Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used in this Quarterly Report on Form 10-Q, the “Company”, the “Registrant”, “we” or “us” refer to ProKidney Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes that appear elsewhere in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the Risk Factors section of the prospectus dated September 8, 2022 and filed with the Securities and Exchange Commission, and elsewhere in this report under “Part II, Other Information—Item 1A, Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities, potential results of our drug development efforts or trials, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Overview
We are a clinical-stage biotechnology business with a transformative proprietary cell therapy platform capable of treating multiple chronic kidney diseases using a patient’s own cells isolated from the patient intended for treatment. Our approach seeks to redefine the treatment of chronic kidney disease (“CKD”), shifting the emphasis away from management of kidney failure, to the restoration or improvement of kidney function to stop or delay progression of CKD. Our lead product candidate, which we refer to as REACT, is designed to stabilize or improve kidney function in a CKD patient’s diseased kidneys. REACT is a product that includes selected renal cells (“SRCs”) prepared from a patient’s own, autologous, renal cells. SRCs are formulated into a product for reinjection into the patient’s kidney using a minimally invasive outpatient procedure that can be repeated if necessary. Because REACT is a personalized treatment composed of cells prepared from a patient’s kidney, there is no need for treatment with immunosuppressive therapies, which are required during a patient’s lifetime when a patient receives a kidney transplant from another, allogeneic donor.
We are currently conducting a Phase 3 development program and multiple Phase 2 clinical trials for REACT in subjects with moderate to severe diabetic kidney disease. We are also conducting a Phase 1 clinical trial for REACT in subjects with congenital anomalies of the kidney and urinary tract (“CAKUT”). REACT has been well tolerated by subjects with moderate to severe diabetic kidney disease in Phase 1 and 2 clinical testing to date. It has also been shown to stabilize renal function in subjects based on measurements of iohexol renal clearance and UACR. REACT has received Regenerative Medicine Advanced Therapy (“RMAT”) designation from the United States Food and Drug Administration (the “FDA”).
Since our inception, we have devoted substantially all of our resources to raising capital, organizing and staffing our company, business and scientific planning, conducting discovery and research activities, acquiring or discovering product candidates, establishing and protecting our intellectual property portfolio, developing and progressing REACT and preparing for clinical trials, establishing arrangements with third parties for the manufacture of component materials, and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue from product sales.
The Business Combination
We entered into the business combination agreement, dated as of January 18, 2022 (the “Business Combination Agreement”) with Social Capital Suvretta Holdings Corp. III (“SCS”), a special purpose acquisition company, on January 18, 2022 (the “Business Combination”). Pursuant to the Business Combination Agreement, and upon the close of the transaction on July 11, 2022, SCS acquired ProKidney LP (“PKLP”) and its subsidiaries. As a result of the closing (the “Closing”) of the Business Combination, SCS’s name was changed to ProKidney Corp. After the Closing, the combined company is organized in an umbrella partnership-C corporation (a so called “Up-C”) structure, and the Company’s direct assets consist of common units in the combined company (“Post-Combination ProKidney Common Units”) and all of the issued and outstanding equity interests of ProKidney Corp. GP Limited (“New GP”), which became the general partner of PKLP upon the Closing. Substantially all of the operating assets and business of the Company is indirectly through PKLP.
The Business Combination was accounted for as a common control transaction in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under the guidance in ASC 805, SCS was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination is reflected as the equivalent of PKLP issuing stock
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for the net assets of SCS, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations following the Business Combination are those of ProKidney Corp. The Business Combination had a significant impact on our future reported financial position and results as a consequence of the reverse capitalization.
The Business Combination resulted in gross proceeds of approximately $596,537,000. This amount reflected a contribution of $21,737,000 of cash held in SCS’ trust account, net of redemptions, and a $574,800,000 concurrent private placement of Class A ordinary shares of the combined company, priced at $10.00 per share (the “PIPE Placement”). Upon close, these proceeds were used to repay the outstanding balance of $35,000,000 under the Company’s two promissory note agreements with certain holders of its Class A Units and related accrued interest. Additionally, the proceeds were used to pay those expenses previously incurred by SCS related to the business combination of approximately $21,029,000 as well as advisory and placement fees of approximately $29,389,000 incurred in connection with the PIPE Placement.
Business Impact of the COVID-19 Pandemic
The global COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. To date, our financial condition and operations have not been significantly impacted by the COVID-19 pandemic. However, we cannot, at this time, predict the specific extent, duration or full impact that the COVID-19 pandemic will have on our financial condition and operations, including our ongoing and planned clinical trials. The extent of the impact of the COVID-19 on our business, operations and clinical development timelines and plans remains uncertain and will depend on certain developments, including the duration and spread of the outbreak and its impact on our clinical trial enrollment, trial sites, contract research organizations (“CROs”), and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel as some of our employees are working remotely. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. The development of our product candidates could be disrupted and materially adversely affected in the future by the COVID-19 pandemic. Our planned clinical trials also could be delayed due to government orders and site policies on account of the pandemic, and some patients may be unwilling or unable to travel to study sites, enroll in our trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results and could delay our ability to obtain regulatory approval and commercialize REACT or any future product candidates. Furthermore, COVID-19 could affect our employees or the employees of research sites and service providers on whom we rely, including CROs, as well as those of companies with which we do business, including our suppliers, thereby disrupting our business operations. Quarantines and travel restrictions imposed by governments in the jurisdictions in which we and the companies with which we do business operate could materially impact the ability of employees to access clinical sites, laboratories, manufacturing sites and offices. These and other events resulting from the COVID-19 pandemic could disrupt, delay, or otherwise adversely impact our business.
Other Trends and Uncertainties
In 2022, various central banks around the world (including the Federal Reserve in the United States) raised interest rates. While these rate increases have not had a significant adverse impact on the Company to date, the impact of such rate increases on the overall financial markets and the economy may adversely impact the Company in the future. In addition, the global economy has experienced and is continuing to experience high levels of inflation and global supply chain disruptions. We continue to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic environment.
In addition, although we have no operations in or direct exposure to Russia, Belarus and Ukraine, we have experienced limited constraints in availability and increasing costs required to obtain some materials and supplies due, in part, to the negative impact of the Russia-Ukraine military conflict on the global economy. To date, our business has not been materially impacted by the conflict, however, as the conflict continues or worsens, it may impact our business, financial condition or results of operations
Financial Operations Overview
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for REACT or any other product candidates are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such agreements.
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Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with our research and development activities, including the development of REACT.
Research and development costs include:
•external research and development expenses incurred under agreements with CROs and other scientific development services;
•costs of other outside consultants, including their fees and related travel expenses;
•costs related to compliance with quality and regulatory requirements;
•costs of laboratory supplies and acquiring and developing clinical trial materials;
•payments made under third-party licensing agreements;
•personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses, for individuals involved in research and development activities; and
•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, insurance and other internal operating costs.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid clinical or as a component of total accrued expenses and other. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are recorded as prepaid clinical and are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. We expect that our research and development expenses will increase significantly for the foreseeable future as REACT moves into later stages of clinical development.
The successful development of REACT and any product candidates we may develop in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of REACT or potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, many of which are outside of our control, including the uncertainty of:
•the timing and progress of non-clinical and clinical development activities;
•the number and scope of non-clinical and clinical programs we decide to pursue;
•our ability to maintain our current research and development programs and to establish new ones;
•establishing an appropriate safety-profile;
•the number of sites and patients including clinical trials;
•the countries in which the clinical trials are conducted;
•per patient trial costs;
•successful patient enrollment in, and the initiation of, clinical trials, as well as drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;
•the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA and comparable foreign regulatory authorities;
•the number of trials required for regulatory approval;
•the timing, receipt and terms of any regulatory approvals from applicable regulatory authorities;
•our ability to establish new licensing or collaboration arrangements;
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•the performance of our future collaborators, if any;
•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•significant and changing government regulation and regulatory guidance;
•the impact of any business interruptions to our operations or to those of the third parties with whom we work, particularly in light of the current COVID-19 pandemic environment;
•obtaining, maintaining, defending and enforcing patient claims or other intellectual property rights;
•the potential benefits of REACT over other therapies;
•launching commercial sales of REACT, if approved, whether alone or in collaboration with others; and
•maintaining a continued acceptable safety profile of REACT following approval.
Any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We may never obtain regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits and equity-based compensation expenses for individuals involved in our executive, finance, corporate and administrative functions, as well as expenses for outside professional services, including legal, audit, accounting and tax-related services and other consulting fees, facility-related expenses, which include depreciation costs and other allocated expenses for rent and maintenance of facilities, insurance costs, recruiting costs, travel expenses and other general administrative expenses.
We expect that our general and administrative expenses will increase significantly for the foreseeable future as our business expands and we hire additional personnel to support our operations. We also anticipate increased expenses associated with being a public company, including costs for legal, audit, accounting, investor and public relations, tax-related services, director and officer insurance, and regulatory costs related to compliance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) as well as listing standards applicable to companies listed on a national securities exchange.
Other Income (Expense)
Other income consists primarily of interest income earned on cash and cash equivalents held in financial institutions.
Income Tax (Expense) Benefit
Income tax expense reflects federal and state taxes on income earned by our subsidiary that is organized as a C corporation for U.S. income tax purposes.
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Results of Operations
Comparison of Three Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
21,132 |
|
|
$ |
14,742 |
|
|
$ |
6,390 |
|
General and administrative |
|
|
14,440 |
|
|
|
2,339 |
|
|
|
12,101 |
|
Total operating expense |
|
|
35,572 |
|
|
|
17,081 |
|
|
|
18,491 |
|
Loss from operations |
|
|
(35,572 |
) |
|
|
(17,081 |
) |
|
|
(18,491 |
) |
Interest income |
|
|
1,581 |
|
|
|
– |
|
|
|
1,581 |
|
Interest expense |
|
|
(29 |
) |
|
|
(1 |
) |
|
|
(28 |
) |
Net loss before taxes |
|
|
(34,020 |
) |
|
|
(17,082 |
) |
|
|
(16,938 |
) |
Income tax (benefit) expense |
|
|
(75 |
) |
|
|
60 |
|
|
|
(135 |
) |
Net and comprehensive loss before noncontrolling interest |
|
|
(33,945 |
) |
|
|
(17,142 |
) |
|
|
(16,803 |
) |
Net loss and comprehensive loss attributable to noncontrolling interest |
|
|
(22,017 |
) |
|
|
– |
|
|
|
(22,017 |
) |
Net loss and comprehensive loss available to Class A ordinary shareholders |
|
$ |
(11,928 |
) |
|
$ |
(17,142 |
) |
|
$ |
5,214 |
|
Research and development expenses
The increase in research and development expenses of approximately $6.4 million was primarily driven by the following:
•increases of $1.7 million related to equity-based compensation costs due to additional awards granted to employees and other service providers during 2022;
•increases in cash-based compensation costs of approximately $2.0 million due to the hiring of additional personnel; and
•increases in other research and development costs of approximately $2.1 million related to additional spending on manufacturing improvements, quality control and professional fees.
General and administrative expenses
The increase in general and administrative expenses of approximately $12.1 million was primarily driven by the following:
•increases in professional service fees of approximately $2.0 million incurred in connection with the Business Combination;
•increases of approximately $4.5 million related to director and officer insurance coverage associated with our operations as a public company and also includes the costs related to a director and officers tail policy with respect to SCS;
•increases in equity-based compensation costs of approximately $2.6 million due to additional awards granted to employees and other service providers during 2022;
•increases in cash-based compensation expenses increased approximately $0.7 million due to the hiring of additional personnel; and
•increases in legal and professional service fees of approximately $1.9 million primarily driven by costs incurred related to operating as a public company.
Income tax expense
Income tax expense for the three months ended September 30, 2022 was relatively consistent with the income tax expense recognized for the three months ended September 30, 2021.
Comparison of Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
61,180 |
|
|
$ |
35,570 |
|
|
$ |
25,610 |
|
General and administrative |
|
|
61,592 |
|
|
|
5,831 |
|
|
|
55,761 |
|
Total operating expense |
|
|
122,772 |
|
|
|
41,401 |
|
|
|
81,371 |
|
Loss from operations |
|
|
(122,772 |
) |
|
|
(41,401 |
) |
|
|
(81,371 |
) |
Interest income |
|
|
1,581 |
|
|
|
1 |
|
|
|
1,580 |
|
Interest expense |
|
|
(213 |
) |
|
|
– |
|
|
|
(213 |
) |
Net loss before taxes |
|
|
(121,404 |
) |
|
|
(41,400 |
) |
|
|
(80,004 |
) |
Income tax expense |
|
|
2,158 |
|
|
|
76 |
|
|
|
2,082 |
|
Net and comprehensive loss before noncontrolling interest |
|
|
(123,562 |
) |
|
|
(41,476 |
) |
|
|
(82,086 |
) |
Net loss and comprehensive loss attributable to noncontrolling interest |
|
|
(22,017 |
) |
|
|
– |
|
|
|
(22,017 |
) |
Net loss and comprehensive loss available to Class A ordinary shareholders |
|
$ |
(101,545 |
) |
|
$ |
(41,476 |
) |
|
$ |
(60,069 |
) |
Research and development expenses
The increase in research and development expenses of approximately $25.6 million was primarily driven by the following:
•increase in cost of $14.1 million related to equity-based payments for services rendered by a third-party in prior periods, as the cost of those payments was adjusted to the fair value of the awards issued upon their grant date in the nine months ended September 30, 2022;
•increases in equity-based compensation costs of approximately $6.3 million due to additional awards granted to employees during 2022;
•increases in depreciation of $0.8 million related to the addition of new equipment during the year;
•increases in cash-based compensation and recruitment costs of approximately $4.0 million related to the hiring of additional employees in 2022;
•increases in costs related to manufacturing improvements of approximately $2.8 million; and
•increases in other research and development costs related to professional fees, quality control and depreciation of approximately $2.2 million; offset by:
•decreases in the cost of clinical trials of approximately $4.9 million related primarily to decreased costs for the Phase 3 trials which were incurring start-up costs in the nine-month period ended September 30, 2021 and decreases in spending for the Phase 2 trials.
General and administrative expenses
The increase in general and administrative expenses of approximately $55.8 million was primarily driven by the following:
•increases in equity-based compensation of approximately $33.0 million for Class B-1 Units sold at less than their fair value to employees, board members and other service providers of the Company;
•increases in equity-based compensation expense of approximately $11.2 million which was driven by a modification to the existing awards as well as the grant of additional awards during the nine months ended September 30, 2022;
•increases in cash-based compensation expenses of approximately $2.2 million due to the hiring of additional personnel;
•increases in professional service fees of approximately $2.0 million incurred in connection with the Business Combination;
•increases of approximately $4.2 million related to director and officer insurance coverage; and
•increases in legal and professional fees of approximately $2.2 million attributable, in part, to operating as a public company.
Income tax expense
The increase in income tax expense of approximately $2.1 million for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, was driven primarily by the impact of a provision of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) which became effective for tax years beginning after December 31, 2021. This provision requires specified research and development expenses to be capitalized and amortized ratably over a five-year period and is the primary driver of the income tax expense recognized during the nine months ended September 30, 2022.
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Liquidity and Capital Resources
Sources of liquidity
Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. From our inception through September 30, 2022, we funded our operations primarily through capital contributions from the holders of PKLP prior to the Closing and the proceeds obtained through the Business Combination and related PIPE financing.
We expect that the net proceeds from the Business Combination, together with our existing cash and cash equivalents at September 30, 2022, will enable us to fund our operating expenses and capital expenditure requirements through 2024. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
We expect our expenses to increase substantially if, and as, we:
•initiate and continue research and clinical development of our product candidates, including in particular our clinical trials for REACT;
•incur third-party manufacturing costs to support our non-clinical studies and clinical trials of our product candidate and, if approved, its commercialization;
•seek to identify and develop additional product candidates;
•make investment in developing internal manufacturing capabilities; and
•seek regulatory and marketing approvals for our product candidates.
In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, investor and public relations, regulatory, tax-related, director and officer insurance premiums and other expenses that we did not incur as a private company. Developing pharmaceutical products, including conducting clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product that we do not expect to be commercially available for at least several years, if ever.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our unitholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain additional funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our technology, future- revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our units. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses, and there is no assurance that we will ever be profitable or generate positive cash flow from operating activities.
Cash Flows
Cash Flows for the Nine Months Ended September 30, 2022 and 2021
The following table provides information regarding our cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):
29
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
Net cash flows used in operating activities |
|
$ |
(61,328 |
) |
|
$ |
(37,309 |
) |
Net cash flows used in investing activities |
|
|
(1,432 |
) |
|
|
(4,652 |
) |
Net cash flows provided by financing activities |
|
|
548,529 |
|
|
|
41,478 |
|
Net change in cash and cash equivalents |
|
$ |
485,769 |
|
|
$ |
(483 |
) |
Operating Activities
Net cash used in operating activities was approximately $61.2 million for the nine months ended September 30, 2022, reflecting a net loss of approximately $123.6 million and uses driven by changes in working capital of approximately $5.5 million. Such uses were partially offset by non-cash charges of $67.8 million. The non-cash charges primarily consisted of equity-based compensation expense of $65.5 million and depreciation and amortization expense of $2.2 million. The changes in working capital primarily relate to the timing of payments made to our vendors for services performed.
Net cash used in operating activities was approximately $37.3 million for the nine months ended September 30, 2021, reflecting a net loss of $41.5 million, partially offset by non-cash charges of $1.9 million and a net change of $2.3 million in our net working capital. The non-cash charges primarily consisted of depreciation and amortization of $1.4 million and equity-based compensation expense of $0.5 million.
The approximately $24.0 million increase in cash used in operating activities for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by an increase in net loss after adjusting for the non-cash charges of approximately $16.2 million coupled with the increased use of cash related to the timing of payments to our vendors.
Investing Activities
Net cash used in investing activities were approximately $1.4 million and $4.6 million for the nine months ended September 30, 2022 and 2021, respectively, which was primarily due to purchases of equipment and facility expansion.
Financing Activities
Net cash provided by financing activities was $548.5 million and $41.5 million for the nine months ended September 30, 2022 and 2021, respectively. The primarily driver of the financing activities for the nine months ended September 30, 2022 was the proceeds received from the Business Combination. The driver of the financing activities for the 2021 period was the sales of Class A and B-1 Units in PKLP during the period.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements. Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2 to our audited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements included in this Form 10-Q.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our ordinary shares less attractive to investors.