MARIN SOFTWARE INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis of our financial condition, results of
operations and cash flows should be read in conjunction with the (1) unaudited
condensed consolidated financial statements and the related notes thereto
included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended
March 31, 2022, and (2) the audited consolidated financial statements and notes
thereto and management's discussion and analysis of financial condition and
results of operations for the fiscal year ended December 31, 2021, included in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,
filed with the Securities and Exchange Commission (the "SEC"), on February 24,
2022. This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. These statements are often identified by the use
of words such as "believe," "may," "potentially," "will," "estimate,"
"continue," "anticipate," "intend," "could," "should," "would," "project,"
"plan," "predict," "expect," "seek" and similar expressions or variations. Such
forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results and the timing of certain events to differ
materially from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those identified herein, and those discussed in the
section titled "Risk Factors", set forth in Part II, Item 1A of this Form 10-Q.
Except as required by law, we disclaim any obligation to update any
forward-looking statements to reflect events or circumstances after the date of
such statements

Overview

We are a leading provider of digital marketing solutions for search, social, and
eCommerce advertising channels, offered as a unified software-as-a-service, or
SaaS, advertising management platform for performance-driven advertisers and
agencies. Our platform is an analytics, workflow and optimization solution for
marketing professionals, enabling them to maximize the performance of their
digital advertising spend. We market and sell our solutions to advertisers
directly and through leading advertising agencies, and our customers
collectively manage billions of dollars in advertising spend on our platform
globally across a wide range of industries. We believe this makes us one of the
largest providers of independent advertising cloud solutions. Our software
solution is designed to help our customers:

•

measure the effectiveness of their advertising campaigns with our proprietary reporting and analytics capabilities;

•

manage and execute campaigns through our intuitive user interface and underlying
technology that streamlines and automates key functions, such as advertisement
creation and bidding, across multiple publishers and channels; and

•

Optimize campaigns across multiple publishers and channels based on market and company data to achieve desired revenue using our predictive bid management technology.

Our current product lineup consists of MarinOne and our two legacy products,
Marin Search and Marin Social. We have migrated all of our customers to use
MarinOne as their primary experience when logging in. We will continue to allow
access to Marin Search through at least mid-Q3 2022 to ensure a smooth
transition for our customers.

•

MarinOne. Our next-generation solution brings search, social and eCommerce
advertising into a single-platform that helps advertisers maximize a customer
journey that spans Google, Facebook, Twitter and Amazon by combining the power
of Marin Search and Marin Social with new channels like LinkedIn, Tik Tok, Apple
Search Ads, Instacart, Criteo and YouTube.

•

Marine Research. Our original solution for large advertisers and agencies. Marin Search is designed to provide search advertisers with the power, scale, and flexibility to manage large-scale advertising campaigns.

•

Social sailor. Helps advertisers manage their ad spend on Facebook, Instagram, and Twitter at scale.

Advertisers use our platform to create, target and convert precise audiences
based on recent buying signals from users' search, social and eCommerce
interactions. Our platform is integrated with leading publishers such as Amazon,
Apple, Baidu, Bing, Criteo, Facebook, Google, Instacart, Instagram, Pinterest,
Tik Tok, Twitter, Yahoo!, Yahoo! Japan and Yandex. Additionally, we have
integrations with dozens of leading web analytics and advertisement-serving
solutions and key enterprise applications, enabling our customers to more
accurately measure the return on investment of their marketing programs.

Our software platform serves as an integration point for advertising
performance, sales and revenue data, allowing advertisers to connect the dots
between advertising spend and revenue outcomes. Through an intuitive interface,
we enable our customers to simultaneously run large-scale digital advertising
campaigns across multiple publishers and channels, making it easy for marketers
to create, publish, modify and optimize campaigns.

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Our predictive bid management and optimization technology also allows
advertisers to forecast outcomes and optimize campaigns across multiple
publishers and channels to achieve their business goals. Our optimization
technology can help advertisers increase advertisement spend on those campaigns,
publishers and channels that are performing well while reducing investment in
those that are not. This category of solutions, which we refer to as
cross-channel bid and campaign optimization, helps businesses intelligently and
efficiently measure, manage, and optimize their digital advertising spend to
achieve desired business results.

The ongoing COVID-19 pandemic has had and may continue to have an adverse impact
on many of our customers and their businesses and their spending on digital
advertising and has had an adverse impact on our recent results of operations
and may continue to affect our future results of operations. The extent of the
impact of the COVID-19 pandemic on our operational and financial performance
will depend on certain developments, including containment of COVID-19, the
availability, deployment and efficacy of vaccines, impact on our customers and
our sales cycles, and impact on our employees, all of which are uncertain and
cannot be predicted. At this time, the extent to which the COVID-19 pandemic may
impact our financial condition or results of operations is uncertain. Since
mid-March 2020, some of our customers have reduced the amount of digital
advertising spend that they manage using our product which has had an adverse
effect on our results of operations and some of our customers have requested
extended payment terms, reduced fees or fee waivers, early contract terminations
and other forms of contract relief. Also, since mid-March 2020 most of our
employees have not been able to work from our offices and have been working from
home, which could cause some disruptions or delays in our business activities,
including our product development efforts.

Under the provisions of the extension of the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act") passed by the United States Congress and
signed by the President, we were eligible for a refundable employee retention
credit subject to certain criteria. We recognized a $0.5 million employee
retention credit during the three months ended March 31, 2021 which was recorded
in cost of revenues and operating expenses.

Components of operating results

Revenue

We generate revenues principally from subscription contracts under which we
provide advertisers with access to our search, social and eCommerce advertising
management platform, either directly or through the advertiser's relationship
with an agency with whom we have a contract. Our subscription contracts are
generally one year or less in length. Under subscription contracts with most of
our direct advertisers and some independent agencies, we generally charge fees
based on the amount of advertising spend that these customers manage through our
platform or a contractual minimum monthly platform fee, whichever is greater.
Certain of these customers are charged only a fixed monthly platform fee. Most
of our subscription contracts with our network agency customers do not include a
committed minimum monthly platform fee, and we charge fees based upon the amount
of advertising spend that these customers manage through our platform. Due to
the nature of the platform and the services performed under the subscription
agreements, revenues are typically recognized in the amount billable to the
advertiser.

Our long-term strategic agreements have historically included multiple-year
terms and are invoiced quarterly. Our largest agreement, with Google, was
entered into in September 2021 with an effective date of October 1, 2021 (the
"New Google Revenue Share Agreement") for a three-year term continuing until
September 30, 2024. Under this New Google Revenue Share Agreement, we are
eligible to receive fixed and variable revenue share payments based on a
percentage of the search advertising spend that is managed through our platform.
Our other long-term strategic agreements are generally variable in nature, based
on a percentage of relevant search advertising spend that runs through our
technology platform.


The majority of our revenues are derived from advertisers based in the United
States. Advertisers from outside of the United States represented 23% and 24% of
total revenues for the three months ended March 31, 2022 and 2021, respectively.
The New Google Revenue Share Agreement accounted for approximately 35% of our
total revenues for the three months ended March 31, 2022. The original Google
revenue share agreement that we entered into with Google in 2018 accounted for
approximately 36% of our total revenues for the three months ended March 31,
2021. Refer to our Annual Report on Form 10-K for the fiscal year 2021 for
details of the original Google revenue share agreement.

Refer to Note 2 of the accompanying condensed consolidated financial statements for further discussion of our revenue recognition considerations.

Revenue cost

Cost of revenues primarily includes personnel costs, consisting of salaries,
benefits, bonuses and stock-based compensation expense for employees associated
with our cloud infrastructure and global services for implementation and ongoing
customer service. Other costs of revenues include fees paid to contractors who
supplement our support and data center personnel, expenses related to
third-party data centers,

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depreciation of data center equipment, amortization of internally developed
software and allocated overhead. Incremental cost of revenues associated with
our long-term strategic agreements, including our largest agreement with Google,
are generally not significant.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs, including
salaries, benefits, stock-based compensation expense and bonuses, as well as
sales commissions and other costs including travel and entertainment, marketing
and promotional events, lead generation activities, public relations, marketing
activities, professional fees and allocated overhead. All of these costs are
expensed as incurred, except sales commissions and the related payroll taxes,
which are capitalized and amortized over the expected period of benefit in
accordance with the relevant authoritative accounting guidance. Our commission
plans provide that commission payments to our sales representatives are paid
based on the key components of the applicable customer contract, including the
minimum or fixed monthly platform fee during the initial contract term.

Research and development

Research and development expenses consist primarily of personnel costs for our
product development and engineering employees and executives, including
salaries, benefits, stock-based compensation expense and bonuses. Also included
are non-personnel costs such as professional fees payable to third-party
development resources, and allocated overhead.

Our research and development efforts are focused on improving our software architecture, adding new features and functionality to our platform, and improving the efficiency with which we provide these services to our customers, including development by MarinOne.

General and administrative

General and administrative expenses consist primarily of personnel costs,
including salaries, benefits, stock-based compensation expense and bonuses for
our administrative, legal, human resources, finance and accounting employees and
executives. Also included are non-personnel costs, such as audit fees, tax
services and legal fees, as well as professional fees, insurance and other
corporate expenses, including allocated overhead.

                             Results of Operations

The following table is a summary of our unaudited condensed consolidated
statements of operations for the specified periods and results of operations as
a percentage of our revenues for those periods. The period-to-period comparisons
of results are not necessarily indicative of results for future periods.
Percentage of revenues figures are rounded and therefore may not subtotal
exactly.

                                                     Three Months Ended March 31,
                                            2022                                     2021
                                                      % of                                     % of
                                  Amount            Revenues               Amount            Revenues
                                                         (dollars in thousands)
Revenues, net                $           5,161               100 %    $           6,308               100 %
Cost of revenues                         3,328                64                  3,241                51
Gross profit                             1,833                36                  3,067                49
Operating expenses
Sales and marketing                      1,787                35                  1,246                20
Research and development                 2,917                57                  2,399                38
General and administrative               2,469                48                  1,869                30
Total operating expenses                 7,173               139                  5,514                87
Loss from operations                   (5,340)             (103)                (2,447)              (39)
Other income, net                        3,402                66                    327                 5
Loss before income taxes               (1,938)              (38)                (2,120)              (34)
Income tax provision                        61                 1                     92                 1
Net loss                     $         (1,999)              (39) %    $         (2,212)              (35) %




Adjusted EBITDA

Adjusted EBITDA is a financial measure not calculated in accordance with
generally accepted accounting principles in the United States ("GAAP"). We
define Adjusted EBITDA as net loss, adjusted for stock-based compensation
expense, depreciation, the amortization of internally developed software,
intangible assets, the capitalization of internally developed software, the
impairment of goodwill and long-lived assets, interest expense, net, the benefit
from or provision for income taxes, CARES Act employee retention credits, other
income or expenses, net and the non-recurring costs or gains associated with
acquisitions, divestitures and restructurings, and certain professional fees
that we have incurred in responding to third-party subpoenas that we have
received related to governmental investigations of Google and Facebook.

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Adjusted EBITDA should not be considered an alternative to net loss, operating loss or any other measure of financial performance calculated and presented in accordance with GAAP. We prepare Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. Investors are encouraged to evaluate these adjustments and why we believe them to be appropriate.

We believe Adjusted EBITDA is useful for investors to assess our operating performance for the following reasons:

•

Adjusted EBITDA is widely used by investors and securities analysts to measure a
company's operating performance without regard to items such as stock-based
compensation expense, depreciation and amortization, capitalized software
development costs, interest expense, net, benefit from or provision for income
taxes, other income or expenses, net and costs or gains associated with
acquisitions, divestitures and restructurings, that can vary substantially from
company to company depending upon their financing, capital structures and the
method by which assets were acquired;

•

Our management uses Adjusted EBITDA in conjunction with GAAP financial measures
for planning purposes, including the preparation of our annual operating budget,
as a measure of operating performance and the effectiveness of our business
strategies and in communications with our Board of Directors concerning our
financial performance; and

•

Adjusted EBITDA provides consistency and comparability with our past financial
performance, facilitates period-to-period comparisons of operations and also
facilitates comparisons with other peer companies, many of which use similar
non-GAAP financial measures to supplement their GAAP results.

We understand that although Adjusted EBITDA is widely used by investors and
securities analysts in their evaluations of companies, it has limitations as an
analytical tool, and investors should not consider it in isolation or as a
substitute for analysis of our results of operations as reported under GAAP.
These limitations include:

•

Depreciation and amortization are non-cash charges, and depreciated or depreciated assets will often need to be replaced in the future; however, Adjusted EBITDA does not reflect any cash requirement for these replacements;

•

Adjusted EBITDA does not reflect changes in or cash requirements for our working capital requirements or contractual commitments;

•

Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expenses; and

•

Other companies may calculate Adjusted EBITDA differently from us, which limits its usefulness as a comparative measure.

The following table provides a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated:

                                                     Three Months Ended March 31,
                                                       2022                 2021
                                                            (in thousands)
Net loss                                          $       (1,999 )     $       (2,212 )
Depreciation                                                 179                  240
Amortization of internally developed software                542            

624

Provision for income taxes                                    61            

92

Stock-based compensation expense                             857            

262

Capitalization of internally developed software             (512 )               (434 )
CARES Act employee retention credit                            -                 (539 )
Restructuring related expenses                                53            

3

Other income, net                                         (3,402 )               (327 )
Third-party subpoena-related expenses                         72                    -
Adjusted EBITDA                                   $       (4,149 )     $       (2,291 )

          Comparison of the Three Months Ended March 31, 2022 and 2021

Revenues, net

                    Three Months Ended March 31,                 Change
                    2022                   2021               $           %
                                     (dollars in thousands)
Revenues, net   $       5,161          $       6,308       $ (1,147 )     (18 ) %




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Revenues, net, for the three months ended March 31, 2022 decreased $1.1 million,
or 18%, as compared to the corresponding period in 2021. The decrease was
primarily due to lower revenue under our New Google Revenue Share Agreement, as
described in Note 2 to the consolidated financial statements, of approximately
$0.5 million for the three months ended March 31, 2022, as compared to revenue
under our original Google revenue share agreement for the three months ended
March 31, 2021. Also, since the end of the three-month period ended March 31,
2021, we experienced ongoing customer turnover that was not fully offset by new
customer bookings. Revenues, net from our customers located in the United States
represented 77% and 76% of total revenues, net for the three months ended March
31, 2022 and 2021, respectively. Revenues, net from Google Revenue Share
Agreements accounted for 35% and 36% of total revenues, net for the three months
ended March 31, 2022 and 2021, respectively. There were no other customers that
accounted for 10% or greater of our revenues, net for the three months ended
March 31, 2022 and 2021.

Revenue Cost and Gross Margin

                              Three Months Ended March 31,                 Change
                              2022                   2021               $           %
                                               (dollars in thousands)
Cost of revenues          $       3,328          $       3,241       $     87         3   %
Gross profit                      1,833                  3,067         (1,234 )     (40 )
Gross profit percentage              36    %                49   %


Cost of revenues for the three months ended March 31, 2022 increased $0.1
million, or 3%, as compared to the corresponding period in 2021. The increase
was primarily due to higher personnel costs of $0.3 million and higher equipment
costs of $0.1 million for the three months ended March 31, 2022, resulting from
an increase in the number of full-time personnel. This was partially offset by a
decrease in allocated facilities and information technology costs of $0.1
million and a decrease in amortization of $0.1 million for the three months
ended March 31, 2022. We also experienced a decrease of $0.1 million in hosting
costs during the three months ended March 31, 2022, due to a decline in the
usage of our hosted platform from the corresponding period in 2022.

We expect the cost of revenue to remain stable in the short term in absolute dollars, as we anticipate savings on colocation expenses, but we may increase staff costs.

Our gross margin decreased to 36% for the three months ended March 31, 2022, as
compared to 49% for the corresponding period in 2021. This was primarily due to
the impact of higher personnel costs and lower revenue under the New Google
Revenue Share Agreement as compared to 2021.

Sales and Marketing

                               Three Months Ended March 31,               Change
                               2022                   2021              $        %
                                              (dollars in thousands)
Sales and marketing        $       1,787          $       1,246       $ 541       43   %
Percent of revenues, net              35    %                20   %




Sales and marketing expenses for the three months ended March 31, 2022 increased
$0.5 million, or 43%, as compared to the corresponding period in 2021. This was
primarily due to an increase in global sales support and marketing headcount,
contributing to a net increase for the three months ended March 31, 2022 of $0.4
million in personnel-related costs and a net increase for the three months ended
March 31, 2022 of $0.2 million in marketing expense due to investments in
advertising.

We expect sales and marketing expenses to remain stable in the near term in absolute dollars as we continue with our currently planned investments.

Research and Development

                               Three Months Ended March 31,               Change
                               2022                   2021              $        %
                                              (dollars in thousands)
Research and development   $       2,917          $       2,399       $ 518       22   %
Percent of revenues, net              57    %                38   %




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Research and development expenses for the three months ended March 31, 2022
increased $0.5 million, or 22%, as compared to the corresponding period in 2021.
The increase was primarily due to higher personnel costs of $0.7 million for the
three months ended March 31, 2022, resulting from an increase in the number of
full-time research and development personnel and engineering team. The increase
was partially offset by lower facilities and information technology costs of
$0.2 million for the three months ended March 31, 2022.

We expect research and development spending to remain stable or increase slightly in the near term as we increase investment in research and development.

General and Administrative

                                 Three Months Ended March 31,               Change
                                 2022                   2021              $        %
                                                (dollars in thousands)
General and administrative   $       2,469          $       1,869       $ 600       32   %
Percent of revenues, net                48    %                30   %



General and administrative expenses for the three months ended March 31, 2022
were 32% higher than the corresponding 2021 period. This was primarily due to
higher personnel costs of $0.5 million, which consisted mostly of higher
stock-based compensation costs of $0.3 million. In addition, there were $0.1
million in professional fees that we have incurred in responding to third-party
subpoenas that we have received related to governmental investigations of Google
and Facebook.

We expect our general and administrative expenses to remain stable or increase slightly in the near term in absolute dollars.

Other Income, Net

                       Three Months Ended March 31,                Change
                         2022                    2021            $          %
                                        (dollars in thousands)
Other income, net   $         3,402             $   327       $ 3,075       940   %



Other income, net, primarily consists of sublease income as well as foreign
currency transaction gains and losses and interest income and expense. For the
three months ended March 31, 2022 we recognized a gain of $3.1 million due to
PPP loan forgiveness. For the three months ended March 31, 2022 and 2021, we
earned sublease income of $0.3 million and $0.3 million, respectively. Foreign
currency transaction gains and losses and interest income and expense were not
material for the three months ended March 31, 2022 and 2021.

Income Tax Provision

                          Three Months Ended March 31,               Change
                           2022                     2021           $         %
                                          (dollars in thousands)
Income tax provision   $         61                $    92       $ (31 )     (34 ) %




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The income tax provision for the three months ended March 31, 2022 was primarily
due to a partial release of foreign uncertain tax positions, benefits of foreign
returns filed, valuation allowances in the United States and taxable income
generated by our foreign wholly owned subsidiaries.

                        Liquidity and Capital Resources

Since our incorporation in March 2006, we have relied primarily on sales of our
capital stock to fund our operating activities. From incorporation until our
initial public offering ("IPO") we raised $105.7 million, net of related
issuance costs, in funding through private placements of our preferred stock. In
March and April 2013, we raised net proceeds of $109.3 million in our IPO. From
March 2019 through March 2021, we raised total net proceeds of $12.3 million
from an at-the-market offering program administered by JMP Securities and in
2020 we received proceeds of $3.3 million from a loan through the Paycheck
Protection Program. From time to time, we have also utilized equipment lines and
entered into finance lease arrangements to fund capital purchases. As of March
31, 2022, our principal source of liquidity was our unrestricted cash and cash
equivalents of $41.5 million. Our primary operating cash requirements include
the payment of compensation and related expenses, as well as costs for our
facilities and information technology infrastructure.

We maintain a $0.2 million irrevocable letter of credit to secure the non-cancellable lease of our head office at San Francisco which is reflected as restricted cash on the consolidated balance sheets in the accompanying condensed consolidated financial statements.

We maintain cash balances in our foreign subsidiaries. As of March 31, 2022, we
had $41.5 million of unrestricted cash and cash equivalents in aggregate, of
which $0.8 million was held by our foreign subsidiaries. On December 22, 2017,
the United States enacted the Tax Cuts and Jobs Act, or the TCJA, which
instituted fundamental changes to the taxation of multinational corporations.
Among these changes is a mandatory one-time transition tax on the deemed
repatriation of the accumulated earnings of certain of our foreign subsidiaries,
and a tax on earnings of foreign subsidiaries in excess of a specified return on
the subsidiaries' tangible assets, known as the Global Intangible Low-Taxed
Income, or GILTI. We completed our analysis of the accounting for the transition
tax in the fourth quarter of 2018 and there was no tax due as a result of
significant accumulated losses in our foreign subsidiaries. We also determined
that no GILTI inclusion would be required in 2020 as our foreign subsidiaries
have accumulated significant losses. If funds held by our foreign subsidiaries
were needed for our U.S. operations, we would be required to accrue U.S. tax
liabilities associated with the repatriation of these funds. However, given the
amount of our net operating loss carryovers in the United States, such
repatriation will most likely not result in material U.S. cash tax payments
within the next year. Additionally, we do not believe that foreign withholding
taxes associated with repatriating these funds would be material.

On March 14, 2019, we filed a shelf registration statement on Form S-3 with the
SEC, which was declared effective by the SEC on May 10, 2019, under which we
could offer our common stock, preferred stock, debt securities, warrants,
subscription rights and units having an aggregate offering price of up to $50.0
million. As part of the shelf registration statement, we entered into an equity
distribution agreement with JMP Securities LLC under which we could offer and
sell shares of our common stock having an aggregate offering price of up to
$13.0 million through an at-the-market offering program administered by JMP
Securities. We were not required to sell any of our stock under this program.
JMP Securities was entitled to compensation of up to 5.0% of the gross proceeds
from sales of our common stock pursuant to the equity distribution agreement. We
intend to use the net proceeds from the sale of securities under the equity
distribution agreement primarily for working capital and general corporate
purposes. For the year ended December 31, 2020, we sold 2.7 million shares of
our common stock under this equity distribution agreement, and received proceeds
of $7.5 million, net of offering costs of $0.5 million, at a weighted average
sales price of $2.92 per share. During February 2021 we sold an additional 1.2
million shares of our common stock under this equity distribution agreement and
received proceeds of $3.0 million, net of offering costs of $0.2 million, at a
weighted average sales price of $2.68 per share. There are currently no
additional amounts available to be sold under this equity distribution
agreement. On July 15, 2021, we entered into a new equity distribution agreement
with JMP Securities under which we could sell shares of our common stock up to
an aggregate gross sales price of $40.0 million through a new at-the-market
securities offering program. In July 2021, we sold 4.3 million shares of our
common stock under this July 2021 equity distribution agreement and received
proceeds of $38.8 million, net of offering costs of $1.2 million, at a weighted
average sales price of $9.27 per share, which exhausted all securities available
for sale under this July 2021 equity distribution agreement.

In May 2020, we entered into a loan agreement with a lender for the loan in an
aggregate principal amount of $3.3 million (the "Loan") pursuant to the Paycheck
Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic
Security (CARES) Act. We received the Loan proceeds on May 12, 2020. An
aggregate principal amount of $3.1 million of the Loan was forgiven in January
2022 and we repaid the remaining outstanding balance of $0.2 million in February
2022. See Note 4 to the accompanying consolidated financial statements for
further discussion of this loan.


On August 3, 2021, we filed a new shelf registration statement on Form S-3 with
the SEC, which was declared effective by the SEC on August 19, 2021 and provides
that we may offer our common stock, preferred stock, debt securities, warrants,
subscription rights and units having an aggregate offering price of up to $100.0
million. As part of this new 2021 registration statement, we entered into a
third equity distribution agreement with JMP Securities and established a new
$50.0 million "at-the-market" securities offering facility, pursuant to which we
may be able to issue and sell shares of our common stock. We have not yet sold
any shares under this August 2021 equity distribution

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agreement and no assurances can be provided as to if or when me may be able to
sell any shares or the terms of any such sales. In accordance with the SEC's
Instruction I.B.6 of Registration Statement on Form S-3, we adjusted the maximum
aggregate market value of the securities that may be sold pursuant to this
current "at-the-market" securities offering facility from $50.0 million to
approximately $22.8 million based on our estimated market capitalization on the
date we filed our Annual Report on Form 10-K for the year ended December 31,
2021 until such time when we are eligible to conduct such offering in accordance
with Instruction I.B.1 of the Registration Statement on Form S-3.

We have incurred significant losses in each fiscal year since our incorporation
in 2006, and we expect to continue to incur losses and negative cash flows in
the future.

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