What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-04 compared with 2021-05-13 · 88 added, 60 removed, 367 unchanged (29% of the section changed)

5 unchanged sentences

Cash and cash equivalents $ 332,554,000 $ 38,449,000

Accounts receivable, net of allowance for doubtful accounts of $ 2,091,000 and $ 2,119,000 as of March 31, 2021 and December 31, 2020, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2,068,000 and $ 2,119,000 as of June 30, 2021 and December 31, 2020, respectively

2,838,000 2,775,000

13 unchanged sentences

Total current liabilities 10,730,000 8,945,000

Long-term debt, net of current portion 14,866,000 16,326,000

Long-term debt — 16,326,000

Long-term contract liabilities 213,000 98,000

3 unchanged sentences

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized and no shares issued or outstanding as of March 31, 2021 and December 31, 2020

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at March 31, 2021 and December 31, 2020;

278,794,000 and 189,953,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

10,000,000 shares authorized and no shares issued or outstanding as of June 30, 2021 and December 31, 2020

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at June 30, 2021 and December 31, 2020;

279,054,000 and 189,953,000 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

28,000 19,000

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Product revenue $ 2,496,000 $ 940,000 $ 4,545,000 $ 1,923,000

13 unchanged sentences

Gain on forgiveness of Paycheck Protection Program loan — — 1,775,000 —

Loss on debt extinguishment ( 2,076,000 ) — ( 2,076,000 ) —

Other income (expense) ( 15,000 ) ( 73,000 ) ( 29,000 ) ( 55,000 )

18 unchanged sentences

Balance at March 31, 2020 37,752,000 $ 3,000 $ 108,871,000 $ ( 113,087,000 ) $ ( 4,213,000 )

Stock-based compensation expense — — 328,000 — 328,000

Issue common stock, net of issuance costs 16,896,000 2,000 16,364,000 — 16,366,000

Issue stock for employee stock purchase plan 44,000 — 21,000 — 21,000

Issue stock for covenant waiver 873,000 — 300,000 — 300,000

Issue stock for warrant exercises 36,410,000 4,000 1,105,000 — 1,109,000

Net loss — — — ( 8,074,000 ) ( 8,074,000 )

Balance at June 30, 2020 91,975,000 $ 9,000 $ 126,989,000 $ ( 121,161,000 ) $ 5,837,000

Balance at January 1, 2021 189,953,000 $ 19,000 $ 178,747,000 $ ( 143,684,000 ) $ 35,082,000

5 unchanged sentences

Balance at March 31, 2021 278,794,000 $ 28,000 $ 516,321,000 $ ( 153,631,000 ) $ 362,718,000

Stock option exercises 60,000 — 89,000 — 89,000

Stock-based compensation expense — — 1,758,000 — 1,758,000

Issue stock for warrant exercises 50,000 — 22,000 — 22,000

Issue stock for employee stock purchase plan 150,000 — 65,000 — 65,000

Net loss — — — ( 18,786,000 ) ( 18,786,000 )

Balance at June 30, 2021 279,054,000 $ 28,000 $ 518,255,000 $ ( 172,417,000 ) $ 345,866,000

See accompanying notes to the condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

Operating activities:

9 unchanged sentences

Gain on forgiveness of PPP Loan ( 1,775,000 ) —

Loss on debt extinguishment 2,076,000 —

Changes in operating assets and liabilities:

12 unchanged sentences

Purchases of property and equipment

Sale of property and equipment 126,000 —

Net cash used in investing activities 50,000 —

2 unchanged sentences

( 17,010,000 ) ( 5,000,000 )

Proceeds from PPP Loan — 1,775,000

Proceeds from borrowing from line of credit

3 unchanged sentences

Offering expenses on sale of common stock ( 1,149,000 ) ( 1,597,000 )

Proceeds from sale of common stock under employee stock purchase plan 65,000 21,000

Proceeds from warrant and option exercises

9,837,000 3,469,000

Net cash provided by (used in) financing activities 337,536,000 ( 1,135,000 )

Net cash provided by financing activities 320,378,000 15,133,000

Net increase in cash and cash equivalents 294,105,000 ( 117,000 )

7 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Transfer of instruments and servers from property and equipment into inventory $ 126,000 $ —

Transfer of instruments and servers from inventory to property and equipment $ 2,035,000 $ 1,191,000

Forgiveness of PPP Loan $ 1,775,000 $ —

Offering costs in accounts payable $ 324,000 $ —

Issue stock for covenant waiver $ — $ 300,000

Warrant exercise pursuant to cashless exercise $ 129,000 $ —

14 unchanged sentences

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

As of March 31, 2021, the Company had approximately $ 362.1 million in cash and cash equivalents, and working capital of $ 363.1 million as a result of common stock offerings executed in the quarters ended December 31, 2020 and March 31, 2021.

As of June 30, 2021, the Company had approximately $ 332.6 million in cash and cash equivalents, and working capital of $ 331.2 million as a result of common stock offerings executed in the quarters ended December 31, 2020 and March 31, 2021.

In February 2021, we applied for forgiveness of our Paycheck Protection Program (“the PPP”) Loan, and in March 2021, the PPP Loan, including all accrued interest, was forgiven in full for $ 1.8 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 March 31, 2021.

This facility is scheduled to expire in March 2024.

As of June 30, 2021, the outstanding term loan with Innovatus was paid in full, including all accrued interest, an end of term fee, and a prepayment fee for a total of $ 17.0 million.

The Company believes its available cash balance will be sufficient to fund operations, obligations as they become due and capital investments for at least the next twelve months.

5 unchanged sentences

The Company’s manufacturing partners, suppliers, and customers, have implemented similar operational restrictions.

Despite reporting an increase in revenue for the three months ended March 31, 2021 when compared to the same period in 2020, the Company believes travel restrictions and overall reduced activity has negatively impacted the Company’s first quarter 2021 financial results.

Despite reporting an increase in revenue for the three and six months ended June 30, 2021 when compared to the same period in 2020, the Company believes travel restrictions and overall reduced activity has negatively impacted the Company’s second quarter 2021 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.

3 unchanged sentences

Significant Accounting Policies

During the three months ended March 31, 2021, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

During the three and six months ended June 30, 2021, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for emerging growth companies, which are the dates included below.

However, as of May 7, 2021, the market value of the Company’s common stock held by non-affiliates exceeded $700.0 million.

If the market value of the Company’s common stock held by non-affiliates exceeds $700.0 million as of June 30, 2021, the Company will be a large accelerated filer and therefore will cease to be an emerging growth company effective December 31, 2021.

As of June 30, 2021, the market value of the Company’s common stock held by non-affiliates exceeded $700.0 million.

Accordingly, the Company will be a large accelerated filer and therefore will cease to be an emerging growth company effective December 31, 2021.

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.

8 unchanged sentences

The Company is currently evaluating the expected impact of ASU 2016-13 on its financial statements.

In May 2021, the FASB issued ASU No.

2021-04, Issuer’s Accounting for Certain Modifications or Exchanges for Freestanding Equity-Classified Written Call Options to clarify the accounting for modifications or exchanges of equity-classified warrants.

The standard is effective for fiscal years beginning after December 15, 2021.

Early adoption is permitted.

The Company is in the process of evaluating the expected impact of ASU 2021-04 on its financial statements.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Accounting for Goodwill Impairment.

The revised guidance eliminates step two of the goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment.

A goodwill impairment loss will instead be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill.

All other goodwill impairment guidance will remain largely unchanged.

Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary.

Public business entities that meet the definition of an U.S.

SEC filer, excluding entities eligible to be smaller reporting companies, should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

All other entities should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company’s early adoption of this accounting standard on January 1, 2020, did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

10 unchanged sentences

Common stock equivalents are only included when their effect is dilutive.

The Company’s potentially dilutive securities which include warrants and outstanding stock options under the

Company’s equity incentive plan have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share.

The Company’s potentially dilutive securities which include warrants and outstanding stock options under the Company’s equity incentive plan have been excluded from the computation of diluted net loss per share as they 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.

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

2021 March 31,

2021 June 30,

Stock options 9,550,000 2,988,000

Warrants 4,361,000 79,914,000

RSUs 820,000 —

Total 14,731,000 82,902,000

1 unchanged sentence

Revenue by Source

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Instruments $ 1,158,000 $ 229,000 $ 2,040,000 $ 763,000

4 unchanged sentences

Revenue by Geographic Location

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

$ % $ % $ % $ %

North America $ 2,365,000 61 % $ 788,000 67 % $ 3,872,000 55 % $ 1,514,000 65 %

6 unchanged sentences

Asia Pacific includes China, Japan, South Korea, Singapore and Australia.

For the three months ended March 31, 2021 and 2020, the United States represented 44.8 % and 63.9 % of total revenue.

For the three months ended June 30, 2021 and 2020, the United States represented 59.5 % and 60.0 % of total revenue, respectively.

For the six months ended June 30, 2021 and 2020, the United States represented 53.1 % and 63.0 % of total revenue, respectively.

Remaining Performance Obligations

As of March 31, 2021, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was $ 409,000 .

As of June 30, 2021, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was $ 658,000 .

These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations.

The Company expects to recognize approximately 64.8 % of this amount as revenue during the remainder of 2021, 31.1 % in 2022, and 4.1 % in 2023.

The Company expects to recognize approximately 45.3 % of this amount as revenue during the remainder of 2021, 38.1 % in 2022, and 16.6 % in 2023 and thereafter.

Warranty revenue is included in Service and other revenue.

The Company recognized revenue of $ 156,885 and $ 127,000 during the three months ended March 31, 2021 and 2020, respectively, which was included in the contract liability balance at the end of the previous year.

The Company recognized revenue of $ 90,000 and $ 106,000 during the three months ended June 30, 2021 and 2020, respectively, and revenue of $ 247,000 and $ 232,000 during the six months ended June 30, 2021 and 2020, respectively, which was included in the contract liability balance at the end of the previous year.

Balance Sheet Account Details

8 unchanged sentences

The Company does not perform credit evaluations and therefore subsequent adjustments to the amount expected to be collected are recorded to revenue.

The balance of our Lineagen accounts receivable balance as of March 31, 2021 was $ 284,000 .

The balance of our Lineagen accounts receivable balance as of June 30, 2021 was $ 606,000 .

For optical genome mapping (“OGM”) products and services, credit is extended based upon an evaluation of each customer’s credit history, financial condition, and other factors.

1 unchanged sentence

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 three months ended March 31, 2021, the Company recorded a recovery of bad debt expense of $( 28,000 ), which is included in selling, general and administrative expenses.

During the three and six months ended June 30, 2021, the Company recorded a recovery of bad debt expense of $( 15,000 ) and $( 40,000 ), 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.

1 unchanged sentence

Accounts receivable is subject to concentration risk whenever a customer has a balance that meets or exceeds 10.0% of the Company’s total accounts receivable balance.

As of March 31, 2021, there were no customer balances that met or exceeded 10.0 % 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.

As of June 30, 2021, one customer balance represented 10.1 % of the Company’s total accounts receivable balance.

As of December 31, 2020, two customer balances represented 27.4 % of the Company’s total accounts receivable balance.

Inventory is stated at the lower of cost or net realizable value, on a first-in, first-out basis.

11 unchanged sentences

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.

A gain on forgiveness of Paycheck Protection Program loan of $ 1.8 million was recognized during the three months ended March 31, 2021.

I nnovatus LSA

A gain on forgiveness of Paycheck Protection Program loan of $ 1.8 million was recognized during the six months ended June 30, 2021.

No gain on forgiveness of Paycheck Protection Program loan was recognized during the three months ended June 30, 2021.

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.

2 unchanged sentences

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 March 31, 2021, the effective interest rate, including debt issuance costs, for the 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.

As of May 14, 2021 (the effective date of the loan payoff), the effective interest rate, including debt issuance costs, for the Term Loans was 16.7 %.

The LSA provided 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”), under which no borrowings were outstanding as of March 31, 2021 and December 31, 2020.

The Company may repay and re-borrow 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 March 31, 2021, the Company believes there have been no events or changes in conditions that could require immediate repayment of amounts due to Innovatus.

As of March 31, 2021, the Company was in compliance with the covenants under the Innovatus LSA and the Revolver.

This end of term fee was being recognized as interest expense over the term of the LSA.

As of June 30, 2021, the outstanding term loan with Innovatus was paid in full, including all accrued interest, the end of term fee, and a prepayment fee for a total of $ 17.0 million.

The LSA also provides for a revolving line of credit in an amount not to exceed $ 5.0 million (the “Revolver”), which was terminated effectively upon payment in full of the above term loan.

Summary of Debt Obligations

The carrying value of the Company’s debt for the periods presented was as follows:

2021 December 31,

Term Loans $ 15,981,000

21 unchanged sentences

Stock Warrants

A summary of the Company’s warrant activity during the three months ended March 31, 2021 was as follows:

A summary of the Company’s warrant activity during the six months ended June 30, 2021 was as follows:

Shares of Stock under Warrants Weighted-

4 unchanged sentences

Canceled ( 24,000 )

Outstanding at March 31, 2021

Outstanding at June 30, 2021

4,361,000 $ 5.95 2.27 $ 6,904,000

Stock Options

A summary of the Company’s stock option activity during the three months ended March 31, 2021 was as follows:

A summary of the Company’s stock option activity during the six months ended June 30, 2021 was as follows:

Shares of Stock under Stock Options Weighted-

5 unchanged sentences

Canceled ( 645,000 ) 2.64

Outstanding at March 31, 2021

Outstanding at June 30, 2021

9,550,000 $ 4.81 9.16 $ 27,042,000

Vested and exercisable at March 31, 2021

Vested and exercisable at June 30, 2021

1,896,000 $ 3.86 8.02 $ 7,555,000

For the three months ended March 31, 2021 and 2020, the weighted-average grant date fair value of stock options granted was $ 10.83 and $ 1.04 per share, respectively.

For the three months ended June 30, 2021 and 2020, the weighted-average grant date fair value of stock options granted was $ 5.06 and $ 0.30 per share, respectively.

For the six months ended June 30, 2021 and 2020, the weighted-average grant date fair value of stock options granted was $ 5.13 and $ 0.55 per share, respectively.

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Research and development $ 384,000 $ 66,000 $ 465,000 $ 133,000

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Risk-free interest rate 1.1 % 0.4 % 1.1 % 1.1 %

37 unchanged sentences

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.

There were no additional purchase price adjustments made during the first quarter of 2021.

There were no additional purchase price adjustments made during the second quarter of 2021.

The Company is still finalizing working capital adjustments with the seller.

31 unchanged sentences

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.

Three Months Ended March 31,

Six Months Ended June 30,

Revenue $ 4,931,000

1 unchanged sentence

Basic and diluted net loss per share

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 $ 77,000 for the three months ended March 31, 2020;

and (ii) the removal of interest expense related to the historical debt of Lineagen which was not acquired of $ 312,000 or the three months ended March 31, 2020 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements