
our existing products. 

Selling, General and Administrative Expenses

 Selling, general and administrative ("SG&A") expenses consist primarily of
personnel expenses, including salaries, benefits and stock-based compensation
related to selling, marketing and corporate functions, allocation of IT and
facility overhead expenses, bad debt expense, finance, legal and human resource
costs. Other SG&A expenses include training, travel expenses, promotional
activities, marketing initiatives, market research and 27
-------------------------------------------------------------------------------- analysis, conferences and trade shows, professional services fees (including
external legal, audit, consulting and tax fees), insurance costs, and general
corporate expenses. Interest Expense

Interest expense consists primarily of interest incurred on our outstanding
indebtedness and non-cash interest related to the amortization of debt discount
and issuance costs associated with our outstanding loan.

Other Income (Expense), Net

 Other income (expense), net consists of interest and amortization on
held-to-maturity investments in treasury securities, as well as, gains and
losses resulting from the remeasurement of the fair value of our redeemable
convertible preferred stock warrant liability. The redeemable convertible
preferred stock warrants were exercised in 2021 and the final fair value of the
warrant liability was reclassified to stockholders' equity. We will no longer
record any related periodic fair value adjustments. 

Results of Operations

 Comparison of the Three Months Ended September 30, 2022 and 2021 (dollars in
thousands) Three Months Ended September 30, Change 2022 2021 $ % (unaudited)
Revenue
Surgical Glaucoma $ 17,072 $ 12,446 $ 4,626 37.2 %
Percentage of total revenue 91.4 % 95.0 %
Dry Eye 1,605 655 950 145.0
Percentage of total revenue 8.6 % 5.0 %
Total 18,677 13,101 5,576 42.6
Cost of goods sold
Surgical Glaucoma 1,932 1,621 311 19.2
Dry Eye 996 441 555 125.9
Total 2,928 2,062 866 42.0
Gross profit
Surgical Glaucoma 15,140 10,825 4,315 39.9
Dry Eye 609 214 395 184.6
Total 15,749 11,039 4,710 42.7
Gross margin
Surgical Glaucoma 88.7 % 87.0 %
Dry Eye 37.9 % 32.7 %
Total 84.3 % 84.3 %
Operating expenses
Research and development 6,053 4,279 1,774 41.5
Selling, general and
administrative 31,541 20,790 10,751 51.7
Total operating expenses 37,594 25,069 12,525 50.0
Loss from operations (21,845 ) (14,030 ) (7,815 ) 55.7
Interest expense (1,131 ) (1,122 ) (9 ) 0.8
Other income (expense), net 766 (2,001 ) 2,767 (138.3 ) Loss before income tax (22,210 ) (17,153 ) (5,057 ) 29.5
Provision (benefit) for
income tax 19 16 3 18.8
Net loss and comprehensive
loss $ (22,229 ) $ (17,169 ) $ (5,060 ) 29.5 % 28
-------------------------------------------------------------------------------- Revenue. Revenue in the three months ended September 30, 2022 was $18.7 million,
an increase of $5.6 million, or 42.6%, from the prior year comparable period.
The overall increase in Surgical Glaucoma revenue was primarily attributable to
a significant increase in the number of OMNI units sold in the three months
ended September 30, 2022 as a result of growth in the number of facilities
ordering OMNI and an increase in unit utilization per ordering facility. Our Dry
Eye revenues increased in the three months ended September 30, 2022 versus the
comparable period in 2021 due to the continued growth in our installed base of
facilities that have purchased TearCare. Surgical Glaucoma sales represented
91.4% and 95.0% of our revenue generated in the three months ended September 30,
2022 and 2021, respectively. Cost of Goods Sold and Gross Profit. Cost of goods sold during the three months
ended September 30, 2022, increased $0.9 million compared to the same period in
the prior year. Our Surgical Glaucoma cost of goods sold increased $0.3 million
as compared to 2021. The increase was driven by increased sales activity,
partially offset by lower per unit production costs as a result of continued
manufacturing efficiencies. Dry Eye cost of goods sold increased $0.6 million in
the three months ended September 30, 2022 over the comparable period in 2021,
which was primarily driven by increases in sales activity. Our total gross profit was $15.7 million in the three months ended September 30,
2022, an increase of $4.7 million from the comparable period in 2021. Our total
gross margin remained flat at 84.3% from the three months ended September 30,
2021 to the three months ended September 30, 2022 as segment-level increases in
gross margin were offset by an increase in the revenue from our Dry Eye segment.
Gross margin in our Surgical Glaucoma segment was 88.7% for the quarter ended
September 30, 2022, an increase from 87.0% for the prior year comparable period.
In our Dry Eye segment, gross margin increased from 32.7% in the second quarter
of 2021, to 37.9% for the quarter ended September 30, 2022, driven by cost
efficiencies achieved through higher sales volumes. Research and Development ("R&D") Expenses. The $1.8 million increase in R&D
expenses during the three months ended September 30, 2022 compared to the three
months ended September 30, 2021 was primarily attributable to a $1.2 million
increase in clinical studies expense as we expanded studies on both new and
existing products. In addition, there was a $0.6 million increase in personnel
expenses as a result of increased headcount, including a $0.1 million increase
in stock-based compensation expense. Selling, General, and Administrative ("SG&A") Expenses. SG&A expenses were $31.5
million for the three months ended September 30, 2022, an increase of $10.8
million from the prior year comparable period. The increase was attributable to
a $7.7 million increase in personnel expenses as a result of increased
headcount, which included a $1.2 million increase in stock-based compensation
expense. In addition, there was a $2.0 million increase in professional services
expense, primarily consulting and legal expenses, as well as a $0.8 million
increase in marketing expenses, and a $0.2 million increase in travel expenses. 

Interest Expense. Interest expense was consistent during the three months ended
September 30, 2022 compared to the three months ended September 30, 2021.

 Other Income (Expense), Net. Other income (expense), net was $0.8 million for
the three months ended September 30, 2022 as compared to an expense of $2.0
million in the three months ended September 30, 2021. The income in the current
year is attributable to the amortization of purchase discounts on
held-to-maturity cash-equivalent investments. During the related prior year
comparable period, the expense relates to the remeasurement of our convertible
preferred stock warrants and recognition of the change in fair value. As
detailed in the notes to our financial statements included herein, the
convertible preferred stock warrants were automatically converted into common
stock warrants concurrent with our IPO and subsequently exercised in the third
quarter of fiscal year 2021. 29
-------------------------------------------------------------------------------- Comparison of the Nine Months Ended September 30, 2022 and 2021 (dollars in
thousands) Nine Months Ended September 30, Change 2022 2021 $ % (unaudited)
Revenue
Surgical Glaucoma $ 46,842 $ 32,573 $ 14,269 43.8 %
Percentage of total revenue 92.2 % 95.0 %
Dry Eye 3,946 1,698 2,248 132.4
Percentage of total revenue 7.8 % 5.0 %
Total 50,788 34,271 16,517 48.2
Cost of goods sold
Surgical Glaucoma 5,372 5,252 120 2.3
Dry Eye 3,324 1,416 1,908 134.7
Total 8,696 6,668 2,028 30.4
Gross profit
Surgical Glaucoma 41,470 27,321 14,149 51.8
Dry Eye 622 282 340 120.6
Total 42,092 27,603 14,489 52.5
Gross margin
Surgical Glaucoma 88.5 % 83.9 %
Dry Eye 15.8 % 16.6 %
Total 82.9 % 80.5 %
Operating expenses
Research and development 17,626 11,265 6,361 56.5
Selling, general and
administrative 91,367 53,100 38,267 72.1
Total operating expenses 108,993 64,365 44,628 69.3
Loss from operations (66,901 ) (36,762 ) (30,139 ) 82.0
Interest expense (3,243 ) (3,288 ) 45 (1.4 )
Other income (expense), net 846 (6,884 ) 7,730 (112.3 ) Loss before income tax (69,298 ) (46,934 ) (22,364 ) 47.6
Provision (benefit) for
income tax $ 37 $ 90 (53 ) (58.9 )
Net loss and comprehensive
loss (69,335 ) (47,024 ) $ (22,311 ) 47.4 % Revenue. Revenue in the nine months ended September 30, 2022 was $50.8 million,
an increase of $16.5 million, or 48.2%, from the prior year comparable period.
The overall increase in Surgical Glaucoma revenue was primarily attributable to
a significant increase in the number of OMNI units sold in the nine months ended
September 30, 2022 as a result of growth in the number of facilities ordering
OMNI and an increase in unit utilization per ordering facility. Our Dry Eye
revenues increased in the nine months ended September 30, 2022 versus the
comparable period in 2021 due to the continued growth in our installed base of
facilities that have purchased TearCare. Surgical Glaucoma sales represented
92.2% and 95.0% of our revenue generated in the nine months ended September 30,
2022 and 2021, respectively. Cost of Goods Sold and Gross Profit. Cost of goods sold during the nine months
ended September 30, 2022, increased $2.0 million compared to the same period in
the prior year. The increase was primarily driven by an increase in cost of
goods sold in our Dry Eye segment. Dry Eye cost of goods sold increased $1.9
million in the nine months ended September 30, 2022 over the comparable period
in 2021, which was driven by increased sales activity and $0.9 million of
charges in the 2022 period associated with the voluntary recall of our SmartHub
1.0 devices. Our Surgical Glaucoma cost of goods sold increased $0.1 million as
compared to 2021, which was primarily driven by continued manufacturing
efficiencies which lowered our production cost per unit. Our total gross profit was $42.1 million in the nine months ended September 30,
2022, an increase of $14.5 million from the comparable period in 2021. Our total
gross margin increased from 80.5% to 82.9% from the 2021 to the 2022 period. The
increase in gross margin was primarily due to increased sales volume in OMNI
units 30
-------------------------------------------------------------------------------- and manufacturing efficiencies. Gross margin in our Surgical Glaucoma segment
was 88.5% for the nine months ended September 30, 2022, an increase from 83.9%
for the prior year comparable period. In our Dry Eye segment, gross margin
decreased from 16.6% in the first nine months of 2021, to 15.8% for the nine
months ended September 30, 2022. Research and Development ("R&D") Expenses. The $6.4 million increase in R&D
expenses during the nine months ended September 30, 2022 compared to the nine
months ended September 30, 2021 was primarily attributable to a $4.1 million
increase in personnel expenses as a result of increased headcount, including a
$0.7 million increase in stock-based compensation expense. In addition, there
was a $1.8 million increase in clinical studies expense. Selling, General, and Administrative ("SG&A") Expenses. SG&A expenses were $91.4
million for the nine months ended September 30, 2022, an increase of $38.3
million from the prior year comparable period. The increase was attributable to
a $23.9 million increase in personnel expenses as a result of increased
headcount, which included a $5.8 million increase in stock-based compensation
expense. In addition to personnel expense increases, our SG&A expense from 2021
to the 2022 period included a $5.3 million increase in professional services
expense, including consulting and legal expenses, a $3.8 million increase in
marketing expenses, a $1.6 million increase in training, events, and demos, and
a $1.5 million increase in travel expenses. 

Interest Expense. Interest expense was consistent during the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021.

 Other Income (Expense), Net. Other income (expense), net was $0.8 million for
the nine months ended September 30, 2022 as compared to an expense of $6.9
million in the nine months ended September 30, 2021. The income in the current
year is attributable to the amortization of purchase discounts on
held-to-maturity cash-equivalent investments. During the related prior year
comparable period, the expense relates to the remeasurement of our convertible
preferred stock warrants and recognition of the change in fair value. As
detailed in the notes to our financial statements included herein, the
convertible preferred stock warrants were automatically converted into common
stock warrants concurrent with our IPO and subsequently exercised in the third
quarter of fiscal year 2021. Cash Flows The following table summarizes our cash flows for the periods indicated (in
thousands): Nine Months Ended September 30, 2022 2021

Net cash used in operating activities $ (60,463 ) $ (41,818 )
Net cash used in investing activities $

 (841 ) $ (656 )
Net cash provided by financing activities $ 436 $ 

252,438

Net (decrease) increase in cash $ (60,868 ) $ 209,964 

Net Cash Used in Operating Activities.

 Net cash used in operating activities for the nine months ended September 30,
2022 was $60.5 million, consisting primarily of a net loss of $69.3 million and
a net change in our operating assets and liabilities of $2.9 million, partially
offset by non-cash charges of $11.7 million. The change in our net operating
assets and liabilities was primarily due to a $4.3 million increase in accounts
receivable and a $2.2 million increase in inventory to support the continued
growth of our operations. The Company had a $0.1 million decrease in accounts
payable, while accrued compensation, as well as accrued and other current
liabilities, increased $3.6 million, driven by the timing of payments on
invoices and bonuses. The non-cash charges primarily consisted of $9.7 million
related to stock-based compensation, $0.6 million of depreciation, $0.5 of
accretion of debt discount and amortization of debt issuance costs, and $0.4
million of noncash operating lease expense. 31
-------------------------------------------------------------------------------- Net cash used in operating activities for the nine months ended September 30,
2021 was $41.8 million, consisting primarily of a net loss of $47.0 million and
a net change in our operating assets and liabilities of $6.7 million, partially
offset by non-cash charges of $11.9 million. The change in our net operating
assets and liabilities was primarily due to a $3.7 million increase in accounts
receivable, a $3.3 million increase in our prepaid expenses to support the
continued growth of our operations, and a $0.6 million increase in inventory,
partially offset by a $0.6 million increase in accrued compensation, and a $0.3
million increase in other non-current liabilities. The non-cash charges
primarily consisted of $6.9 million from the fair value remeasurement of our
convertible preferred stock warrants, $3.1 million related to stock-based
compensation, $0.5 million of accretion of debt discount and amortization of
debt issuance costs, $0.5 million in depreciation and amortization, $0.4 million
of right of use asset amortization related to our office leases, and $0.3
million provision for excess and obsolete inventories. 

Net Cash Used in Investing Activities.

 Net cash used in investing activities in the nine months ended September 30,
2022 and 2021 was $0.8 million and $0.7 million, respectively, in both cases for
purchases of property and equipment. 

Net Cash Provided by Financing Activities.

Net cash provided by financing activities in the nine months ended September 30,
2022
related to proceeds from stock option exercises.

 Net cash provided by financing activities in the nine months ended September 30,
2021 primarily related to net IPO proceeds of $252.2 million and $0.3 million
related to proceeds from stock option exercises. 

Liquidity and Capital Resources

Sources of Liquidity

 To date, our primary sources of capital have been private placements of
redeemable convertible preferred stock, debt financing agreements, the sale of
common stock in our IPO, and revenue from the sale of our products. In July
2021, we completed our IPO, including the underwriters' full exercise of their
option to purchase additional shares, selling 11,500,000 shares of our common
stock at $24.00 per share. Upon completion of our IPO, we received $252.2
million, after deducting underwriting discounts and commissions and offering
costs. As of September 30, 2022, we had cash and cash equivalents of $199.8 million, an
accumulated deficit of $222.3 million and $35.0 million outstanding under our
term loan agreement (before debt discount). Based on our current planned
operations, we expect our cash and cash equivalents and additional borrowings
available under the 2020 Term Loan and the 2020 Revolver will enable us to fund
our operations for at least the next twelve months. 

MidCap Loan Agreements

 In January 2019, we entered into credit and security agreements with MidCap
Financial Services (the "Lender"), which provided a maximum of $25.0 million
credit facility consisting of a $20.0 million senior secured term loan (the "2019 Term Loan") and a $5.0 million 2019 revolving loan (the "2019 Revolver"
and collectively with the 2019 Term Loan, the "2019 MidCap Credit Facility"). In
November 2020, we entered into amended and restated credit and security
agreements with the same institution, which replaced the 2019 MidCap Credit
Facility, and provided for a maximum of $40.0 million credit facility consisting
of a $35.0 million senior secured term loan (the "2020 Term Loan") and a $5.0
million revolving loan (the "2020 Revolver and collectively with the 2020 Term
Loan, the "2020 MidCap Credit Facility"). Our obligations under the 2020 MidCap Credit Facility are guaranteed by us and
our future subsidiaries, subject to exceptions for certain foreign subsidiaries.
Our obligations under the agreements are secured by substantially all of our
assets, including our material intellectual property. Additionally, we are
subject to customary affirmative and negative covenants, including covenants
that limit or restrict the ability of us to, among other things, incur
indebtedness, grant liens, merge or consolidate, make investments, dispose of
assets, make acquisitions, pay dividends or make distributions, repurchase stock
and enter into certain transactions with affiliates, in each case 32
--------------------------------------------------------------------------------

subject to certain exceptions. As of September 30, 2022, we were in compliance
with all financial and non-financial covenants.

The MidCap Credit Facility agreements each contain events of default that
include, among others, non-payment of principal, interest or fees, breach of
covenants, inaccuracy of representations and warranties, cross-defaults and
bankruptcy and insolvency events.

2020 Term Loan

 The 2020 Term Loan agreement amended the maturity date to November 1, 2025 and
adjusted the stated floating interest rate to reserve-adjusted LIBOR, plus
7.00%. Outstanding principal amounts of Tranche One Loans and Tranche Two Loans
borrowed under the 2019 Term Loan were designated as Tranche One Loans and
Tranche Two Loans under the 2020 Term Loan. The Tranche Three Loan commitment
amount was increased to $21.0 million and the full amount was drawn in November
2020. Principal payments under the 2020 Term Loan are scheduled to begin in
December 2022. However, if certain conditions are met, the initiation of
principal payments can be delayed to either December 2023 or December 2024. We
currently expect that we will be in a position to meet the conditions necessary
to extend the commencement date for the initiation of principal payments under
the 2020 Term Loan from December 1, 2022 to December 1, 2023. In addition, the
final payment fee was amended to 6.0%. We are subject to certain financial and
non-financial covenants. We incurred $0.7 million of issuance costs in conjunction with the 2020 Term
Loan which were netted against the borrowed funds in the balance sheet and are
being accreted using the effective interest method as interest expense over the
contractual period of five years. In conjunction with the funding of the 2020 Term Loan, we issued a 10-year
warrant to the Lender to purchase 300,000 shares of our Series F redeemable
convertible preferred stock at an exercise price of $21.88 per share, or the
2020 MidCap Warrant, with the estimated fair value of $1.8 million. The 2020
MidCap Warrants were recorded at the fair value as a debt discount and as a
warrant liability. The debt discount is being accreted using the effective
interest method as interest expense over the contractual period of four years
for the 2020 Term Loan. 2020 Revolver The maturity date of the 2020 Revolver was amended to November 1, 2025 and the
stated floating interest rate was adjusted to reserve-adjusted LIBOR plus 4.50%.
As of September 30, 2022, $5.0 million was available to be drawn under the 2020
Revolver which remains undrawn. Other key terms of the 2020 Revolver remained
substantially unchanged compared to those of 2019 Revolver. 

Lease Agreements

 Our corporate headquarters are located in Menlo Park, California, where we lease
approximately 11,000 square feet of office, research and development,
engineering and laboratory space pursuant to a lease that commenced on August 1,
2021, and expires on August 31, 2024. We also lease approximately 2,040 square
feet of office space, which is primarily used by our commercial leadership team,
in Southlake, Texas, pursuant to a lease that commenced on April 30, 2019 and
expires on May 15, 2024. 

Critical Accounting Policies and Estimates

 Our condensed consolidated financial statements included elsewhere in this
Quarterly Report are prepared in accordance with GAAP. The preparation of these
condensed consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
costs and expenses, and related disclosures. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. 33
-------------------------------------------------------------------------------- An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, if different estimates reasonably could have
been used, or if changes in the estimate that are reasonably possible could
materially impact the financial statements. We believe that the assumptions and
estimates associated with revenue recognition and stock-based compensation have
the greatest potential impact on our condensed consolidated financial
statements. Therefore, we consider these to be our critical accounting policies
and estimates. There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in our consolidated financial statements for the year ended December
31, 2021, included under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Critical Accounting Policies and
Estimates" in our 2021 Form 10-K and in Note 2 to our condensed consolidated
financial statements appearing elsewhere in this Quarterly Report. 

JOBS Act Accounting Election

 The Jumpstart Our Business Startups Act of 2012 (JOBS Act) permits an "emerging
growth company" such as us to take advantage of an extended transition period to
comply with new or revised accounting standards applicable to public companies.
We have elected to use this extended transition period under the JOBS Act. As a
result, our financial statements may not be comparable to the financial
statements of issuers who are required to comply with the effective dates for
new or revised accounting standards that are applicable to public companies,
which may make comparison of our financials to those of other public companies
more difficult. 

Recently Issued Accounting Pronouncements

 As of September 30, 2022, there are no significant Accounting Standard Updates
(ASU's) issued and not yet adopted, that are expected to have a material impact
on the Company's financial statements and related disclosures.

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