PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2.   COVID-19 Pandemic (continued)

The Coronavirus Aid, Relieve and Economic Security Act (“CARES”) Act, enacted on March 27, 2020, and the Families First Coronavirus Response Act, in each case modified by the Consolidated Appropriations Act (“CAA”) enacted in December 2020, was anwere emergency economic stimulus packagepackages that included spending provisions and tax cuts to strengthen the United States economy and to fund a nationwide effort to curtail the effect of COVID-19. The principal impact of the CARES Act and subsequent legislation was the adoption of the Paycheck Protection Program (“PPP”) described below.. The CARES Act, together with subsequent legislation, also provided sweeping tax changes in response to the COVID-19 pandemic, including amendments to certain provisions of the previously enacted Tax Cuts and Jobs Act (“TCJA”).Act. The Company recognized a benefit of $0.8 million0 and $1.6$0.8 million for the three and sixmonths ended June 30, March 31, 2022, and 2021, respectively, as a reduction to cost of revenues and operating expenses related to the employee retention credit which was a tax provision in the CARES Act and subsequent legislation. Additionally, the CARES Act allowed the Company to fully carryback the 2020 net operating loss, for a refund of corporate income taxes previously paid.  See Item 2: “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.

Liquidity and Management’s Plans

At June 30, 2021,March 31,2022,the Company’s principal sources of liquidity included approximately $2.7$2.1 million of cash. Management currently believes that such funds, together with future operating profits, which are expected to be positively impacted by employee retention credit provisions of the CAA, and the effect of the full forgiveness of the PPP loan (the “PPP Loan” – see Note 12 – “Subsequent Events”), should be adequate to fund anticipated working capital requirements, including equipment financing obligations, and capital expenditures for at least the next 12 months. Furthermore, dependingDepending upon the Company’s results of operations, its future capital needs and available marketing opportunities, the Company may use various financing sources to raise additional funds. Such sources could include but are not limited to, issuance of common stock, debt financing, lines of credit, or equipment leasing, although there is no assurance that such financings will be available to the Company on terms it deems acceptable, if at all.

Accounts Receivable

The Company believes its allowance for credit losses related to its accounts receivable remained adequate as of June 30, 2021,March 31, 2022, due to the essential nature of its customers business, as well as the diversity of its large customer base. While the Company anticipates there could be an increase in the aging of its accounts receivable, the Company does not anticipate a significant increase in default risk.

Risk and Uncertainties

The duration and severity of COVID-19-related potential disruptions involve risks and uncertainties, and it is not possible at this time to estimate the full impact on the Company’s business and could adversely affect our estimates, results of operations and financial condition.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3.    Stock-Based Compensation

The Company’s 2006 Incentive Plan (“the Plan”) provides for cash-based awards or the grant or issuance of stock-based awards. As of DecemberMarch 31, 2020, 45 thousand shares were then available for future grant under the Plan. At the 2021 Annual Meeting, an additional 350 thousand shares were approved for future grant under the Plan. As of June 30, 2022, 276294 thousand shares remained available for future grant under the Plan.

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). The compensation cost charged against income is included in cost of revenues and operating expenses as follows (in thousands):

There was 0no income tax benefit recognized in the condensed consolidated statements of operations and comprehensive income/(loss) for stock-based compensation arrangements for the three and six months ended June 30, 2021,March 31, 2022, and 2020.2021.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3.           Stock-Based Compensation (continued)

A summary of the Company’s stock option activity for the sixthree months ended June 30, 2021,March 31, 2022, is as follows (in thousands except per share amounts)amounts and years):

A summary of the Company’s stock unit award (“SUA”) activity for the sixthree months ended June 30, 2021,March 31, 2022, is as follows (in thousands except per share amounts):

As of June 30, 2021,March 31, 2022, 901833 thousand shares of common stock were reserved for issuance under the Plan. As of June 30, 2021,March 31, 2022, the unamortized fair value of awards relating to outstanding SUAs and options was $1.6$1.0 million, which is expected to be amortized over a weighted average period of 3.32.7 years.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4.         Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (or loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (or loss) by the weighted average number of common and dilutive common equivalent shares outstanding during the period when the effect is dilutive. The number of dilutive common equivalent shares outstanding during the period was determined in accordance with the treasury-stock method. Common equivalent shares consisted of common stock issuable upon the exercise of outstanding options and common stock issuable upon the vesting of outstanding, unvested SUAs. Basic and diluted weighted average common shares outstanding for the three and sixmonths ended June 30, 2021,March 31, 2022, and 20202021 were as follows (in thousands):

The computation of diluted earnings (loss) per share for the three and sixmonths ended June 30, 2021,March 31, 2022, and 20202021 excludes the effect of the potential exercise of stock awards, including stock options, when the effect is anti-dilutive. For the three and sixmonths ended June 30, March 31, 2022, and 2021,the number of antidilutive stock awards excluded from diluted earnings per share was 550 thousand.were 56 thousand and 107 thousand, respectively.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5.    Commitments and Contingencies

TheFrom time to time, the Company is subjecta party to various lawsuits, claims and other legal proceedings and claims whichthat arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its business. Whilefinancial statements only for matters in which losses are probable and can be reasonably estimated. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Although it is difficult to predict the ultimate outcome of individual legal claims is inherently unpredictable, we believethese cases, management believes, that the final resolution of any pending actions willultimate liability would not have a material adverse effect on our resultsthe consolidated statements of operations. However, an unforeseen unfavorable development in any of these cases could have a material adverse effect on the statements of operations financial position, liquidity, or capital resources.cash flows in the period in which it is recorded. Developments in legal proceedings and other matters that could cause changes in the amounts previously accrued are evaluated each reporting period.

Settlements

As previously reported in the 10-K, on December 6, 2021, the Company entered into a binding Memorandum of Understanding (the “MOU”) to settle a purported class action lawsuit against it related to certain California wage and hour laws. The lawsuit, Enma Sagastume v. Psychemedics Corporation, Case No.2:20-CV-06624-DSF, is pending in the United States District Court for the Central District of California (the “California Lawsuit”) and is similar to numerous lawsuits filed against employers with operations in California.

In the binding MOU, the parties agreed to settle this matter for a payment by the Company of $1.2 million in exchange for the dismissal of the California Lawsuit and a customary release of liability, subject only to final court approval and the process described below. Factoring in that process, the Company estimates that the settlement funds will be dispersed in the second half of 2022, subject to the actual timing of final court approval.

Although the Company believes that the allegations in the California Lawsuit lack merit, it agreed at a mediation to enter into the binding MOU to settle the claims in the California Lawsuit in order to avoid potentially significant legal fees, other expenses, and management time that would have to be devoted to protracted litigation in California regarding its wage and hour laws. The foregoing was also impacted in part by new California case law in February 2021 regarding meal period compliance. The allegations in the California Lawsuit relate to alleged discrepancies in compliance with meal and rest periods required by California law and other alleged compliance discrepancies relating to the California wage and hour laws with respect to non-exempt hourly employees of the Company in California for a period since June 9, 2017. The California Lawsuit sought recovery of wages, penalties, interest, attorneys’ fees and other alleged damages. As part of the settlement, the Company continues to deny any liability or wrongdoing with respect to the claims made in the California Lawsuit.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5.Commitments and Contingencies (continued)

The MOU assumes class certification for purposes of the settlement only. The settlement amount of $1.2 million, which includes plaintiff attorneys' fees and costs, is subject to potential increase based on any adjustments in the final class size and the exact period to be covered, as determined by the court’s final approval. However, the Company believes that such adjustments, if any, would likely be immaterial. Once court approved, in exchange for the settlement payment, the plaintiff and all class members who do not opt out of the settlement will provide a broad release of any liability relating to the subject matter of the California Lawsuit, including any claims of such persons under California’s Private Attorneys' General Act of 2004. Such release is for the benefit of the Company, its affiliates, and any successor to the Company. The Company has the right to revoke the settlement prior to court approval in the event opt-outs, if any, from the class membership exceed a specified level. While the settlement is subject to final court approval as is customary, the MOU expressly provides that it is binding on and enforceable by each of the parties thereto, including by any successor to the Company. The Company has accrued $1.2 million as of March 31, 2022 related to the California Lawsuit, which is included in accrued expenses on the accompanying consolidated balance sheets.

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6.        Operating Leases

The Company has five operating leases for office and laboratory space used to conduct business. The exercise of lease renewal options is at our discretion. There is one lease which contains renewal options to extend the lease terms included in our Right-Of-Use (“ROU”) assets and lease liabilities as they are reasonably certain of exercise. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise. As most of the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at the lease commencement date in determining the net present value (NPV) of the lease payments.

As of June 30, 2021,March 31, 2022, the Company recognized a Right-Of-Use (“ROU”) asset of $4.0$3.3 million and an operating lease liability of $4.5$3.7 million based on the present value of the minimum rental payments as a result of adoption of ASC Topic 842.payments. The weighted average discount rate used for leases as of June 30, 2021,March 31, 2022, is 3.9%. The weighted average lease term as of June 30, 2021,March 31, 2022, is 4.53.8 years. The operating lease expense for the three and sixmonths ended June 30, 2021,March 31, 2022, was $269 thousand and $538 thousand, respectively.thousand.

Maturities and balance sheet presentation of the Company’s lease liabilities for all operating leases as of June 30, 2021,March 31, 2022, is as follows (in thousands):

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7.           Debt and Other Financing Arrangements

On March 20, 2014, the Company entered into an equipment financing arrangement (“Loan Agreement”) with Banc of America Leasing & Capital, which it amended on August 8, 2014, September 15, 2015, October 30, 2017, and December 2, 2019. The terms of the arrangement are detailed in the 10-K.

The weighted average interest rate on outstanding debt under the Loan Agreement was 3.4% and 3.4%3.6% for the three and sixmonths ended June 30, 2021.March 31, 2022. The interest expense was $13 thousand and $27$9 thousand for the three and sixmonths ended June 30, 2021,March 31, 2022. respectively. As of June 30, 2021,March 31, 2022, the weighted average interest rate was 3.1%3.3% and there was $1.6$1.1 million of outstanding debt related under the loan agreement.Loan Agreement. The Company was in compliance with all loan covenants under the Loan Agreement as of June 30, 2021.

On May 1, 2020, the Company entered into a term loan with Bank of America N.A. under the PPP administered by the United States Small Business Administration (“SBA”) under the CARES Act. The principal amount of the loan was $2,181,157, which was evidenced by a promissory note with a maturity date of May 4,March 31, 2022.The note bore interest on the unpaid balance at the rate of one percent (1%) per annum. In July 2021, the PPP Loan was 100% forgiven by the SBA (see Note 12 – “Subsequent Events” and the Company’s Current Report on Form 8-K filed on July 20, 2021).

The annual principal repayment requirements for debt obligations as of June 30, 2021,March 31, 2022, were as follows (in thousands):

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8.         Revenue

The table below disaggregates our external revenue by major source (in thousands).  For additional revenue detail relating to geographic breakdown of sales, see Note 9 – “Business Segment Reporting”.:

9.Business Segment Reporting

The Company manages its operations as 1 segment, drug testing services. As a result, the financial information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment. All Brazil sales are through 1 independent distributor. The Company’s revenues by geographic region are as follows (in thousands):

PSYCHEMEDICS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10.         Significant Customers

The Company had 0 customers that represented over 10% of revenue during either of the sixthree months-month periods ended June 30, March 31, 2022, or 2021.The Company had 1 customer that represented 11% of revenue for the six months ended June 30, 2020. The Company had 1 customer that represented 12%17% and 15% of the total accounts receivable balance as of June 30, 2021.March 31, 2022, The Company had 0 customers that represented greater thanand 10%2021, of the total accounts receivable balance as of December 31, 2020.respectively.

11.Recently Adopted Accounting Pronouncements

December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASU Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASU Topic 740 by clarifying and amending existing guidance. The amendments in this update are effective for interim and annual periods for the Company beginning after December 15, 2020, with early adoption permitted. The Standard may be adopted using the prospective or retrospective transition approach and could be applied to a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year adoption. The Company adopted ASU 2019-12 as of January 1, 2021, with no material impact to the Company’s consolidated financial statements.

12.10.       Subsequent Events

InOn July 2021,May 10, 2022, the outstanding principal and accrued interest for the PPP Loan was forgiven in full by the SBA.

Company declared a cash dividend of $0.07 per share, which will be paid on June 24, 2022, to shareholders of record on May 27, 2022.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FACTORS THAT MAY AFFECT FUTURE RESULTS

From time to time, information provided by the Company or statements made by its employees may contain forward-looking information that involves risks and uncertainties. In particular, statements contained in this report that are not historical facts (including but not limited to statements concerning earnings, earnings per share, revenues, cash flows, dividends, future business, growth opportunities, profitability, pricing, new accounts, customer base, market share, test volume, sales and marketing strategies, market demand for drug testing services in Brazil,the U.S. and foreign drug testing laws and regulations, including, without limitation, Brazilian professional driver drug testing requirements, required investments in plant, equipment and people and new test development, the effect of the COVID- 19 pandemic on our business, including its effects on our business and profitability, and on the well-being and availability of our employees, and the continued operation of our testing facilities) may be “forward looking” statements. Actual results may differ from those stated in any forward-looking statements. Factors that may cause such differences include but are not limited to risks associated with the severity of the COVID-19 pandemic, and its impact on the Company’s markets, including its impact on the Company’s customers, suppliers and employees, as well as its risk on the United States and worldwide economies, the timing, scope and effectiveness of further governmental, regulatory, fiscal monetary and public health responses to the COVID-19 pandemic, changes in U.S. and foreign government regulations, including but not limited to FDA regulations, changes in Brazilian laws and regulations and proposed laws and regulations and the implementation of such laws and regulations, currency risks, R&D spending, competition (including, without limitation, competition from other companies pursuing the same growth opportunities), the Company’s ability to maintain its reputation and brand image, the ability of the Company to achieve its business plans, cost controls, leveraging of its global operating platform, risks of information technology system failures and data security breaches, the uncertain global economy, the Company’s ability to attract, develop and retain executives and other qualified employees and independent contractors, including distributors, the Company’s ability to obtain and protect intellectual property rights, litigation risks, general economic conditions With respect to the continued payment of cash dividends, factors include, but are not limited to, all of the factors listed above with respect to the impact of the COVID-19 pandemic on the our business generally, plus cash flows, available surplus, capital expenditure reserves required, debt service obligations, regulatory requirements and other factors that the Board of Directors of the Company may take into account.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent the Company’s estimates and assumptions only as of the filing date of this Report. The Company expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the filing date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of the 10-K, as well as the risks and uncertainties discussed elsewhere in this Report. The Company qualifies all of its forward-looking statements by these cautionary statements. The Company cautions you that these risks are not exhaustive. The Company operates in a continually changing business environment and new risks emerge from time to time.

OVERVIEW

Revenue for the secondfirst quarter of 20212022 was $6.1$6.5 million compared to $3.3$5.7 million in 2020,2021, an increase of 85%14%. The Company reported net income of $0.1 million,39 thousand, or $0.02$0.01 per diluted share for the three months ended June 30, 2021,March 31, 2022, versus a net lossincome of $2.1 million,83 thousand, or ($0.37)$0.01 per diluted share for the same period in 2020.2021. Revenue and earnings increase for the quarter was attributed primarily to an increase of bothin domestic and international sales volume andvolume. The slight earnings decrease was primarily attributable to the absence of a refundable retention tax credit in 2022. The refundable retention tax credit program under the CARES Act was terminated at the end of the third calendar quarter of 2021. Accordingly, we recorded zero and $0.8 million of employee retention tax credit. The refundable employee retention tax credit forcredits during the three and six months ended June 30,March 31, 2022, and 2021, was $0.8 millionrespectively, which is included in cost of revenues and $1.6 million, respectively. Revenue foroperating expenses in the six months ended June 30, 2021, and 2020 was $11.8 million and $10.9 million, respectively, an increasestatements of 8%. The Company had net income for the six months ended June 30, 2021, of $0.2 million versus net loss for the six months ended June 30, 2020, of $2.2 million.operations. The Company did not declare or pay any cash dividends to its shareholders during the three months ended March 31, 2022.

As the Company disclosed in the six months ended June 30, 2021. This10-K, the Company’s Board of Directors authorized the Company to explore shareholder enhancement opportunities, including strategic alternatives, such as the potential sale or merger of the Company, capitalization optimization and dividend strategies. The Company continues to explore such opportunities. There can be no assurances that the shareholder enhancement review process will result in a transaction or other strategic change or outcome. The Company has not set a timetable for the conclusion of its review of strategic alternatives, and it does not intend to comment further unless and until the Board has approved a specific course of action or the Company has otherwise determined that further disclosure is comparedappropriate or required by law. The Company’s Board of Directors has designated a subcommittee of the Board to cash dividends paidreview shareholder enhancement opportunities. The Company has retained investment banking firms and corporate transaction legal advisors in connection with its exploration of $0.18 per share during the six-month period ended June 30, 2020.shareholder enhancement opportunities.

RESULTS OF OPERATIONS

Revenue increased 84%14% for the three months ended June 30, 2021,March 31, 2022, compared to the same period in 2020,2021, primarily due to a 95%14% increase in total volume, as 2020 results were adversely impacted by the COVID-19 outbreak, offset by a 11% decrease in average revenue per sample resulting from a greater mix of international volumes.2021. For the same period, domestic revenues increased $2.5$0.9 million (80%) and international revenues increased $0.3 million (153%). For the six months ended June 2021, revenue increased 9%, primarily due to an increase in domestic volume. For the same period, domestic revenues increased $1.5 million (16%(17%) and international revenues decreased $0.6$0.1 million (42%). The Company’s domestic revenues increase was impacted by overall stronger job creation and people returninghigher testing volumes in the base business due to continued recovery from the workforce.impact of the COVID-19 pandemic as well new business accounts. The international revenue decline was primarily from lower Brazil testing volume.

Gross profit (loss): The Company had a $2.4 million gross profit for the three months ended June 30, 2021,March 31, 2022, compared to a ($252) thousand$2.6 million gross lossprofit for the same period in 2020.2021. Cost of revenues increased by $0.1$0.9 million or 2%29% for the three months ended June 30, 2021,March 31, 2022, compared to the same period in 2020.2021. The decrease in gross marginprofit was beneficially impacted by higher sales volume andprimarily due to absence of the refundable employee retention tax credit present in the first quarter of 2021, as noted above. Gross profit for the six months ended June 30, 2021, was $5.0 million, an increase of $2.5 million from the comparable period in 2020. Cost of revenues decreased by $1.6 million or 19% for the six months ended June 30, 2021, when compared to the same period in 2020. TheIn addition, gross profit margin for the six-month period ended June 30, 2021, was 42% compared to 23% for the comparable period in 2020.  The gross margin was positivelynegatively impacted by higher shipping charges incurred in the first quarter of 2022 as we incurred soaring variable fuel surcharges from our main transportation provider. This was offset in part by higher sales volume and the refundable employee retention tax credit noted above.    volume.

General and administrative (“G&A”) expenses decreased 31%13% or $0.6$0.2 million to $1.3 million for the three months ended June 30, 2021,March 31, 2022, compared to $1.9$1.5 million for the same period in 2020.2021.  As a percentage of revenue, G&A expenses were 21%20% and 56%27% for the three months ended June 30,March 31, 2022, and 2021, and 2020, respectively. The decrease in G&A expenses was primarily driven by the absence of certain non-recurring legal fees incurred in 2020 and in addition salary reductions in 2021. G&A expenses were $2.8 million and $3.4 million for the six months ended June 30, 2021 and 2020, respectively. As a percentage of revenue, G&A expenses were 24% and 31% for the six months ended June 30, 2021, and 2020, respectively.involving two different case settlements previously reported.

Marketing and selling expenses decreased 23%increased 26% or $0.2 million to $0.7$0.8 million for the three months ended June 30, 2021,March 31,2022, compared to $0.9$0.6 million for the same period in 2020.2021. Total marketing and selling expenses represented 11%12% and 26%11% of revenue for the three months ended June 30,March 31, 2022, and 2021, and 2020, respectively. Expenses wereThe increase was primarily reduced fromdriven by higher overall personnel and related costs (including less travel). Marketing and selling expenses were $1.3 million and $2.0 million forincluding the six months ended June 30, 2021, and 2020, respectively. As a percentageabsence of revenue, marketing and selling expenses were 11% and 18% for the six months ended June 30, 2021, and 2020, respectively.refundable employee retention tax credit present in the first quarter of 2021.

Research and development (“R&D”) expenses for the three months ended June 30,March 31, 2022, and 2021, and 2020 were $0.3 million and $0.3 million, respectively. R&D expenses represented 5% and 10%5% of revenue for the three months ended June 30,March 31, 2022, and 2021, and 2020, respectively. R&D expenses were $0.6 million and $0.7 million for the six months ended June 30, 2021, and 2020, respectively. R&D expenses represented 5% and 6% of revenue for the six months ended June 30, 2021, and 2020, respectively.

Provision for income taxes:taxes Our provision for income taxes consisted primarily of federal and state income taxes in the United States. We estimate income taxes in each of the jurisdictions in which we operate. During the three months ended June 30, 2021,March 31, 2022, the Company recorded a tax provision of $73 thousand (effective tax rate of 35%) and a tax benefit of $1.3 million (effective tax rate of 39%) for the comparative period in 2020. During the six months ended June 30, 2021, the Company recorded a tax provision of $93$17 thousand (effective tax rate of 30%) and a tax benefitprovision of $1.5 million$20 thousand (effective tax rate of 40%19%) orfor the comparative period in 2020.2021.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2021,March 31, 2022, the Company had approximately $2.7$2.1 million of cash and $7.1$5.2 million of working capital. The Company's operating activities provided $0.2generated net cash of $0.3 million of cash for the sixthree months ended June 30, 2021.March 31, 2022. Investing activities used $0.1 million$36 thousand of net cash while financing activities used $0.3$0.2 million of net cash during the first sixthree months of 2021.