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
June 30, 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 discontinue access
to Marin Search for most customers at the end of Q3 2022.

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 COVID-19 pandemic has had, and any lingering or renewed effects of the
pandemic may continue to have, an adverse impact on many of our customers and
their businesses and their spending on digital advertising, which has had an
adverse impact on our historical results of operations and may continue to
affect our future results of operations. At this time, the extent to which any
lingering or renewed effects of the COVID-19 pandemic may impact our financial
condition or results of operations is uncertain.

Since the start of the COVID-19 pandemic in March 2020, most of our employees
have not been able to work from our offices and have been working from home. In
addition, the lease for our largest office, in San Francisco, California,
expired in July 2022, and we expect that most of our employees will continue to
work from home for the foreseeable future.

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 an employee retention credit
of $0.5 million and $1.1 million for the three and six months ended June 30,
2021, respectively, 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 21% and 23% of
total revenues for the three months ended June 30, 2022 and 2021, respectively.
The New Google Revenue Share Agreement accounted for approximately 38% and 36 %
of our total revenues for the three and six months ended June 30, 2022,
respectively. The original Google revenue share agreement that we entered into
with Google in 2018 accounted for approximately 36% and 37% of our total
revenues for the three and six months ended June 30, 2021, respectively. 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, 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.

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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 the continued development of 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 June 30,                                                        Six Months Ended June 30,
                                              2022                                     2021                                     2022                                     2021
                                                        % of                                     % of                                     % of                                     % of
                                    Amount            Revenues               Amount            Revenues               Amount            Revenues               Amount            Revenues
                                                                                                    (dollars in thousands)
Revenues, net                  $           4,720               100 %    $           6,094               100 %    $           9,881               100 %    $          12,402               100 %
Cost of revenues                           3,203                68                  3,175                52                  6,531                66                  6,416                52
Gross profit                               1,517                32                  2,919                48                  3,350                34                  5,986                48
Operating expenses
Sales and marketing                        1,588                34                  1,268                21                  3,375                34                  2,514                20
Research and development                   2,980                63                  2,667                44                  5,897                60                  5,066                41
General and administrative                 2,545                54                  1,995                33                  5,014                51                  3,864                31
Total operating expenses                   7,113               151                  5,930                97                 14,286               145                 11,444                92
Loss from operations                     (5,596)             (119)                (3,011)              (49)               (10,936)             (111)                (5,458)              (44)
Other income, net                            297                 6                    221                 4                  3,699                37                    548                 4
Loss before income taxes                 (5,299)             (112)                (2,790)              (46)                (7,237)              (72)                (4,910)              (40)
Provision for (benefit from)
income taxes                                  75                 2                  (289)               (5)                    136                 1                  (197)               (2)
Net loss                       $         (5,374)             (114) %    $         (2,501)              (41) %    $         (7,373)              (75) %    $         (4,713)              (38) %




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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. Adjusted
EBITDA should not be considered as 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 the reasons we
consider them 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 June 30,             Six Months Ended June 30,
                                            2022                 2021              2022                2021
                                                                    (in thousands)
Net loss                               $       (5,374 )     $       (2,501 )   $      (7,373 )     $      (4,713 )
Depreciation                                      199                  223               378                 463
Amortization of internally developed
software                                          431                  596               973               1,220
Provision for (benefit from) income
taxes                                              75                 (289 )             136                (197 )
Stock-based compensation expense                  800                  379             1,657                 641
Capitalization of internally
developed software                               (408 )               (238 )            (920 )              (672 )
CARES Act employee retention credit                 -                 (525 )               -              (1,064 )
Restructuring related expenses                     59                    -               112                   3
Other income, net                                (297 )               (221 )          (3,699 )              (548 )
Third-party subpoena-related
expenses                                           99                    -               171                   -
Adjusted EBITDA                        $       (4,416 )     $       (2,576 )   $      (8,565 )     $      (4,867 )




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      Comparison of the Three and Six Months Ended June 30, 2022 and 2021

Revenues, net

                   Three Months Ended June 30,                 Change                  Six Months Ended June 30,                   Change
                    2022                  2021              $           %             2022                  2021               $            %
                                                                     (dollars in thousands)
Revenues, net   $      4,720          $      6,094       $ (1,374 )      (23 ) %   $     9,881          $      12,402       $ (2,521 )       (20 ) %



Revenues, net, for the three and six months ended June 30, 2022 decreased $1.3
million and $2.5 million, respectively, or 23% and 20%, respectively, as
compared to the corresponding periods in 2021. The decreases were due to
customer turnover that was not fully offset by new customer bookings as well as
lower revenue under our New Google Revenue Share Agreement, as described in Note
2 to the consolidated financial statements, of approximately $0.5 million and
$1.0 million for the three and six months ended June 30, 2022, respectively, as
compared to revenue under our original Google revenue share agreement for the
three and six months ended June 30, 2021, respectively. Revenues, net from our
customers located in the United States represented 79% and 77% of total
revenues, net for the three months ended June 30, 2022 and 2021, respectively,
and represented 78% and 76% of total revenues, net for the six months ended June
30, 2022 and 2021, respectively. Revenues, net from Google Revenue Share
Agreements accounted for 38% and 37% of total revenues, net for the three months
ended June 30, 2022 and 2021, respectively, and 36% and 37% of total revenues,
net for the six months ended June 30, 2022 and 2021, respectively.

Revenue Cost and Gross Margin

                Three Months Ended June 30,                 Change                  Six Months Ended June 30,                   Change
                 2022                  2021              $           %              2022                  2021              $            %
                                                                    (dollars in thousands)
Cost of
revenues     $      3,203          $      3,175       $     28          1   %   $      6,531          $      6,416       $    115           2   %
Gross
profit              1,517                 2,919         (1,402 )      (48 )            3,350                 5,986         (2,636 )       (44 )
Gross
profit
percentage             32    %               48   %                                       34    %               48   %


Cost of revenues for each of the three and six months ended June 30, 2022
increased less than $0.1 million, or 1% and 2%, respectively, as compared to the
corresponding periods in 2021. The increases were primarily due to higher
personnel costs of $0.3 million and $0.6 million for the three and six months
ended June 30, 2022, respectively, resulting from an increase in the number of
full-time personnel and the absence of the benefits in the 2022 periods of the
CARES Act employee retention credits that we realized in the corresponding 2021
periods. This was partially offset by a decrease in amortization of $0.2 million
for the three and six months ended June 30, 2022 and a decrease in hosting costs
of $0.1 million and $0.2 million during the three and six months ended June 30,
2022, respectively, due to a decline in the usage of our hosted platform from
the corresponding period in 2022.

We expect revenue costs to remain stable in the near term in absolute dollars, as we anticipate savings on colocation expenses, but personnel costs could increase.

Our gross margin decreased to 32% and 34% for the three and six months ended
June 30, 2022, respectively, as compared to 48% for each of the corresponding
periods in 2021. This was primarily due to the lower revenue under the New
Google Revenue Share Agreement as compared to 2021.

Sales and Marketing

                Three Months Ended June 30,                Change                 Six Months Ended June 30,                  Change
                 2022                  2021             $          %              2022                  2021             $           %
                                                                  (dollars in thousands)
Sales and
marketing    $      1,588          $      1,268       $  320         25   %   $      3,375          $      2,514       $  861          34   %
Percent of
revenues,
net                    34    %               21   %                                     34    %               20   %




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Sales and marketing expenses for the three and six months ended June 30, 2022
increased $0.3 million and $0.9 million, respectively, or 25% and 34%,
respectively, as compared to the corresponding periods in 2021. The increases
were primarily due to higher personnel-related costs of $0.2 million and $0.7
million for the three and six months ended June 30, 2022, respectively, due to
higher global sales support and marketing headcount, higher stock-based
compensation expense and the absence of the benefits in the 2022 periods of the
CARES Act employee retention credits that we realized in the corresponding 2021
periods. There was also an increase in marketing expenses of $0.1 million and
$0.4 million for the three and six months ended June 30, 2022, respectively, due
to investments in advertising.

In the near term, we expect sales and marketing expenses to increase in absolute dollars as we continue our currently planned investments aimed at increasing brand awareness.

Research and development

                 Three Months Ended June 30,                Change                 Six Months Ended June 30,                  Change
                  2022                  2021             $          %              2022                  2021             $           %
                                                                   (dollars in thousands)
Research
and
development   $      2,980          $      2,667       $  313         12   %   $      5,897          $      5,066       $  831          16   %
Percent of
revenues,
net                     63    %               44   %                                     60    %               41   %




Research and development expenses for the three and six months ended June 30,
2022 increased $0.3 million and $0.8 million, respectively, or 12% and 16%,
respectively, as compared to the corresponding periods in 2021. The increases
were primarily due to higher personnel-related costs of $0.5 million and $1.2
million for the three and six months ended June 30, 2022, respectively,
resulting from higher stock-based compensation expense and the absence of the
benefits in the 2022 periods of the CARES Act employee retention credits that we
realized in the corresponding 2021 periods. The increase was partially offset by
lower facilities and information technology costs of $0.1 million and $0.3
million for the three and six months ended June 30, 2022, respectively, and
higher capitalization of internally developed software costs of $0.2 million in
each of the three and six months ended June 30, 2022.

In the near term, we expect research and development expenses to decline slightly in absolute dollars, primarily due to lower facility costs.

General and administrative

                    Three Months Ended June 30,                Change                 Six Months Ended June 30,                  Change
                     2022                  2021             $          %              2022                  2021              $           %
                                                                      (dollars in thousands)
General and
administrative   $      2,545          $      1,995       $  550         28   %   $      5,014          $      3,864       $ 1,150          30   %
Percent of
revenues, net              54    %               33   %                                     51    %               31   %




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General and administrative expenses for the three and six months ended June 30,
2022 increased $0.6 million and $1.2 million, respectively, or 28% and 30%,
respectively, as compared to the corresponding periods in 2021. This was
primarily due to higher personnel costs of $0.4 million and $0.9 million for the
three and six months ended June 30, 2022, respectively, from higher stock-based
compensation costs and the absence of the benefits in the 2022 periods of the
CARES Act employee retention credits realized in the corresponding 2021 periods.
Additionally, professional fees increased $0.2 million and $0.2 million in the
three and six months ended June 30, 2022, respectively, primarily due to legal
fees incurred in responding to third-party subpoenas that we have received
related to governmental investigations of Google and Facebook.

In the near term, we expect our general and administrative expenses to decrease slightly in absolute dollars, primarily due to lower facility costs.

Other income, net

                  Three Months Ended June 30,                 Change                Six Months Ended June 30,                 Change
                 2022                     2021             $          %              2022                 2021             $           %
                                                                   (dollars in thousands)
Other
income,
net          $        297             $        221       $   76         34   %   $       3,699          $     548       $ 3,151         575   %



Other income, net, primarily consists of sublease income as well as foreign
currency transaction gains and losses and interest income and expense. The
increase in the six months ended June 30, 2022 was due to the gain of $3.1
million from Paycheck Protection Program ("PPP") loan forgiveness recognized
during the period. We earned sublease income of $0.3 million in each of the
three months ended June 30, 2022 and 2021 and earned sublease income of $0.5
million each of the six months ended June 30, 2022 and 2021. Foreign currency
transaction gains and losses and interest income and expense were not material
for the three or six months ended June 30, 2022 and 2021.

Provision for income tax

                 Three Months Ended June 30,                 Change                 Six Months Ended June 30,                  Change
               2022                     2021              $          %             2022                    2021            $           %
                                                                   (dollars in thousands)
Provision
for
(benefit
from)
income
taxes        $      75             $         (289 )     $  364       (126 ) %   $       136             $     (197 )     $  333        (169 ) %



The income tax provision for the three and six months ended June 30, 2022 was
primarily due to valuation allowances in the United States and taxable income
generated by certain of 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 August 2021, we raised total net proceeds of $50.8 million
from at-the-market offering programs administered by JMP Securities and in 2020
we received proceeds of $3.3 million from a loan through the PPP, of which $3.1
million was forgiven. From time to time, we have also utilized equipment lines
and entered into finance lease arrangements to fund capital purchases. As of
June 30, 2022, our principal source of liquidity was our unrestricted cash and
cash equivalents of $37.3 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 June 30, 2022, we
had $37.3 million of unrestricted cash and cash equivalents in aggregate, of
which $0.8 million was held by our foreign subsidiaries. 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

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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. 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. 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. We intend to use
the net proceeds from the sale of securities under the equity distribution
agreements primarily for working capital and general corporate purposes.


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 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, if at all, when we are required to make any further adjustments to the
maximum aggregate offering size or we become eligible to conduct such offering
in accordance with Instruction I.B.1 of the Registration Statement on Form S-3.

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 PPP
under the 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.

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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