This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In some cases,
you can identify forward-looking statements by the following words: "ability,"
"anticipate," "attempt," "believe," "can be," "continue," "could," "depend,"
"enable," "estimate," "expect," "extend," "grow," "if," "intend," "likely,"
"may," "objective," "ongoing," "plan," "possible," "potential," "predict,"
"project," "propose," "rely," "should," "target," "will," "would" or the
negative of these terms or other comparable terminology, although not all
forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from the information expressed or implied by these
forward-looking statements. Although we believe that we have a reasonable basis
for each forward-looking statement, we caution you that these statements are
based on a combination of facts and factors currently known by us and our
projections of the future, about which we cannot be certain.

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Forward-looking statements include, but are not limited to, statements about:
the size of our market opportunity; our ability to compete effectively against
other providers of similar products and services, as well as competing
technologies; applications and processes that will use lasers, including the
suitability of our products; our ability to develop new technology, designs and
applications for our lasers; the reduction in cost per brilliant watt and
increase in power of semiconductor lasers going forward; the implementation of
our business model and strategic plans, including estimates regarding future
sales, revenues, expenses, acquisitions, investments, capital requirements and
stock performance; our future financial performance; fluctuations in our
quarterly results of operations and other operating measures, particularly as a
result of seasonality; the regulatory regime for our products and services,
domestically and internationally; the adoption of our products or lasers
generally and the growth of the laser market broadly and within specific
industries; our utilization of vertical integration; our ability to adequately
protect our intellectual property rights; our ability to maintain and grow our
relationships with our foreign customers; the impact on our sales and operations
of public health crises in China, the United States or internationally,
including the current COVID-19 pandemic and our response to it; the effect on
our business of litigation to which we are or may become a party; our ability to
maintain an effective system of internal controls necessary to accurately report
our financial results and prevent fraud; future macroeconomic conditions and the
effect of trade restrictions and new or increased tariffs on our products; the
sufficiency of our existing liquidity sources to meet our cash needs; and our
ability to sustain and manage growth in our business.

You should refer to the "Risk Factors" section of this report for a discussion
of other important factors that may cause our actual results to differ
materially from those expressed or implied by our forward-looking statements. As
a result of these factors, we cannot assure you that the forward-looking
statements in this report will prove to be accurate. In addition, statements
that "we believe" and similar statements reflect our beliefs and opinions on the
relevant subject. These statements are based upon information available to us as
of the date of this report, which although we believe such information forms a
reasonable basis for such statements, such information may be limited or
incomplete, and our statements should not be read to indicate that we have
conducted a thorough inquiry into, or review of, all potentially available
relevant information. These statements are inherently uncertain and investors
are cautioned not to unduly rely upon these statements. Furthermore, if our
forward-looking statements prove to be inaccurate, the inaccuracy may be
material. In light of the significant uncertainties in these forward-looking
statements, you should not regard these statements as a representation or
warranty by us or any other person that we will achieve our objectives and plans
in any specified time frame, or at all. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

Overview

nLIGHT, Inc., headquartered in Vancouver, Washington, is a leading provider of
high­power semiconductor and fiber lasers. Revolutionizing laser technology, we
are making the impossible possible. We design, develop and manufacture the
critical elements of our lasers, and we believe our vertically integrated
business model enables us to rapidly introduce innovative products, control our
costs and protect our intellectual property.

In November 2019, we acquired Nutronics, Inc. (Nutronics), based in Longmont,
Colorado, a leading developer of coherently combined lasers and beam control
systems (BCS) for high-energy laser (HEL) systems serving the defense market.
Our consolidated financial results for the three and six months ended June 30,
2020 include the results of Nutronics, and therefore may not be directly
comparable to the corresponding period of 2019, which does not include the
results of Nutronics.

Since the acquisition of Nutronics, we operate in two reportable segments
consisting of the Laser Products segment and Advanced Development segment. Sales
of our semiconductor lasers, fiber lasers and optical fibers are included in the
Laser Products segment, while revenue earned from research and development
contracts are included in the Advanced Development segment.

Revenues increased to $95.4 million in the six months ended June 30, 2020
compared to $89.9 million in the same period of 2019 as a result of higher
revenue from the Aerospace and Defense market, including the acquisition of
Nutronics, offset partially by lower revenues from the Microfabrication market.
We generated a net loss of $14.3 million for the six months ended June 30, 2020
as compared to a net loss of $1.4 million for the same period of 2019. The
higher net loss in 2020 was driven by a decrease in gross margins on product
sales, increased stock-based compensation, and amortization of intangible assets
from the Nutronics acquisition.

Factors Affecting Our Performance

Impact of the COVID-19 Pandemic on Our Business



In March 2020, the World Health Organization declared the outbreak of COVID-19 a
pandemic. COVID-19 continues to spread throughout the United States and the
world, including in geographies in which we and our customers operate. Our first
priority is the health and safety of our employees and our communities. As of
the date of this report, all our U.S. operating locations have

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been deemed essential and all of our global manufacturing facilities are fully
operational. Our Shanghai manufacturing facility was closed for an additional
week following the Chinese New Year, due to COVID-19, but has since re-opened.
All of our facilities have implemented a variety of policies and procedures,
including additional cleaning, social distancing, wearing masks, staggered
shifts and prohibiting or significantly restricting on-site visitors, to
minimize the risk to our employees.

The impact from the rapidly changing U.S. and global market and economic
conditions due to the COVID-19 pandemic is uncertain, with disruptions to the
business of our customers and suppliers, which may materially adversely impact
our business, operations, demand for our products and coincidentally our
consolidated results of operations and financial condition in the future. In
response to mandates ordered by global government authorities, our
non-manufacturing and technical service personnel outside of China have been
primarily working from home since March 2020. While we have not incurred
significant disruptions to our manufacturing or to our supply chain thus far
from the COVID-19 pandemic, we may experience decreased demand from certain
customers. We are unable to accurately predict the impact COVID-19 will have due
to numerous uncertainties, including the severity of the disease, the duration
of the pandemic, potential resurgence of outbreaks in locations where outbreaks
have previously been contained, actions that may be taken by governmental
authorities, the impact to our customers' and suppliers' businesses and other
factors identified in the "Risk Factors" section of this report. We are
continuing to evaluate closely the nature and extent of the impact to our
business, consolidated results of operations, and financial condition.

Demand for our Semiconductor and Fiber Laser Solutions
In order to continue to grow our revenues, we must continue to achieve design
wins for our semiconductor and fiber lasers. We consider a design win to occur
when a customer notifies us that it has selected one of our products to be
incorporated into a product or system under development by such customer. For
the foreseeable future, our operations will continue to depend upon capital
expenditures by customers in the Industrial and Microfabrication markets, which,
in turn, depend upon the demand for these customers' products or services. In
addition, in the Aerospace and Defense market, our business depends in large
part on continued investment in laser technology by the U.S. government and its
allies, and our ability to continue to successfully develop leading technology
in this area.
Erosion of average selling prices, or ASPs, of established products is typical
in our industry, and the ASPs of our products generally decrease as our products
mature. We may also negotiate discounted selling prices from time to time with
certain customers that purchase higher volumes, or to penetrate new markets or
applications. Historically, we have been able to offset decreasing ASPs by
introducing new and higher value products, increasing the sales of our existing
products, expanding into new applications and reducing our manufacturing costs.
However, recent ASP pressure has been more pronounced, and as a result, we have
only been able to partially offset the impact of the lower selling
prices. Certain of our competitors have continued to reduce the price of their
fiber lasers sold in the China Industrial market. Although we anticipate further
increases in product volumes and the continued introduction of new and higher
value products, we expect further ASP reduction that may cause our revenues to
decline or grow at a slower rate.

Technology and New Product Development
We invest heavily in the development of our semiconductor and fiber laser
technologies to provide solutions to our current and future customers. We
anticipate that we will continue to invest in research and development to
achieve our technology and product roadmap. Our product development is targeted
to specific sectors of the market where we believe the power and performance
requirements of our products can provide the most benefit. We believe our close
coordination with our customers regarding their future product requirements
enhances the efficiency of our research and development expenditures.
Manufacturing Costs and Gross Margins
Our gross profit, in absolute dollars and as a percentage of revenues, is
impacted by our product sales mix, sales volumes, changes in ASPs, production
volumes, the corresponding absorption of manufacturing overhead expenses,
production costs and manufacturing yields. Our product sales mix can affect
gross profits due to variations in profitability related to product-
configurations and cost profiles, customer volume pricing, availability of
competitive products in various markets, and new product introductions, among
other factors. Capacity utilization affects our gross margin because we have a
high fixed cost base due to our vertically integrated business model. Increases
in sales and production volumes drive favorable absorption of fixed costs,
improved manufacturing efficiencies and lower production costs. Gross margins
may fluctuate from period to period depending on product mix and the level of
capacity utilization.

Given the fixed nature of our facilities and equipment costs, we expect gross
margin to increase as revenues and volumes increase. Historically, gross margins
have fluctuated from period to period depending on product mix and the level of
capacity utilization. However, in recent periods, gross margins have been
negatively affected by increased tariff costs as a result of the trade war

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between the United States and China. So long as such increased tariff costs remain in place or increase further, our gross margins may continue to decline unless we can sufficiently increase our prices to offset those costs. Seasonality



Our quarterly revenues can fluctuate with general economic trends, holidays in
foreign countries such as Chinese New Year in the first quarter of our fiscal
year, the timing of capital expenditures by our customers, and general economic
trends. In addition, as is typical in our industry, we tend to recognize a
larger percentage of our quarterly revenues in the last month of the quarter,
which may impact our working capital trends.

Results of Operations



The following table sets forth our operating results as a percentage of revenues
for the periods indicated:

                                      Three Months Ended June 30,          Six Months Ended June 30,
                                        2020               2019              2020              2019
Revenue:
Products                                 86.5  %           100.0  %           86.0  %           100.0  %
Development                              13.5  %               -              14.0                  -
Total revenue                           100.0  %           100.0             100.0              100.0
Cost of revenue:
Products                                 62.5               67.0              63.4               67.3
Development                              12.5                  -              12.9                  -
Total cost of revenue                    75.0               67.0              76.3               67.3
Gross profit                             25.0               33.0              23.7               32.7
Operating expenses:
Research and development                 18.1               13.5              18.9               14.4
Sales, general, and administrative       18.5               17.8              18.2               18.6
Total operating expenses                 36.6               31.3              37.1               33.0
Loss from operations                    (11.6 )              1.7             (13.4 )             (0.3 )
Other income (expense):
Interest income (expense), net           (0.1 )              1.6               0.2                1.7
Other income (expense), net              (0.6 )             (1.9 )            (0.4 )             (0.1 )
Income (loss) before income taxes       (12.3 )              1.4             (13.6 )              1.3
Income tax expense                        0.8                1.7               1.4                2.8
Net loss                                (13.1 )%            (0.3 )%          (15.0 )%            (1.5 )%



Revenues by Segment

Our revenues by segment were as follows for the periods presented (dollars in
thousands):
                                Three Months Ended June 30,                     Change
                       2020    % of Revenue      2019    % of Revenue        $           %
Laser Products       $ 45,104        86.5 %    $ 48,048       100.0 %    $ (2,944 )   (6.1 )%
Advanced Development    7,034        13.5             -           -         7,034       NM
                     $ 52,138       100.0 %    $ 48,048       100.0 %    $  4,090      8.5  %



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                                 Six Months Ended June 30,                     Change
                       2020    % of Revenue      2019    % of Revenue       $          %
Laser Products       $ 82,034        86.0 %    $ 89,909       100.0 %    (7,875 )   (8.8 )%
Advanced Development   13,319        14.0             -           -      13,319       NM
                     $ 95,353       100.0 %    $ 89,909       100.0 %     5,444      6.1  %



The decrease in Laser Products revenue for the three and six months ended
June 30, 2020, compared to the same periods of 2019, was driven by decreased
revenue in the Microfabrication market, offset partially by increased revenue in
the Aerospace and Defense market. Prior to the acquisition of Nutronics in
November 2019, we operated only in the Laser Products segment. The Laser
Products segment for the three and six months ended June 30, 2019 includes
approximately $1.2 million and $2.4 million, respectively, of revenue earned
from non-Nutronics research and development contracts.

Revenues by End Market



Our revenues by end market were as follows for the periods presented (dollars in
thousands):
                                      Three Months Ended June 30,                             Change
                             2020    % of Revenue       2019    % of Revenue        $                         %
Industrial                $ 22,630         43.4 %    $ 20,920         43.5 %    $ 1,710                      8.2  %
Microfabrication            14,300         27.4      $ 18,094         37.7       (3,794 )                  (21.0 )
Aerospace and Defense       15,208         29.2      $  9,034         18.8        6,174    0.8259452412     68.3
                          $ 52,138        100.0 %    $ 48,048        100.0 %    $ 4,090   0.03234514226      8.5  %


                                  Six Months Ended June 30,                      Change
                        2020    % of Revenue      2019    % of Revenue        $          %
Industrial            $ 38,620        40.5 %    $ 39,044        43.4 %    $  (424 )    (1.1 )%
Microfabrication        24,719        25.9        32,627        36.3       (7,908 )   (24.2 )
Aerospace and Defense   32,014        33.6        18,238        20.3       13,776      75.5
                      $ 95,353       100.0 %    $ 89,909       100.0 %    $ 5,444       6.1  %



The increase in revenue from the Industrial market for the three months ended
June 30, 2020, compared to the same period of 2019, was driven by an increase in
unit sales offset partially by a decrease in average selling price (ASP), while
the decrease in revenue from the Industrial market for the six months ended June
30, 2020, compared to the same period of 2019, was driven by a decrease in ASP
offset partially by increased unit sales. The decrease in revenue from the
Microfabrication market for the three and six months ended June 30, 2020,
compared to the same periods of 2019, was driven primarily by lower unit sales
to customers for consumer electronics and semiconductors. The increase in
revenue from the Aerospace and Defense end market for the three and six months
ended June 30, 2020, compared to the same periods of 2019, was primarily
attributable to the acquisition of Nutronics, and an increase in unit sales to
new and existing customers for defense applications.

Revenues by Geographic Region

Our revenues by geographic region were as follows for the periods presented (dollars in thousands):


                         Three Months Ended June 30,                     

Change


                2020    % of Revenue      2019    % of Revenue        $          %
North America $ 20,494        39.3 %    $ 18,142        37.8 %    $ 2,352      13.0  %
China           21,495        41.2        18,201        37.9        3,294      18.1
Rest of World   10,149        19.5        11,705        24.3       (1,556 )   (13.3 )
              $ 52,138       100.0 %      48,048       100.0 %    $ 4,090       8.5  %



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                          Six Months Ended June 30,                      Change
                2020    % of Revenue      2019    % of Revenue        $          %
North America $ 41,540        43.6 %    $ 33,912        37.7 %    $ 7,628      22.5  %
China           33,537        35.2        31,854        35.4        1,683       5.3
Rest of World   20,276        21.2        24,143        26.9       (3,867 )   (16.0 )
              $ 95,353       100.0 %    $ 89,909       100.0 %    $ 5,444       6.1  %



Geographic revenue information is based on the location to which we ship our
products. The increase in North America revenue for the three and six months
ended June 30, 2020 compared to the same periods of 2019 was primarily driven by
the acquisition of Nutronics and increased sales in the Aerospace and Defense
market, partially offset by decreased sales in the Microfabrication market. The
increase in China revenue for the three and six months ended June 30, 2020
compared to the same periods of 2019 was primarily due to increased sales in the
Industrial market. The decrease in Rest of World revenue for the three and six
months ended June 30, 2020 compared to the same periods of 2019 was primarily
driven by decreased sales in the Microfabrication and Industrial markets.

Cost of Revenues and Gross Margin

Cost of revenues consists primarily of manufacturing materials, payroll, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted customer orders. We expense all warranty costs and inventory provisions as cost of revenues.

Our gross profit and gross margin were as follows for the periods presented (dollars in thousands):


                                                Three Months Ended June 30,                                            Change
                Laser Products     Advanced Development      Corporate and Other        2020         2019          $            %
Gross profit   $       12,846     $             549        $             (339 )      $ 13,056     $ 15,871     $ (2,815 )     (17.7 )%
Gross margin             28.5 %                 7.8 %                      NM            25.0 %       33.0 %          -        (8.0 )%


                                              Six Months Ended June 30,                                          Change
                                      Advanced
                Laser Products      Development        Corporate and Other        2020         2019          $            %
Gross profit   $       22,221     $      1,020       $             (684 )      $ 22,557     $ 29,385     $ (6,828 )     (23.2 )%
Gross margin             27.1 %            7.7 %                     NM            23.7 %       32.7 %          -        (9.0 )%



The decrease in Laser Products gross margin for the three and six months ended
June 30, 2020, compared to the same periods of 2019, was driven primarily by
price reductions in the industrial market and increased reserve charges, offset
partially by lower product costs. Since we operated only in the Laser Products
segment prior to the acquisition of Nutronics in 2019, no segment breakout is
presented for the comparative periods in 2019.

Operating Expenses



Our operating expenses were as follows for the periods presented (dollars in
thousands):

Research and Development
                                Three Months Ended June 30,               Change
                                      2020                  2019        $         %
Research and development $         9,472                  $ 6,494    $ 2,978    45.9 %


                              Six Months Ended June 30,              Change
                                   2020               2019         $         %
Research and development $      18,010              $ 12,916    $ 5,094    39.4 %




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The increase in research and development expense for the three and six months
ended June 30, 2020, compared to the same periods in 2019, was primarily due to
increases in stock-based compensation of $1.6 million and $2.8 million,
respectively; increases in purchased intangible amortization from the Nutronics
acquisition of $0.7 million and $1.3 million, respectively; and increased
project-related costs to support our development efforts.

Sales, General and Administrative


                                         Three Months Ended June 30,        

Change


                                            2020              2019             $            %

Sales, general, and administrative $ 9,633 $ 8,572 $


  1,061         12.4 %


                                        Six Months Ended June 30,             Change
                                             2020               2019        $        %
Sales, general, and administrative $      17,333              $ 16,716    $ 

617 3.7 %





The increase in sales, general and administrative expense for the three and six
months ended June 30, 2020, compared to the same periods in 2019 was primarily
due to increases in stock-based compensation of $2.0 million and $2.5 million,
respectively, offset partially by decreases in marketing costs, travel and
entertainment, and professional service fees.

Interest Income (Expense), net


                                   Three Months Ended June 30,              

Change


                                     2020                 2019           $  

%


Interest income (expense), net $         (65 )       $         740    $ (805 )   (108.8)%


                                     Six Months Ended June 30,                Change
                                          2020                2019         $           %
Interest income (expense), net $       218                  $ 1,490    $ 

(1,272 ) (85.4)%





The decrease in interest income (expense), net, for the three and six months
ended June 30, 2020, compared to the same periods in 2019 was primarily
attributable to lower balances in our money market funds coupled with a decrease
in the market rates on those funds. In addition, during the three months ended
June 30, 2020, we incurred approximately $0.1 million interest on the $15.0
million outstanding balance on our credit revolver, as compared to zero in the
comparable period of 2019.

Other Income (Expense), net


                                 Three Months Ended June 30,            

Change


                                  2020                 2019           $     

%

Other income (expense), net $ (298 ) $ (907 ) $ 609

 67.1%


                               Six Months Ended June 30,            Change
                                  2020              2019         $          %

Other income (expense), net $ (414 ) $ (87 ) $ (327 ) (375.9)%





The changes in other income (expense), net for the three and six months ended
June 30, 2020, compared to the same periods in 2019 was primarily attributable
to changes in net unrealized and realized foreign exchange transactions
resulting from currency rate fluctuations.

Income Tax Expense
                          Three Months Ended June 30,                Change
                                 2020                  2019       $          %
Income tax expense $         418                      $ 793    $ (375 )   (47.3 )%



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                         Six Months Ended June 30,                Change
                              2020                2019         $           %
Income tax expense $       1,323                $ 2,546    $ (1,223 )   (48.0 )%



We record income tax expense for taxes in our foreign jurisdictions including
Finland and Korea. We also record tax expense for uncertain tax positions taken
and associated penalties and taxes. We consider all available evidence, both
positive and negative, in assessing the extent to which a valuation allowance
should be applied against our deferred tax assets. Due to the uncertainty with
respect to their ultimate realizability in the U.S. and China, we continue to
maintain a full valuation allowance in both jurisdictions as of June 30, 2020.

The decrease in income tax expense for the three and six months ended June 30,
2020, compared to the same periods in 2019 was driven by a decrease in income
from our Finland operations and a valuation allowance against our China deferred
tax assets recorded during the fourth quarter of 2019. Our tax expense is
dependent on the geographic mix of earnings and primarily related to our foreign
operations.

Liquidity and Capital Resources

We had cash and cash equivalents of $120.9 million and $117.3 million as of June 30, 2020 and December 31, 2019, respectively.



For the six months ended June 30, 2020, our principal uses of liquidity were to
acquire a commercial property in Camas, Washington and to fund our working
capital needs. Our principal sources of liquidity for the six months ended June
30, 2020 included $15.0 million in proceeds from our revolving line of credit
and also optimizing vendor payments for inventory and other purchases.

We believe our existing sources of liquidity will be sufficient to meet our
working capital and capital expenditure needs for at least the next 12 months.
However, we may need to raise additional capital to expand the commercialization
of our products, fund our operations and further our research and development
activities. Our future capital requirements may vary materially from period to
period and will depend on many factors, including the timing and extent of
spending on research and development efforts, the expansion of sales and
marketing activities, the continuing market acceptance of our products and
ongoing investments to support the growth of our business. We may in the future
enter into arrangements to acquire or invest in complementary businesses,
services, technologies and intellectual property rights. From time to time, we
may explore additional financing sources which could include equity,
equity­linked and debt financing arrangements.

The following table summarizes our cash flows for the periods presented (in
thousands):
                                                        Six Months Ended June 30,
                                                         2020              2019

Net cash provided by (used in) operating activities $ 7,002 $

  (1,183 )
Net cash used in investing activities                   (17,668 )            (6,916 )
Net cash provided by financing activities                14,340             

1,147


Effect of exchange rate changes on cash                     (27 )           

135


Net increase (decrease) in cash                     $     3,647       $      (6,817 )



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Net Cash Provided by (Used in) Operating Activities



During the six months ended June 30, 2020, net cash provided by operating
activities was $7.0 million, which was primarily driven by $14.3 million of net
loss reported for the period, and non­cash adjustments of $17.7 million related
to depreciation and amortization, stock-based compensation, and other items.
These items were partially offset by increases of $4.5 million in inventory and
$7.4 million in accounts payable. The increase in inventory supported new
product introductions, decreased customer lead times and increased safety stock.
The increase in accounts payable was primarily driven by timing of vendor
payments.
During the six months ended June 30, 2019, net cash used in operating activities
was $1.2 million, which was driven by $1.4 million of net loss reported in the
period, and non-cash adjustments of $8.8 million related to depreciation and
amortization, stock-based compensation, and other items. These items were offset
by increases of $4.3 million in accounts receivable, $7.0 million in inventory,
and $1.1 million in accounts payable. The reasons for the increases were as
follows: in accounts receivable, due to the timing of sales and customer
collections; in inventory, primarily to support new product introductions; and
in accounts payable, due to timing of vendor payments.

Net Cash Used in Investing Activities

During the six months ended June 30, 2020, net cash used in investing activities was $17.7 million, primarily resulting from $17.0 million of capital expenditures related to the acquisition of commercial property and other investments in manufacturing equipment for our worldwide operations.



During the six months ended June 30, 2019, net cash used in investing activities
was $6.9 million, which was primarily due to capital expenditures related to
investments in manufacturing equipment and facilities.

Net Cash Provided by Financing Activities



During the six months ended June 30, 2020, net cash provided by financing
activities was $14.3 million, which was primarily driven by proceeds from our
revolving line of credit of $15.0 million to acquire commercial property, and
$1.5 million of proceeds from stock options exercises and employee stock program
purchases, offset by $2.2 million of withholding tax payments related to vesting
of restricted stock awards.

During the six months ended June 30, 2019, net cash provided by financing activities was $1.1 million, which was primarily driven by $1.7 million of proceeds from stock options exercises and employee stock program purchases, partially offset by $0.5 million of withholding tax payments related to vesting of restricted stock awards.



Credit Facilities

We have a $40.0 million revolving line of credit with Pacific Western Bank which
is secured by our assets and expires in September 2021. Interest on the line of
credit is based primarily on the London Interbank Offered Rate (LIBOR), or an
alternative rate such as the Prime rate, plus or minus, respectively, a margin
based on certain liquidity levels. The loan agreement contains restrictive and
financial covenants and bears an unused credit fee of 0.20% on an annualized
basis. As of June 30, 2020, $15.0 million was outstanding under the line of
credit and is classified in our consolidated balance sheet as long-term debt as
no payments are due currently. We were in compliance with all covenants under
the loan agreement, and $24.5 million was available for borrowing under the line
of credit as of June 30, 2020.

Contractual Obligations



For the six months ended June 30, 2020, there have been no material changes to
our significant contractual obligations as previously disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2019.

Off-Balance Sheet Arrangements
Since inception, we have not had any relationships with unconsolidated entities
or financial partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or for another
contractually narrow or limited purpose.

Inflation


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We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.

Recent Accounting Pronouncements

See Note 1 to Consolidated Financial Statements.

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