Bionano Genomics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Pages Report s of Independent Registered Public Accounting Fir ms 3 Consolidated Balance Sheets 5 Consolidated Statements of Operations 6 Consolidated Statements of Stockholders’ Equity 7 Consolidated Statements of Cash Flows 8 Notes to Consolidated Financial Statements 9 2 Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Bionano Genomics, Inc. San Diego, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Bionano Genomics, Inc. (the “Company”) as of December 31, 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion. /s/ BDO USA, LLP We have served as the Company’s auditor since 2020. San Diego, California March 23, 2021 3 Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Bionano Genomics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Bionano Genomics, Inc and subsidiaries (the "Company") as of December 31, 2019, the related consolidated statements of operations, convertible preferred stock and stockholders’ equity (deficit), and cash flows for the year ended December 31, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. In addition, the Company is not in compliance with the covenants included in its loan agreement with its lender. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP San Diego, California March 10, 2020 We have served as the Company’s auditor since 2017. In 2020 we became the predecessor auditor. 4 Bionano Genomics, Inc. Consolidated Balance Sheets December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 38,448,710 $ 17,311,373 Accounts receivable, net of allowance for doubtful accounts of $ 2,119,042 and $ 554,867 as of December 31, 2020 and 2019, respectively 2,775,042 6,333,963 Inventory 3,315,708 3,443,559 Prepaid expenses and other current assets 2,249,696 1,169,346 Total current assets 46,789,156 28,258,241 Property and equipment, net 4,910,414 1,949,625 Intangible assets, net 1,474,667 — Goodwill 7,172,649 — Other long-term assets 102,640 — Total assets $ 60,449,526 $ 30,207,866 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 2,929,662 $ 2,699,153 Accrued expenses 5,598,810 3,225,431 Contract liabilities 415,504 357,492 Current portion of long-term debt — 20,084,945 Total current liabilities 8,943,976 26,367,021 Long-term debt, net of current portion 16,325,501 — Long-term contract liabilities 97,875 182,648 Other non-current liabilities — 44,479 Total liabilities 25,367,352 26,594,148 Commitments and contingencies (Note 10) Stockholders’ equity: Common stock, $ 0.0001 par value, 400,000,000 and 200,000,000 shares authorized at December 31, 2020 and 2019, respectively; 189,952,944 and 34,274,469 shares issued and outstanding at December 31, 2020 and 2019, respectively 18,995 3,427 Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of December 31, 2020 and 2019 — — Additional paid-in capital 178,747,028 106,187,789 Accumulated deficit ( 143,683,849 ) ( 102,577,498 ) Total stockholders’ equity 35,082,174 3,613,718 Total liabilities and stockholders’ equity $ 60,449,526 $ 30,207,866 See accompanying notes to the consolidated financial statements. 5 Bionano Genomics, Inc. Consolidated Statements of Operations Year Ended December 31, 2020 2019 Revenue: Product revenue $ 6,229,611 $ 9,474,444 Service and other revenue 2,273,373 655,064 Total revenue 8,502,984 10,129,508 Cost of revenue: Cost of product revenue 4,810,408 6,495,693 Cost of service and other revenue 919,729 272,454 Total cost of revenue 5,730,137 6,768,147 Operating expenses: Research and development 10,256,109 9,080,891 Selling, general and administrative 31,068,060 20,155,376 Total operating expenses 41,324,169 29,236,267 Loss from operations ( 38,551,322 ) ( 25,874,906 ) Other expenses Interest expense ( 2,518,893 ) ( 2,286,196 ) Loss on debt extinguishment — ( 1,333,496 ) Other expenses ( 6,943 ) ( 299,424 ) Total other expenses ( 2,525,836 ) ( 3,919,116 ) Loss before income taxes ( 41,077,158 ) ( 29,794,022 ) Provision for income taxes ( 29,193 ) ( 21,048 ) Net loss $ ( 41,106,351 ) $ ( 29,815,070 ) Net loss per share, basic and diluted $ ( 0.39 ) $ ( 1.99 ) Weighted-average common shares outstanding, basic and diluted 104,251,327 14,977,901 See accompanying notes to the consolidated financial statements. 6 Bionano Genomics, Inc. Consolidated Statements of Stockholders’ Equity Additional Paid-in Capital Accumulated Deficit Total Stockholders' Equity Common Stock Shares Amount Balance at January 1, 2019 10,055,072 $ 1,004 $ 82,898,775 $ ( 72,762,428 ) $ 10,137,351 Net loss — — — ( 29,815,070 ) ( 29,815,070 ) Issue stock, net of issuance costs 11,829,388 1,183 10,958,352 — 10,959,535 Stock-based compensation expense — — 1,346,023 — 1,346,023 Stock option exercises 50,665 6 65,858 — 65,864 Issue stock for covenant waiver 572,917 57 504,110 — 504,167 Reduce warrant exercise price for covenant waiver — — 45,787 — 45,787 Issue stock for employee stock purchase plan 87,969 9 141,697 — 141,706 Issue stock for debt — — 201,789 — 201,789 Issue warrants for debt — — 629,830 — 629,830 Stock warrant exercises 11,678,458 1,168 9,395,568 — 9,396,736 Balance at December 31, 2019 34,274,469 $ 3,427 $ 106,187,789 $ ( 102,577,498 ) $ 3,613,718 Net loss — — — ( 41,106,351 ) ( 41,106,351 ) Issue stock, net of issuance costs 43,921,384 4,392 37,930,202 — 37,934,594 Stock-based compensation expense — — 1,554,069 — 1,554,069 Stock option exercises 1,354 — 1,359 — 1,359 Issue stock for covenant waiver 872,601 87 299,913 — 300,000 Issue stock for employee stock purchase plan 87,940 9 39,652 — 39,661 Issue stock for acquisition 6,167,510 617 4,099,282 — 4,099,899 Stock warrant exercises 104,627,686 10,463 28,634,762 — 28,645,225 — Balance at December 31, 2020 189,952,944 $ 18,995 $ 178,747,028 $ ( 143,683,849 ) $ 35,082,174 See accompanying notes to the consolidated financial statements. 7 Bionano Genomics, Inc. Consolidated Statements of Cash Flows Year Ended December 31, 2020 2019 Operating activities: Net loss $ ( 41,106,351 ) $ ( 29,815,070 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 1,479,537 1,127,850 Non-cash interest expense 1,263,911 883,269 Stock-based compensation 1,554,069 1,346,023 Provision for bad debt expense 1,808,991 554,867 Inventory impairment 125,640 — Loss on debt extinguishment — 1,333,496 Loss on disposal of fixed assets — 11,918 Changes in operating assets and liabilities (net of assets acquired and liabilities assumed in acquisition) Accounts receivable 2,086,927 ( 2,374,497 ) Inventory ( 4,201,281 ) ( 3,641,017 ) Prepaid expenses and other current assets ( 999,194 ) ( 245,046 ) Accounts payable ( 1,809,309 ) 1,362,397 Accrued expenses and contract liabilities 1,482,682 ( 73,910 ) Net cash used in operating activities ( 38,314,378 ) ( 29,529,720 ) Investing activities: Lineagen acquisition, net of cash acquired ( 2,449,952 ) — Purchases of property and equipment — ( 61,056 ) Net cash used in investing activities ( 2,449,952 ) ( 61,056 ) Financing activities: Proceeds from issuance of debt, net of issuance costs — 19,134,424 Repayment of term-loan debt ( 5,000,000 ) ( 10,812,000 ) Proceeds from PPP Loan 1,774,600 — Proceeds from borrowing from line of credit 760,527 5,113,072 Repayments of borrowing from line of credit ( 2,258,482 ) ( 3,615,117 ) Proceeds from sale of common stock 39,933,977 19,556,464 Offering expenses on sale of common stock ( 2,000,000 ) — Proceeds from sale of common stock under employee stock purchase plan 39,661 141,706 Proceeds from warrant and option exercises 28,651,384 860,871 Net cash provided by financing activities 61,901,667 30,379,420 Net increase in cash and cash equivalents 21,137,337 788,644 Cash and cash equivalents at beginning of period 17,311,373 16,522,729 Cash and cash equivalents at end of period $ 38,448,710 $ 17,311,373 Supplemental disclosure of non-cash financing and investing activity Fair value of stock and warrants issued in conjunction with debt $ — $ 831,619 Transfer of instruments and servers from inventory into property and equipment $ 4,656,432 $ 1,266,015 Transfer of instruments and servers from property and equipment into inventory $ 432,109 $ — Issue stock for acquisition $ 4,099,899 $ — Issue stock for covenant waiver $ 300,000 $ 504,167 Reduce warrant exercise price for covenant waiver $ — $ 45,787 Supplemental disclosure of cash flow information Interest paid $ 1,251,535 $ 1,277,184 See accompanying notes to the consolidated financial statements. 8 Bionano Genomics, Inc. Notes to the Consolidated Financial Statements 1. Organization and Operations Description of Business Bionano Genomics, Inc. (collectively, with its consolidated subsidiaries, the “Company”) is a life sciences instrumentation company in the genome analysis space that provides tools and services based on its Saphyr system to scientists and clinicians conducting genetic research and patient testing, and provides diagnostic testing for those with autism spectrum disorder (“ASD”) and other neurodevelopmental disabilities through newly acquired Lineagen, Inc., a wholly owned subsidiary of the Company (“Lineagen”). The Company currently develops and markets the Saphyr system, a platform for ultra-sensitive and ultra-specific structural variation detection that is designed to enable researchers and clinicians to accelerate the search for new diagnostics and therapeutic targets and to streamline the study of changes in chromosomes, which is known as cytogenetics. The Saphyr system is comprised of an instrument, chip consumables, reagents and a suite of data analysis tools, and genome analysis services to provide access to data generated by the Saphyr system for researchers who want to evaluate Saphyr data quickly and with a low up-front investment. Going concern In accordance with ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, management is required to perform a two-step analysis over its ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued (step 1). If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt (step 2). The Company has experienced recurring net losses from operations, negative cash flows from operating activities, financial covenant breaches, and significant accumulated deficit since its inception and expects to continue to incur net losses into the foreseeable future. The Company had an accumulated deficit of $ 102.6 million as of December 31, 2019. In 2019, the Company used $ 29.5 million cash in operations. As of December 31, 2019, the Company had cash and cash equivalents of $ 17.3 million. Management expects operating losses and negative cash flows to continue for at least the next year as the Company continues to incur costs related to research and commercialization efforts. Management had prepared cash flows forecasts which indicated that based on the Company’s expected operating losses and negative cash flows and current debt obligations, there was substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the financial statements for the year ended December 31, 2019, were issued. The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the outcome of this uncertainty. Liquidity As of December 31, 2020, the Company had approximately $ 38.4 million in cash and cash equivalents, and working capital of 37.8 million. In addition, the Company has a $ 5.0 million revolving line of credit with Innovatus Life Sciences Lending Fund I, LP (the “Innovatus LSA”), under which no borrowings were outstanding as of December 31, 2020. This facility is scheduled to expire in March 2024. During October through December 2020, pursuant an effective registration statement on Form S-3, we sold 27,025,384 shares of our common stock under an at-the-market facility, or the Ladenburg ATM, at an average share price of $ 0.82 , and received gross proceeds of approximately $ 22.1 million before deducting offering costs of $ 573,263 . In January 2021, we sold an additional 6,298,152 shares of our common stock under the Ladenburg ATM at an average share price of $ 2.68 , and received gross proceeds of approximately $ 16.9 million before deducting offering costs of $ 422,034 . On January 12, 2021, the Company completed an underwritten public offering of 33,368,851 shares of common stock, including 4,352,458 shares of common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. The price to the public in the offering was $ 3.05 per share and the underwriters purchased the shares from the Company 9 pursuant to the underwriting agreement at a price of $ 2.867 per share. The gross proceeds were approximately $ 101.8 million before deducting underwriting discounts and commissions and other offering expenses. On January 25, 2021, the Company completed an underwritten public offering of 38,333,352 shares of common stock, including 5,000,002 shares of common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. The price to the public in the offering was $ 6.00 per share and the underwriters purchased the shares from the Company pursuant to the underwriting agreement at a price of $ 5.64 per share. The gross proceeds were approximately $ 230.0 million before deducting underwriting discounts and commissions and other offering expenses. The Company expects to continue to incur net losses for the foreseeable future. The Company plans to continue to fund its losses from operations and capital funding needs through a combination of equity offerings, debt financings or other sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, potentially harming the Company’s business. COVID-19 The Company is subject to additional risks and uncertainties as a result of the continued spread of COVID-19 and uncertain market conditions, which could continue to have a material impact on the Company’s business and financial results. The Company closely monitors and complies with various applicable guidelines and legal requirements in the jurisdictions in which it operates, which may continue to result in reduced business operations in response to new or existing stay-at-home orders, travel restrictions and other social distancing measures. The Company’s manufacturing partners, suppliers, and customers, have implemented similar operational reductions. This overall reduction in activity has contributed to a decrease in sales which has negatively impacted the Company’s 2020 financial results. The future effects of COVID-19 are unknown and the Company’s financial results may continue to be negatively affected in the future. There may be long-term negative effects of the COVID-19 pandemic, even after it has subsided. Specifically, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, reduction in consumer confidence, or any similar negative economic condition. These negative effects could have a material impact on the Company’s operations, business, earnings, and liquidity. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions used by management include estimates of selling prices for multiple performance obligation arrangements, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used in purchase accounting and to evaluate the recoverability of long-lived assets and goodwill, warranty reserves, certain accrued expenses, contingent liabilities, tax reserves, deferred tax rates and recoverability of the Company’s net deferred tax assets and related valuation allowances. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Basis of Presentation The consolidated financial statements are prepared in accordance with U.S. GAAP and include the accounts of the Company’s 100%-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Lineagen Acquisition On August 21, 2020, Alta Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), Lineagen, a Delaware corporation, and Michael S. Paul, Ph.D., solely in his capacity as exclusive agent and attorney-in-fact of the securityholders of Lineagen, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms and conditions of the Merger Agreement, Merger Sub merged with and into Lineagen (the “Merger”) whereupon the separate corporate existence of Merger Sub ceased, with Lineagen continuing as the surviving corporation of the Merger as a wholly owned subsidiary of the Company. The Company accounted for its acquisition of Lineagen using the acquisition method of accounting pursuant to Accounting Standards Codification Topic 805, Business Combinations ("ASC 805"). Under ASC 805, the tangible and identifiable intangible 10 assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the acquisition date. Any excess purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. The Company based the estimated fair value of identifiable intangible assets acquired on independent valuations that use information and assumptions provided by the Company’s management. Under ASC 805, acquisition-related transaction costs (such as advisory, legal, valuation, other professional fees) are expensed in the statements of operations in the periods incurred. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents primarily represent funds invested in readily available money market accounts. The Company has not experienced any losses in such accounts. The Company believes that it is not exposed to any significant credit risk on cash and cash equivalents. Concentrations Credit Risks Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents and accounts receivable. The Company maintains deposits in federally insured major financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institution in which those deposits are held. The Company’s customers are located throughout the world. The Company generally does not require collateral from its customers. More information on accounts receivable is contained in the paragraph titled “Accounts Receivable” below. Sources of Materials and Products The materials and components for the Company’s product offerings are currently obtained from single or limited sources. The Company competes with other companies for production capacity, therefore, the Company is exposed to a risk of inventory being unavailable at acceptable prices, or at all, if suppliers are unable (or decide) to provide sufficient levels of materials and components and the Company is unable to identify alternative suppliers. Accounts Receivable The Company extends credit to its customers in the normal course of business. For diagnostic testing services, receivables are based on either contractual rates with third-party payors, plus the amounts expected to be collected for any patient-responsibility portion, or for non-contracted arrangements, using the amounts expected to be collected from third-party payors and/or the patient-customer based on historical collection experience. The Company does not perform credit evaluations and therefore subsequent adjustments to the amount expected to be collected are recorded to revenue. For OGM products and services, credit is extended based upon an evaluation of each customer’s credit history, financial condition, and other factors. Estimates of allowances for doubtful accounts are determined by evaluating individual customer circumstances, historical payment patterns, length of time past due, and economic and other factors. Bad debt expense is recorded as necessary to maintain an appropriate level of allowance for doubtful accounts in selling, general and administrative expense. During the years ended December 31, 2020 and 2019, the Company recorded bad debt expense of $ 1.8 million and $ 554,867 , respectively, which is included in selling, general and administrative expenses. Amounts are charged to the allowance for doubtful accounts when collection efforts have been exhausted and are deemed uncollectible. Accounts receivable is subject to concentration risk whenever a customer has a balance that meets or exceeds 10% of the Company's total accounts receivable balance. As of December 31, 2019, Gene Company Limited represented 10 % of the Company's total accounts receivable balance. As of December 31, 2020, Illumina, and Quest Diagnostics represented 17.3 %, and 10.1 %, respectively, of the Company's total accounts receivable balance. Inventory Inventory is stated at the lower of cost or net realizable value, on a first-in, first-out basis. Inventory includes raw materials and finished goods that may be used in the research and development process and such items are expensed as consumed or expired. 11 Provisions for slow-moving, excess, and obsolete inventories are estimated based on product life cycles, historical experience, and usage forecasts. The components of inventories are as follows: December 31, 2020 2019 Raw materials $ 2,282,673 $ 950,846 Finished goods 1,033,035 2,492,713 $ 3,315,708 $ 3,443,559 Long-Lived Assets (including Finite-Lived Intangible Assets) Long-lived assets consist of property and equipment and acquired finite-lived intangible assets. The Company records property and equipment at cost, and records acquired finite-lived intangible assets based on their fair values at the date of acquisition. Property and equipment generally consist of laboratory equipment, computer and office equipment, furniture and fixtures, and leasehold improvements. Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful lives of the assets (generally three to five years , or the remaining term of the lease for leasehold improvements, whichever is shorter). Repairs and maintenance costs are charged to expense as incurred. Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date. Intangible assets are amortized over the estimated useful life of the asset on a basis that approximates the pattern of economic benefit. Intangible assets are reviewed for impairment if indicators of potential impairment exist. There was no indication of impairment of intangible assets for any of the periods presented. As a result of the Lineagen acquisition the Company recorded intangible assets, which consist of a trade name intangible and customer relationship intangible, which are both being amortized on a straight-line basis over their estimated useful lives of five years , Straight-line amortization was determined to be materially consistent with the pattern of expected use of the intangible assets. If the Company identifies a change in the circumstances related to its long-lived assets, such as property and equipment and intangible assets (other than goodwill), that indicates the carrying value of any such asset may not be recoverable, the Company will perform an impairment analysis. A long-lived asset (other than goodwill) is not recoverable when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense. During the years ended December 31, 2020 and 2019, the Company recognized no impairment losses on long-lived assets. Substantially all of the Company's long-lived assets are located in the U.S. Goodwill Goodwill arises when the purchase price of an acquired business exceeds the fair value of the identifiable net assets acquired, with such excess recorded as goodwill on the balance sheet. Goodwill is not subsequently amortized. Goodwill is reviewed for impairment annually (during the fourth quarter) or more frequently if indications of impairment exist. Goodwill is assigned to specific reporting units for purposes of impairment assessment. The Company has determined that it has a single operating segment and a single reporting unit. Therefore, the Company has assigned the goodwill recorded from the Lineagen acquisition to this reporting unit. In testing goodwill for impairment, the Company will first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying value, then the Company will perform a quantitative impairment analysis by comparing the fair value of the reporting unit to the carrying value of the reporting unit, including goodwill. An impairment charge for goodwill is recognized for the amount by which the carrying value of the reporting unit exceeds its fair value, not to exceed the total goodwill allocated to the reporting unit. During the years ended December 31, 2020 and 2019, the Company recognized no impairment losses on goodwill. Revenue Recognition Revenue by Source 12 Year Ended December 31, 2020 2019 Instruments $ 3,084,869 $ 6,762,463 Consumables 3,144,742 2,711,981 Total product revenue 6,229,611 9,474,444 Services and other 2,273,373 655,064 Total revenue $ 8,502,984 $ 10,129,508 Revenue by Geographic Location Year Ended December 31, 2020 2019 $ % $ % North America $ 4,489,359 53 % $ 5,030,267 50 % EMEIA 3,162,694 37 % 3,627,602 36 % Asia Pacific 850,931 10 % 1,471,639 14 % Total $ 8,502,984 100 % $ 10,129,508 100 % The Company generates revenue from the sale of its products, primarily its Saphyr system and related consumables, and related services, which are primarily support, repair and maintenance services on the instruments. These products are sold primarily through a direct sales force, and within international markets, there is more reliance on distributors. In addition, the Company provides the Saphyr system to certain customers under its reagent rental program, under which the Company provides Saphyr systems to customers at no cost and the customers agree to purchase minimum quantities of consumables. The Company also generates revenue by performing diagnostic testing services, sourced from our recently acquired subsidiary, Lineagen. Revenue is recorded net of sales tax. The Company provides assurance-type warranties on its Saphyr system with a term of one year, which are not material performance obligations, and also offers separately-priced extended warranties for periods after the initial year. The tables above provide revenue from contracts with customers by source and geographic location on a disaggregated basis. North America consists of the United States and Canada. EMEIA consists of Europe, the Middle East, India and Africa. Asia Pacific includes China, Japan, South Korea, Singapore and Australia. For the years ended December 31, 2020 and 2019, the United States represented 42 % and 47 %, and China represented 8 % and 5 %, respectively, of total revenue. The Company considers revenue to be earned when all of the following criteria are met: the Company has a contract with a customer that creates enforceable rights and obligations; promised products or services are identified; the transaction price, or the amount the Company expects to receive, including an estimate of uncertain amounts subject to a constraint to ensure revenue is not recognized in an amount that would result in a significant reversal upon resolution of the uncertainty, is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the contract. The transaction price for the contract is measured as the amount of consideration the Company expects to receive in exchange for the goods and services expected to be transferred. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company's products is generally at shipment or delivery, depending on contractual terms, but occurs when title and risk of loss transfers to the customer which represents the point in time when the customer obtains control of the product. As such the Company's performance obligation related to product sales is satisfied at a point in time. Revenue from support and maintenance contracts and extended warranties is recognized over time based on the contract term, which represents a faithful depiction of the transfer of goods and services given the stand-ready nature of the performance obligations. Service revenue related to repairs and customer sample evaluations is recognized as the services are performed based on the specific nature of the service. For transfers of instruments and consumables to customers under the Company's rental reagent program, the Company allocates the total contract consideration between the instrument and the consumables based on estimates of stand-alone selling prices, and recognizes the instrument revenue evenly over the rental period, and the consumables revenue when the consumables are delivered. Revenue from the completion of diagnostic testing services is recorded at the billed value less estimated contractual adjustments. The Company performs its obligation under a contract with a customer by processing diagnostic tests and communicating 13 the test results, which the Company has determined is the point at which control is transferred to the customer for revenue recognition purposes. The Company recognizes a receivable when it has an unconditional right to payment, which is generally at the time of shipment of consumables and instruments, including any extended warranties, and at the time when services are rendered. Payment terms are typically 30 days for sales to customers in the United States but may be longer in international markets. The Company treats shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and records these costs within selling, general and administrative expenses, less any amounts reimbursed by the customer, when the corresponding revenue is recognized. Some of the Company's contracts have multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. If the product or service does not have a history of sales or if sales volume is not sufficient, including instruments under reagent rental agreements, the Company has estimated the standalone selling price to be the incremental sales price generally charged for consumables to customers under the reagent rental agreements in relation to amounts charged to other customers. Variable Consideration The Company exercises judgment in estimating variable consideration, if any, and would be recorded as a reduction to revenue. To the extent the transaction price includes variable consideration, the Company applies judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. The Company evaluates constraints based on its historical and projected experience with similar customer contracts. The Company's contracts typically do not provide for product returns or refunds. In general, estimates of variable consideration and constraints are not material to the Company's financial statements. Remaining Performance Obligations As of December 31, 2020, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was $ 513,379 . These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations. The Company expects to recognize approximately 81 % of this amount as revenue in 2021, 16 % in 2022 and 3 % in 2023. Warranty revenue is included in service and other revenue. Contract Assets and Liabilities The Company discloses accounts receivable separately in the consolidated balance sheets at their net realizable value. Contract assets primarily relate to the Company's conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were immaterial. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company records a contract liability, or deferred revenue, when it has an obligation to provide service, and to a much lesser extent product, to the customer and payment is received or due in advance of performance. Deferred revenue primarily relates to support and maintenance contracts and extended warranty obligations. Contract liabilities are classified as other current liabilities and other long-term liabilities on the consolidated balance sheets. The Company recognized revenue of $ 357,492 and $ 270,171 during the years ended December 31, 2020 and 2019, respectively, which was included in the contract liability balance at the end of the previous year. Distributor Transactions In certain markets, the Company sells products and provides services to customers through distributors that specialize in life sciences products. In cases where the product is delivered to a distributor, revenue recognition generally occurs when the distributors obtains control of the product. The terms of sales transactions through distributors are generally consistent with the terms of direct sales to customers and do not contain return rights. Distributor sales transactions typically differ from direct customer sales as they do not require the Company’s services to install the instrument at the end customer or perform the services for the customer that are beyond the standard warranty in the first year following the sale. These transactions are accounted for in accordance with the Company’s revenue recognition policy described herein. 14 Cost of Revenue Cost of revenue for products consists of the Company’s raw material parts costs and associated freight, shipping and handling costs, contract manufacturing costs, royalties due to third parties, salaries and other personnel costs, equipment depreciation, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of service and other revenue consists of salaries and other personnel costs, and facility costs associated with costs related to warranties and other costs of servicing equipment at customer sites, and performance of diagnostics services. Research and Development Costs Costs incurred for research and product development, including acquired technology and costs incurred for technology in the development stage, are expensed as incurred. Patent Costs Costs related to filing and pursuing patent applications are recorded as selling, general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain. Stock-based Compensation The Company issues stock-based awards as compensation to employees and directors. Stock-based awards may include stock options, stock appreciation rights, vesting stock awards and performance share awards. These awards are accounted for as equity awards. To-date, the Company has issued stock options and recognizes stock-based compensation expense net of actual forfeitures on a straight-line basis over the underlying award’s requisite service period, which is generally the vesting period, as measured using the award’s grant date fair value. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. Changes in the valuation allowance when they are recognized in the provision for income taxes may result in a change in the estimated annual effective tax rate. The Company recognizes the impact of uncertain tax positions at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it does not have a greater than 50% likelihood of being sustained. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company chief operating decision-maker, the Chief Executive Officer, views the Company’s operations and manages its business as one operating segment. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive. Pre-funded warrants from the Company's follow-on offering have been treated as if they were common shares outstanding on the date of issuance. The Company’s potentially dilutive securities which include outstanding warrants to purchase stock and outstanding stock options under the Company’s equity incentive plans have been excluded from the computation of diluted net loss per share as they 15 would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares): Year Ended December 31, 2020 2019 Common stock options 5,289,501 1,742,912 Common warrants 15,174,114 24,026,550 Total 20,463,615 25,769,462 Recently Issued But Not Yet Adopted Accounting Pronouncements In April 2012, the Jump-Start Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an emerging growth company. As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than when public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, unless the Company elects early adoption of any standards, will adopt the new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies, which are the dates included below. In February 2015, the FASB issued Accounting Standards Update ("ASU") 2016-2, Leases (Topic 842), which amends the accounting guidance for leases and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. ASU 2016-2 initially mandated a modified retrospective transition method, however, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which amends ASU 2016-2, permitting entities the option to adopt this standard prospectively with a cumulative-effect adjustment to opening equity in the year of adoption and include required disclosures for prior periods but will not restate prior periods. The Company anticipates implementing the accounting guidance for leases using the alternative method beginning with the annual reporting period ending December 31, 2022 and interim reporting periods in 2023. The Company is currently evaluating impact that adoption of this standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of credit Losses on Financial Instruments (ASU 2016-13), which amends the impairment model by requiring entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The standard is effective for the company beginning in the first quarter of 2023, with early adoption permitted. The Company is currently evaluating impact that adoption of this standard will have on its consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions and also simplifies the diluted earnings per share calculation in certain areas. The standard is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and adoption must be as of the beginning of the Company's annual fiscal year. The Company is currently evaluating the impact that adoption of this standard will have on its consolidated financial statements and related disclosures. 3. Fair Value Measurements The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 16 Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). Financial instruments that are not re-measured at fair value include cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, and debt. The carrying values of these financial instruments approximate their fair values. The Company estimates the fair value of any cash equivalents using level 1 inputs. The Company estimates the fair value of all other financial instruments using Level 2 inputs. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: December 31, 2020 December 31, 2019 Prepayment to supplier $ 1,145,705 $ 409,851 Prepaid insurance 642,488 302,433 Other current assets 461,503 457,062 Total $ 2,249,696 $ 1,169,346 5. Property and Equipment, Net Property and equipment, net consist of the following: December 31, 2020 December 31, 2019 Computer and office equipment $ 492,436 $ 476,402 Lab equipment 6,718,674 4,623,714 Service equipment placed at customer sites 3,266,559 1,247,328 Leasehold improvements 1,888,873 1,875,647 12,366,542 8,223,091 Less accumulated depreciation and amortization ( 7,456,128 ) ( 6,273,466 ) $ 4,910,414 $ 1,949,625 For the years ended December 31, 2020 and 2019 the Company recorded depreciation expense of $ 1,369,433 and $ 1,127,850 , respectively, which includes an allocation to cost of revenue of $ 544,176 and $ 41,118 , respectively. 6. Intangible Assets, Net Intangible assets, net, consist of the following: December 31, 2020 Customer Relationships Trade Name Total Gross balance $ 950,000 $ 630,000 $ 1,580,000 Accumulated amortization ( 63,333 ) ( 42,000 ) ( 105,333 ) Intangibles, net $ 886,667 $ 588,000 $ 1,474,667 17 The Company recorded amortization expense for intangible assets of $ 105,333 for the year ended December 31, 2020, in selling, general and administrative expenses. The customer relationships and trade name intangibles are both being amortized on a straight-line basis over their estimated useful lives of five years , and have remaining amortization periods of 4.7 years. Future amortization expense of intangible assets is as follows: 2021 316,000 2022 316,000 2023 316,000 2024 316,000 2025 and thereafter 210,667 Total $ 1,474,667 7. Accrued Expenses Accrued expenses consist of the following: December 31, 2020 December 31, 2019 Compensation expenses $ 3,250,709 $ 1,805,357 Deferred rent — 266,282 Goods received not invoiced 567,092 191,721 Taxes payable 562,149 268,129 Insurance 357,618 — Professional fees and royalties 247,222 213,514 Interest 98,152 125,743 Other 515,868 354,685 Total $ 5,598,810 $ 3,225,431 8. Long-Term Debt Paycheck Protection Program On April 17, 2020, the Company received loan proceeds of approximately $ 1.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (“the PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan accrued interest at a rate of 1.00% per annum, and was subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act. In February 2021, the Company applied for forgiveness of the PPP Loan, and in March 2021, the PPP Loan, including all accrued interest, was forgiven in full. Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of such loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs (the “Eligible Costs”). Pursuant to the Paycheck Protection Program Flexibility Act (the “PPPFA”), enacted on June 5, 2020, the Company was permitted to use loan proceeds on Eligible Costs through October 2, 2020, or the date that was 24 weeks from the PPP Loan origination date (the “Covered Period”). In order to apply for the PPP Loan, the Company was required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support the Company’s ongoing operations. This certification further required the Company to take into account the maintenance of its workforce, the Company’s need for additional funding to continue operations, and the Company’s ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic. Innovatus LSA In March 2019, the Company entered into a Loan and Security Agreement (the “LSA”) by and among Innovatus Life Sciences Lending Fund I, LP, a Delaware limited partnership (“Innovatus”), as collateral agent and the lenders listed on Schedule 1.1 thereto, including East West Bank. The LSA provided a first term loan of $ 17.5 million, a second term loan of $ 2.5 million and a third term loan of $ 5.0 million (collectively, “Term Loans”) if the Company satisfied certain funding conditions. Interest on the Term Loans is due on the first of each month at a rate of 10.25 % per annum in cash or a discounted rate of 7.25 % in cash with 3.0 % of the 10.25 % 18 per annum rate added to the principal of the loan and subject to accruing interest through the end of the interest only payment period, which ends March 1, 2022. At inception, the Company elected to pay interest in cash at a rate of 7.25 % per annum and have 3.0 % per annum of the interest added back to the outstanding principal. As of December 31, 2020, the effective interest rate, including debt issuance costs, for Term Loans was 16.7 %. Beginning in April 2022, the Company must make 24 equal monthly payments of principal and interest with a final maturity date in March 2024, which may be earlier due to an event of default if not cured within time specified. The LSA provides for prepayment fees of 3.0 % of the outstanding balance of the loan if the loan is repaid on or prior to March 14, 2020, 2.0 % of the amount prepaid if the prepayment occurs after March 14, 2020 but prior to March 14, 2021, 1.0 % of the amount prepaid after March 14, 2021 but prior to March 14, 2022 and 0 % of the amount prepaid if the prepayment occurs thereafter. In addition, upon the final repayment of the total amounts borrowed, the Company is required to pay an end of term fee of $ 0.8 million. This end of term fee is being recognized as interest expense over the term of the LSA. The LSA also provides for a revolving line of credit in an amount not to exceed $ 5.0 million (the “Revolver”). The Company may repay and reborrow amounts under the Revolver at any time prior to the March 1, 2024 maturity date without penalty or premium. The outstanding balance of amounts borrowed under the Revolver bears interest at a rate equal to 2.0 % above the prime rate, per annum, as specified in the terms of the Revolver. The LSA allows the Company to borrow and repay amounts at any time prior to the maturity date in 2024. The LSA is collateralized by substantially all of the Company’s assets, including its intellectual property. The LSA requires the Company to comply with various affirmative and negative covenants, including: (1) a liquidity covenant requiring the Company to maintain a minimum cash balance at all times in a collateral account and (2) a revenue covenant requiring the Company to meet certain minimum revenue targets measured at the end of each calendar quarter. The LSA also includes certain standard events of default, and a provision that Innovatus could declare an event of default upon the occurrence of any event that it interprets as having a material adverse impact to the Company's business, operations, or condition, a material impairment on the Company's ability to pay the secured obligations under the LSA, or upon a material adverse effect on the collateral under the agreement, thereby requiring the Company to repay the loans immediately, together with a prepayment fee and other applicable fees. As of December 31, 2020, the Company believes there have been no events or changes in conditions that could require immediate repayment of amounts due to Innovatus. In March 2019, in connection with the receipt of $ 20.0 million in proceeds from the Term Loans, the Company issued to Innovatus a warrant to purchase up to 161,987 shares of its common stock at an exercise price of $ 4.63 per share, which has a term of 10 years. The Company applied the Black-Scholes option pricing model to estimate the fair value of the warrants, with the following assumptions: a) risk-free rate of 2.43 %; b) expected volatility of 66.93 %; c) no dividend expected to be paid; and d) expected life of 10 years. Based on this model, the relative fair value of the warrant was determined to be $ 0.6 million, which was recorded as a debt discount and is being amortized as interest expense using the effective-interest method over the term of the LSA. Pursuant to the LSA, if the Company borrows the third term loan of $ 5.0 million, Innovatus will be entitled to purchase up to an additional 40,496 shares of the Company’s common stock at an exercise price of $ 4.63 per share. In addition, in connection with entry into the LSA, the Company paid fees to third parties of approximately $ 0.8 million which were recorded as a deduction of the debt liability and are being amortized as interest expense using the effective-interest method over the term of the LSA. In June 2019, the LSA was amended to among other things: (i) extend the deadline for the Company to maintain its domestic depository and operating accounts with the Bank, subject to a control agreement in favor of Innovatus, to July 31, 2019 and (ii) permit the Company to incur credit card indebtedness in an amount not to exceed $ 150,000 . As of September 30, 2019, the Company did not achieve the revenue covenant under the Innovatus LSA. As a result, in October 2019, the Company obtained a waiver letter from Innovatus. Pursuant to the waiver letter, Innovatus agreed to allow the Company to cure its noncompliance with the revenue covenant as of September 30, 2019 so long as the Company (i) raised at least $ 10 million in gross proceeds from the sale of its securities in an underwritten public offering by October 31, 2019 and (ii) amended the warrant to purchase stock, issued by the Company to Innovatus in March 2019 to decrease the exercise price of the warrant from $ 4.63 per share to $ 0.48 per share. Also pursuant to the waiver letter, as consideration for the prospective breach of a liquidity covenant, the Company agreed to issue to Innovatus 572,917 shares of the Company's common stock. As a result of the amendment and shares issued, the Company recognized $ 549,955 as a debt discount, which is being amortized as interest expense over the remaining term of the LSA. As of December 31, 2019, the Company did not achieve certain financial covenants under the Innovatus LSA. As a result, in March 2020, the Company and Innovatus entered into an amendment to the Innovatus LSA (the “Second Amendment”) to, among other things: (i) waive the events of default from not achieving the specific financial covenants for the December 31, 2019 measurement date, (ii) require an immediate partial repayment of $ 2.1 million, (iii) require an additional partial repayment of $ 2.9 million on the earlier of completion of an Equity Event (as defined in the Second Amendment), or April 30, 2020, (iv) modify the liquidity covenant, such that the Company’s minimum cash balance shall vary based on outstanding borrowing capacity under the Revolver (provided, however, that the Company shall maintain a minimum cash balance of $ 2 million at any given time), (v) reduce the dollar amount of certain minimum revenue covenants measured as of the end of each calendar quarter (each, a “Revenue Covenant”) and (vi) modify the terms of certain events of default. For example, the Second Amendment provides for a cure 19 period in connection with the breach of certain minimum revenue financial covenants, as long as the Company submits an updated management plan and financial projections, which are subject to Innovatus approval, and completes a Qualified Financing Event (as defined in the Second Amendment) within 45 days of such breach. In connection with the Second Amendment, the Company was obligated to pay Innovatus a waiver fee in the amount of $ 200,000 and a prepayment fee of $ 100,000 , payable in cash or in shares of the Company’s common stock at the Company's election, no later than following completion of the Equity Event, as defined in the Second Amendment. As described in Note 9 below, the Company completed a follow-on public offering in April 2020 that constituted an Equity Event under the Second Amendment. A portion of the proceeds from the follow-on offering were used to pay-down $ 2.9 million of principal balance outstanding under the Term Loans in accordance with the Second Amendment. In addition, the Company issued 872,601 shares of its common stock to Innovatus to satisfy the $ 200,000 waiver fee and the $ 100,000 prepayment fee due under the Second Amendment. As a result of the amendment and shares issued, the Company recognized $ 300,000 as a debt discount, which is being amortized as interest expense over the remaining term of the LSA. Also pursuant to the Second Amendment, the Company subsequently registered such shares for resale on a registration statement on Form S-3 (the “Registration Statement”) filed with the Securities and Exchange Commission on June 22, 2020 and declared effective on July 7, 2020. The Company has not and will not receive any of the proceeds from the offering described in the Registration Statement. In connection with the Merger, the Company and Lineagen entered into a Third Amendment (the “Third Amendment”) to the Innovatus LSA. Among other things, the Third Amendment adds Lineagen as a “Borrower” under the Innovatus LSA and updates certain financial covenants in light of Lineagen becoming a wholly owned subsidiary of the Company. On December 31, 2020, the Company obtained a waiver from Innovatus of its previously disclosed noncompliance, as of September 30, 2020, with the revenue covenant contained in the LSA. As of December 31, 2020, the Company was in compliance with the covenants under the Innovatus LSA. Summary of Debt Obligations The carrying value of the Company's debt for the periods presented was as follows: December 31, 2020 December 31, 2019 Term Loans 15,980,814 $ 20,473,436 Revolver — 1,497,955 PPP Loan 1,774,600 — Total principal 17,755,414 21,971,391 Less: unamortized debt issuance costs ( 1,429,913 ) ( 1,886,446 ) Total carrying value of debt $ 16,325,501 $ 20,084,945 As of December 31, 2020, future minimum scheduled principal payments for the Term Loans are as follows: 2021 — 2022 7,811,845 2023 8,049,660 2024 1,893,909 2025 and thereafter — Total $ 17,755,414 These future minimum scheduled principal payments include scheduled principal payments on the PPP Loan as of December 31, 2020. However, as discussed above, In March 2021, the Company received forgiveness of the full principal amount and accrued interest under PPP Loan. 9. Stockholders’ Equity Common Stock Sale of Common Stock 20 In March 2019, the Company entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) which provides that, upon the terms and subject to the conditions and limitations therein, Aspire Capital is committed to purchase up to an aggregate of $ 10.0 million of shares of the Company’s common stock, subject to certain limitations, including that Aspire Capital is not required to purchase shares if such purchase would result in Aspire Capital (together with its affiliates) beneficially owning more than 19.99 % of the Company’s common stock outstanding. Concurrently with entering into the Aspire Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital, in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, the sale of the shares of the Company’s common stock that have been and may be issued to Aspire Capital under the Aspire Purchase Agreement. Upon execution of the Aspire Purchase Agreement, the Company sold 272,479 shares of the Company’s common stock to Aspire Capital at $ 3.67 per share for net proceeds of approximately $ 1.0 million. Aspire Capital was committed to purchase up to $ 9.0 million of additional shares of common stock, subject to beneficial ownership limitations, solely at the Company’s request from time to time during a 30 month period beginning in April 2019 and at a per share purchase price equal to the lesser of: • the lowest sale price of the Company’s common stock on the purchase date; or • the average of the three lowest closing sale prices for the Company’s common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date. In consideration for entering into the Aspire Purchase Agreement and concurrently with the execution of the Aspire Purchase Agreement, the Company issued 69,444 shares of its common stock to Aspire Capital. The value of these shares was netted against the proceeds received as issuance costs. In December 2019, pursuant to the terms of the Aspire Purchase Agreement, the Company sold 1,067,361 shares of its common stock to Aspire Capital, resulting in $ 1,116,067 in gross proceeds to the Company. As of December 31, 2020, due to beneficial ownership limitations, the Company cannot sell additional shares of its common stock to Aspire Capital. Follow-on Public Offerings In October 2019, the Company completed an underwritten public offering of 10,013,600 shares of its common stock and, to certain investors, pre-funded warrants to purchase 10,923,958 shares of its common stock, and accompanying common warrants to purchase up to an aggregate of 20,937,558 shares of its common stock. Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The public offering price of each share of common stock and accompanying common warrant was $ 0.86 and $ 0.859 for each pre-funded warrant and accompanying common warrant. The pre-funded warrants are immediately exercisable at a price of $ 0.001 per share of common stock. The common warrants are immediately exercisable at a price of $ 0.86 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The gross proceeds to the Company, before deducting offering costs of $ 2.0 million, were $ 18.0 million. In April 2020, the Company completed an underwritten public offering of 16,896,000 shares of its common stock and, to certain investors, pre-funded warrants to purchase 37,650,000 shares of its common stock, and accompanying common warrants to purchase up to an aggregate of 54,546,000 shares of its common stock. Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The public offering price of each share of common stock and accompanying common warrant was $ 0.33 and $ 0.329 for each pre-funded warrant. The pre-funded warrants are immediately exercisable at a price of $ 0.001 per share of common stock. The common warrants are immediately exercisable at a price of $ 0.33 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The gross proceeds to the Company, before deducting offering costs of $ 1.6 million, were $ 18.0 million. On January 12, 2021, the Company completed an underwritten public offering of 33,368,851 shares of common stock, including 4,352,458 shares of common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. The price to the public in the offering was $ 3.05 per share and the underwriters purchased the shares from the Company pursuant to the underwriting agreement at a price of $ 2.867 per share. The gross proceeds were approximately $ 101.8 million before deducting underwriting discounts and commissions and other offering expenses. On January 25, 2021, the Company completed an underwritten public offering of 38,333,352 shares of common stock, including 5,000,002 shares of common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares.. The price to the public in the offering was $ 6.00 per share and the underwriters purchased the shares from the Company 21 pursuant to the underwriting agreement at a price of $ 5.64 per share. The gross proceeds to us were approximately $ 230.0 million before deducting underwriting discounts and commissions and other offering expenses. Shelf Registration Statement and Ladenburg At-the-Market Facility In August 2020, the Company filed a shelf registration statement on Form S-3 with the SEC covering the offering, issuance and sale of up to $ 125.0 million of the Company’s securities, including up to $ 40.0 million of common stock pursuant to an at-the-market facility, or the Ladenburg ATM, with Ladenburg Thalmann & Co. Inc. acting as sales agent. During October through December 2020, the Company sold 27,025,384 shares of common stock under the Ladenburg ATM at an average share price of $ 0.82 , and received gross proceeds of approximately $ 22.1 million before deducting offering costs of $ 573,263 . In January 2021, the Company sold an additional 6,298,152 shares of common stock under the ATM at an average share price of $ 2.68 , and received gross proceeds of approximately $ 16.9 million before deducting offering costs of $ 422,034 . Common Stock Warrants A summary of the Company’s warrant activity for the year ended December 31, 2020 was as follows: Shares of Stock under Warrants Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2019 4,062,507 $ 6.32 4.67 Granted 32,023,503 $ 0.57 4.84 Exercised ( 11,678,458 ) $ 0.07 $ 10,457,345 Canceled ( 1,502 ) $ 59.90 Outstanding at December 31, 2019 24,406,050 $ 1.76 4.82 $ 7,932,689 Granted 95,396,000 $ 0.22 4.28 Exercised ( 104,627,695 ) $ 0.28 $ 56,779,739 Canceled ( 241 ) $ 59.90 Outstanding at December 31, 2020 15,174,114 $ 2.34 3.76 $ 26,840,636 During the year ended December 31, 2019, the Company recognized debt issuance costs of $ 675,617 for warrants issued in 2019. In March 2020, the Company entered into a Warrants Amendment and Agreement with certain holders of warrants that were exercisable for 3,200,000 shares of common stock. The agreement reduced the exercise price of existing warrants from $ .86 per share to $ 0.75 per share, which were exercised following the amendment, in addition to issuing 3,200,000 new warrants at an exercise price per share of $ 1.06 that were exercisable beginning six months from the date of issuance and have a contractual term of five years, six months . 2018 Equity Incentive Plan In August 2018, the Company’s board of directors (the “Board”) and its stockholders adopted the 2018 Equity Incentive Plan (the “2018 Plan”), as a successor to and continuation of the Company’s 2006 Equity Incentive Plan (the “2006 Plan”). Under the 2018 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then its employees, directors and consultants, including employees and consultants of its affiliates. The Company has initially reserved 1,499,454 shares of common stock for issuance under the 2018 Plan, which is the sum of (1) 1,000,000 new shares, plus (2) the number of shares that remained available for issuance under the 2006 Plan at the time the 2018 Plan became effective, and (3) any shares subject to outstanding stock options or other stock awards that were granted under the 2006 Plan that would have otherwise returned to the 2006 Plan. In addition, the number of shares of common stock reserved for issuance under the 2018 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2019 through January 1, 2028, in an amount equal to 5 % of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Board. As of December 31, 2020, 5,119,378 shares of common stock were authorized for future grants under the 2018 Plan. 22 Stock Options A summary of the Company’s stock option activity is as follows: Shares of Stock under Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2019 1,282,847 $ 6.90 9.2 Granted 716,960 $ 3.78 Exercised ( 50,665 ) $ 1.30 $ 151,819 Canceled ( 206,230 ) $ 7.20 Outstanding at December 31, 2019 1,742,912 $ 5.73 8.2 $ 4,356 Granted 4,385,666 $ 0.67 Exercised ( 3,290 ) $ 1.10 $ 7,261 Canceled ( 835,787 ) $ 3.37 Outstanding at December 31, 2020 5,289,501 $ 1.91 8.7 $ 10,177,942 Vested and expected to vest at December 31, 2020 5,261,148 $ 1.91 8.7 $ 10,127,495 Vested and exercisable at December 31, 2020 1,474,891 $ 4.02 8.0 $ 1,750,896 The weighted-average grant date fair value of stock option grants during the years ended December 31, 2020 and 2019 was $ 0.44 and $ 2.16 , respectively. The contractual term of stock options granted to employees was 10 years, which is also the maximum contractual term permitted for stock options (and stock appreciation rights) issued under the 2018 Plan. Stock options generally vest or become exercisable monthly over a four-year period. Stock-Based Compensation Expense The Company recognized stock-based compensation expense for the years ended December 31, 2020 and 2019 was as follows: Year Ended December 31, 2020 2019 Research and development $ 375,471 $ 240,692 General and administrative 1,178,598 1,105,331 Total stock-based compensation expense $ 1,554,069 $ 1,346,023 The weighted-average assumptions used in the Black-Scholes-Merton option pricing model to determine the fair value of the employee stock option grants were as follows: Year Ended December 31, 2020 2019 Risk-free interest rate .6 % 2.4 % Expected volatility 77.0 % 66.7 % Expected term (in years) 5.8 5.1 Expected dividend yield 0.0 % 0.0 % Risk-free interest rate. The risk-free rate assumption is based on the U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options. Expected volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility as a private company, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly available. Expected term. The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding. The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded. As a result, the Company uses the 23 simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. Expected dividend yield. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends. Forfeitures . The Company reduces stock-based compensation expense for actual forfeitures during the period. As of December 31, 2020, the unrecognized compensation cost related to outstanding stock options was $ 2,834,598 and is expected to be recognized as expense over a weighted-average period of 2.55 years. Employee Stock Purchase Plan In August 2018, the Board and the Company’s stockholders adopted the 2018 Employee Stock Purchase Plan (the “ESPP”). A total of 175,000 shares of common stock were initially reserved for issuance under the ESPP. In addition, the number shares of common stock reserved for issuance under the ESPP will automatically increase on January 1 of each calendar year, beginning on January 1, 2019, through January 1, 2028, by the lesser of (1) 1 % of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of the automatic increase, (2) 220,000 shares, or (3) a lesser number of shares as determined by the Board. As of December 31, 2020, 297,462 shares of common stock were authorized for future grants under the ESPP. 24 10. Commitments and Contingencies Leases We lease approximately 35,823 square feet of office, laboratory, and manufacturing space at our headquarters in San Diego, California, with the lease expiring December 31, 2025. From November 2018 to December 31, 2020, sublet one of our two leased facilities in San Diego. In December 2019, we amended the lease of one our two San Diego facilities to add 2,695 square footage and extend the lease through December 2025. In February 2021, we amended the lease of our other San Diego facilities to extend the term from through December 2025. We also lease 9,710 square feet of office space in a Salt Lake City, Utah under a non-cancelable operation lease with a term ending September 30, 2021. The Company has the ability to enter into renewal negotiations, prior to the lease end date, with no specific terms. Rent expense was $ 239,886 and $ 171,796 for the years ended December 31, 2020 and 2019, respectively, including the offsets for amortization of the leasehold incentive obligation of $ 225,052 for each of the years ended December 31, 2020 and 2019 and sublease rental income of $ 422,116 and $ 422,116 for the years ended December 31, 2020 and 2019, respectively. The future minimum lease payments required under non-cancelable leases as of December 31, 2020, are summarized as follows: Year Ending December 31, Total Payments 2021 733,626 2022 638,740 2023 666,411 2024 696,388 2025 and thereafter 728,671 Total minimum lease payments $ 3,463,836 Royalty Agreements The Company has entered into agreements to market and distribute chips and kits used in its instruments. The Company is obligated to pay royalties based on sales during each annual license period. Such royalty agreements extend through the life of underlying intellectual property which is affected by the patent filing date and jurisdiction. Certain royalty agreements require the Company to make minimum payments regardless of the level of sales achieved. As of December 31, 2020, annual future minimum royalty payments total $ 110,000 and are payable through November 2026. Purchase Commitments The Company has a contractual commitment with a supplier to purchase $ 165,000 of products every three months for an initial term of two years beginning in March 2019. The contract can be terminated with 90 days written notice by either party. As of February 28, 2021, the Company was negotiating with the supplier to extend the agreement. Litigation From time to time, the Company may be subject to potential liabilities under various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of the business. The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any material loss exposure as it is not a defendant in any claims or legal actions. 25 11. Income Taxes The domestic and foreign components of income (loss) from continuing operations are as follows: Years Ended December 31, 2020 2019 Domestic $ ( 41,191,343 ) $ ( 29,851,428 ) Foreign 114,185 57,406 Loss before provision for income taxes $ ( 41,077,158 ) $ ( 29,794,022 ) The provision for domestic and foreign income taxes is as follows: Years Ended December 31, 2020 2019 Current: Foreign $ 24,158 $ 19,492 State and local 5,035 1,556 Income tax provision $ 29,193 $ 21,048 Reconciliations of the income tax computed at the federal statutory tax rate to the expense for income taxes are as follows: December 31, 2020 2019 Income taxes at statutory rate $ ( 8,626,202 ) $ ( 6,256,953 ) State income taxes, net of federal benefits ( 521,863 ) ( 529,351 ) Change in valuation allowance 9,815,771 6,786,990 Other permanent differences ( 66,647 ) 449,958 Research credits ( 568,126 ) ( 429,596 ) Other ( 3,740 ) — Income tax expense $ 29,193 $ 21,048 Significant components of the Company’s deferred tax assets at December 31, 2020 and 2019 are as follows: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 62,353,368 $ 41,780,806 Research and development credits 5,670,225 5,007,178 Other 2,249,177 1,406,893 Total 70,272,770 48,194,877 Less: valuation allowance ( 70,272,770 ) ( 48,194,877 ) Deferred tax assets, net of valuation allowance $ — $ — As of December 31, 2020, the Company has federal and state tax net operating loss carryforwards of $ 266.7 million and $ 114.0 million, respectively. The federal tax loss carryforwards include $ 102.5 million that do not expire but utilization is limited to 80% of the Company's taxable income in any given tax year based on current federal tax laws. The remaining federal tax loss carryforwards of $ 164.2 million and state tax loss carryforwards begin to expire in 2027 and 2023, respectively, unless previously utilized. As of December 31, 2020, the Company also has federal and California research credit carryforwards of $ 5.5 million and $ 5.0 million, 26 respectively. The federal research credit carryforwards begin to expire in 2027 unless previously utilized. The California research credits carry forward indefinitely. Management assesses all available evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. The Company has experienced net losses since inception, and the revenue and income potential of the Company’s business and market are unproven. Due to the Company’s continuing research and development ("R&D") activities, the Company expects to continue to incur net losses into the foreseeable future. As such, the Company cannot conclude that it is more likely than not that its deferred tax assets will be realized. A valuation allowance of $ 70.3 million and $ 48.2 million as of December 31, 2020 and 2019, respectively, has been established to offset the deferred tax assets. Utilization of the net operating losses and research and development ("R&D") credit carryforwards may be subject to annual limitations due to ownership changes that have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as similar state and foreign provisions. These ownership changes may limit the amount of net operating losses and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an "ownership change" as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of outstanding stock of a company by certain stockholders. Due to the existence of the valuation allowance, limitations created by past or future ownership changes, if any, will not impact its effective tax rate. During 2013, the Company completed a Section 382/383 analysis, from inception through December 31, 2012, regarding the limitation of the net operating losses and R&D credits. Based upon the analysis, the Company determined that no ownership changes occurred during that period. However, there may have been ownership changes subsequent to December 31, 2012, that could limit the Company's ability to utilize the net operating loss and R&D credit carryforwards. The Company plans to complete an analysis prior to using any of the net operating losses and R&D credits. Reconciliations of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, are as follows: December 31, 2020 2019 Balance at beginning of the year $ 3,708,162 $ 3,389,136 Additions/(reductions) for tax positions - prior year 52,268 — Increase related to current year positions 440,121 319,026 Balance at the end of the year $ 4,200,551 $ 3,708,162 The Company recognizes the benefit of uncertain tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained. Due to the valuation allowance position, none of the unrecognized tax benefits, if recognized, will impact the Company`s effective tax rate. The Company does not anticipate a significant change in the unrecognized tax benefits during the next twelve months. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual of interest and penalties on the Company’s balance sheets and has not recognized any interest and penalties in the statements of operations for the years ended December 31, 2020 and 2019. The Company is subject to taxation in the United States and the United Kingdom. The Company's tax years from 2007 (inception) are subject to examination by the United States and state authorities due to the carry forward of unutilized net operating losses and R&D credits. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are the extension of the carryback period of certain losses to five years, and the suspension of the 80 percent limitation imposed by the TCJA on utilization of NOLs generated in 2018, 2019 and 2020 to offset taxable income generated in tax years prior to 2021. The CARES Act also increased the ability to deduct interest expense from 30 percent, as imposed by the TCJA, to 50 percent of modified taxable income. The CARES Act also provides for a credit against employee wages, the opportunity to defer payment of a portion of federal payroll taxes to December 2021 and December 2022, and enhanced small business loans to assist businesses impacted by the pandemic. The Company's tax provision and financial position was not materially impacted by the CARES Act. On December 27, 2020, the United States enacted the Consolidated Appropriations Act which extended and modified many of the tax related provisions of the CARES Act. The Company does not anticipate a material impact of the Consolidated Appropriations Act on its tax provision or financial position. 27 12. Employee Benefits The Company has a defined contribution 401(k) plan available to eligible employees. Under the terms of the plan, employees may make voluntary contributions as a percent of compensation, limited to the maximum amount allowable under federal tax regulations. The Company, at its discretion, may make certain contributions to the 401(k) plan. The Company expensed matching contributions of $ 459,364 and $ 381,670 for the years ended December 31, 2020 and 2019, respectively. 13. Acquisition of Lineagen In August 2020, the Company, Merger Sub, Lineagen, and Michael S. Paul, Ph.D., solely in his capacity as exclusive agent and attorney-in-fact of the security-holders of Lineagen, entered into the Merger Agreement. Pursuant to the terms and conditions of the Merger Agreement, Merger Sub merged with and into Lineagen whereupon the separate corporate existence of Merger Sub ceased, with Lineagen continuing as the surviving corporation of the Merger as a wholly owned subsidiary of the Company. Lineagen’s expertise in development, commercialization and reimbursement of laboratory-developed tests provides a platform for accelerating sales growth for the Company’s Saphyr system. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), the shares of capital stock of Lineagen and all options of Lineagen that were issued and outstanding immediately prior to the Effective Time were automatically cancelled and extinguished without any payment with respect thereto. Certain holders of convertible notes and other indebtedness of Lineagen at the closing of the Merger (the “Closing”) received common stock of the Company. The total number of shares of the Company’s common stock issued or reserved for issuance as consideration for the Merger is 6,167,510 shares, subject to adjustment for cash, accounts receivable, unpaid indebtedness, unpaid transaction expenses and certain other liabilities of Lineagen (the “Merger Shares”). 925,126 of the Merger Shares (the “Escrowed Shares”) will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Merger Agreement. Also as consideration for the Merger, pursuant to the Merger Agreement, the Company paid approximately $ 1.9 million in cash to certain creditors and assumed certain liabilities of Lineagen totaling approximately $ 2.9 million, reflective of the Company's preliminary estimate of the post-closing purchase price adjustment (which adjustment is subject to finalization pursuant to the terms of the Merger Agreement). In addition, on August 21, 2020, concurrent with the Closing, the Company paid approximately $ 1.1 million to satisfy all outstanding principal and accrued interest amounts due pursuant to that certain Promissory Note, dated April 22, 2020, by and between Lineagen and Silicon Valley Bank (the “Lineagen PPP Loan”), issued pursuant to the CARES Act administered by the SBA. The Lineagen PPP Loan was repaid by the Company prior to maturity without penalty. The Company accounted for its acquisition of Lineagen using the acquisition method of accounting pursuant to ASC 805. The tangible and identifiable intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date, and the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed was recorded to goodwill. Goodwill relates to the expected synergies from combining the operations of the companies. The acquisition was structured as a stock sale and therefore goodwill is non tax deductible. The purchase price allocation for the acquisition of Lineagen is preliminary and subject to revision as additional information about the fair value of assets and liabilities becomes available. As permitted under ASC 805, the Company is allowed a measurement period, which may not exceed one year, in which to complete its accounting for the acquisition. The Company has recognized provisional amounts for tax assets and liabilities, and subsequent adjustments during the measurement period to any of these items may affect the amount of goodwill recognized. During the fourth quarter of 2020, the Company recorded a $ 232,000 adjustment to the original purchase price allocation to reduce the estimated fair value of accounts receivable, with the offsetting amount recorded to goodwill. As discussed above, the purchase price for the acquisition of Lineagen is subject to adjustment for cash, accounts receivable, unpaid indebtedness, unpaid transaction expenses and certain other liabilities of Lineagen. The following is the estimated purchase price for the acquisition of Lineagen: Cash (a) $ 1,939,977 Cash transferred for repayment of Lineage PPP Loan (b) $ 1,104,508 Shares common stock issued as consideration (c) 6,167,510 Estimated shares of common stock to be returned to the Company (c) ( 138,247 ) Stock price per share on closing date $ 0.68 Value of estimated common stock consideration (c) $ 4,099,899 Total estimated purchase price (c) $ 7,144,384 (a) The Company paid approximately $ 1.9 million in cash to certain creditors of Lineagen. (b) The Company paid approximately $ 1.1 million to satisfy all outstanding principal and accrued interest amounts due pursuant to the Lineagen PPP Loan. 1 (c) The total number of shares of the Company’s common stock issued or reserved for issuance as consideration for the Merger was 6,167,510 shares. 925,126 of the Merger Shares will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Merger Agreement. The total number of Merger Shares is subject to adjustment for cash, accounts receivable, unpaid indebtedness, unpaid transaction expenses and certain other liabilities of Lineagen. The value of the estimated common stock consideration and the total estimated purchase price incorporate the return of an estimated 138,247 Escrowed Shares to the Company based on a preliminary estimate of this adjustment. The total estimated purchase price was allocated to Lineagen’s tangible and identifiable intangible assets acquired and liabilities assumed on based on their estimated fair values as of the acquisition date, with the excess recorded as goodwill, as follows: Cash and cash equivalents $ 596,276 Accounts receivable 336,996 Other assets 209,429 Property and equipment 110,670 Intangible assets 1,580,000 Goodwill 7,172,649 Accounts payable and other accrued liabilities ( 2,861,636 ) Net assets acquired $ 7,144,384 The acquisition date fair values of identifiable intangible assets acquired are as following: Customer relationships $ 950,000 Trade name 630,000 Fair value of identifiable intangible assets $ 1,580,000 The customer relationships and trade name intangibles are both being amortized on a straight-line basis over their estimated useful lives of five years . Straight-line amortization was determined to be materially consistent with the pattern of expected use of the intangible assets. The Company recognized approximately $ 1.5 million of acquisition-related costs, including financial advisor fees, legal expenses and accounting fees during the year ended December 31, 2020. These costs are included in the consolidated statement of operations in selling, general and administrative expense. Also, the Company reported approximately $ 1.5 million of service revenue generated by Lineagen in its consolidated statement of operations from the date of acquisition through December 31, 2020. The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Lineagen as if the companies had been combined as of January 1, 2019. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of January 1, 2019. Years Ended December 31, (Unaudited) 2020 2019 Revenue $ 11,938,353 $ 17,664,410 Net loss ( 42,317,665 ) ( 36,655,467 ) Basic and diluted net loss per share $ ( 0.39 ) $ ( 1.74 ) These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Lineagen to reflect (i) additional amortization that would have been charged based upon the fair value of the acquired intangible assets of $ 235,060 and $ 308,240 for the year ended December 31, 2020 and 2019, respectively; (ii) the removal of interest expense related to the historical debt of Lineagen which was not acquired of $ 742,135 and $ 3.8 million for the year ended December 31, 2020 and 2019, respectively, and (iii) the removal of acquisition costs incurred by the companies of $ 2.1 million for the year ended December 31, 2020. 2 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.