Bionano Genomics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS BIONANO GENOMICS, INC. Condensed Consolidated Balance Sheets (Unaudited) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 332,554,000 $ 38,449,000 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 Inventory, net 4,890,000 3,316,000 Prepaid expenses and other current assets 1,683,000 2,250,000 Total current assets 341,965,000 46,790,000 Property and equipment, net 6,084,000 4,910,000 Intangible assets, net 1,317,000 1,475,000 Goodwill 7,173,000 7,173,000 Other long-term assets 270,000 103,000 Total assets $ 356,809,000 $ 60,451,000 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 3,745,000 $ 2,930,000 Accrued expenses 6,540,000 5,599,000 Contract liabilities 445,000 416,000 Total current liabilities 10,730,000 8,945,000 Long-term debt — 16,326,000 Long-term contract liabilities 213,000 98,000 Total liabilities 10,943,000 25,369,000 Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 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 Additional paid-in capital 518,255,000 178,747,000 Accumulated deficit ( 172,417,000 ) ( 143,684,000 ) Total stockholders’ equity 345,866,000 35,082,000 Total liabilities and stockholders’ equity $ 356,809,000 $ 60,451,000 See accompanying notes to the condensed consolidated financial statements 3 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Product revenue $ 2,496,000 $ 940,000 $ 4,545,000 $ 1,923,000 Service and other revenue 1,360,000 242,000 2,479,000 395,000 Total revenue 3,856,000 1,182,000 7,024,000 2,318,000 Cost of revenue: Cost of product revenue 1,869,000 515,000 3,383,000 1,289,000 Cost of service and other revenue 548,000 88,000 1,159,000 170,000 Total cost of revenue 2,417,000 603,000 4,542,000 1,459,000 Operating expenses: Research and development 4,086,000 2,401,000 6,765,000 5,075,000 Selling, general and administrative 13,829,000 5,613,000 23,357,000 12,981,000 Total operating expenses 17,915,000 8,014,000 30,122,000 18,056,000 Loss from operations ( 16,476,000 ) ( 7,435,000 ) ( 27,640,000 ) ( 17,197,000 ) Other income (expense): Interest expense, net ( 210,000 ) ( 561,000 ) ( 748,000 ) ( 1,322,000 ) 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 ) Total other income (expense) ( 2,301,000 ) ( 634,000 ) ( 1,078,000 ) ( 1,377,000 ) Loss before income taxes ( 18,777,000 ) ( 8,069,000 ) ( 28,718,000 ) ( 18,574,000 ) Provision for income taxes ( 9,000 ) ( 5,000 ) ( 15,000 ) ( 10,000 ) Net loss $ ( 18,786,000 ) $ ( 8,074,000 ) $ ( 28,733,000 ) $ ( 18,584,000 ) Net loss per share, basic and diluted $ ( 0.07 ) $ ( 0.09 ) $ ( 0.11 ) $ ( 0.29 ) Weighted-average common shares outstanding basic and diluted 278,898,000 90,907,000 271,460,000 63,238,000 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Balance at January 1, 2020 34,274,000 $ 3,000 $ 106,188,000 $ ( 102,577,000 ) $ 3,614,000 Stock-based compensation expense — — 328,000 — 328,000 Issue stock for warrant exercises 3,478,000 — 2,355,000 — 2,355,000 Net loss — — — ( 10,510,000 ) ( 10,510,000 ) 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 Stock option exercises 102,000 — 333,000 — 333,000 Stock-based compensation expense — — 371,000 — 371,000 Issue common stock, net of issuance costs 78,000,000 8,000 327,478,000 — 327,486,000 Issue stock for warrant exercises 10,739,000 1,000 9,392,000 — 9,393,000 Net loss — — — ( 9,947,000 ) ( 9,947,000 ) 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 5 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2021 2020 Operating activities: Net loss $ ( 28,733,000 ) $ ( 18,584,000 ) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization expense 964,000 591,000 Non-cash interest 383,000 651,000 Stock-based compensation 2,129,000 656,000 Provision for bad debt expense — 1,290,000 Gain on forgiveness of PPP Loan ( 1,775,000 ) — Loss on debt extinguishment 2,076,000 — Changes in operating assets and liabilities: Accounts receivable ( 63,000 ) 1,795,000 Inventory ( 3,605,000 ) ( 1,037,000 ) Prepaid expenses and other current assets 400,000 244,000 Accounts payable 816,000 150,000 Accrued expenses and contract liabilities 1,085,000 ( 1,006,000 ) Net cash used in operating activities ( 26,323,000 ) ( 15,250,000 ) Investing Activities: Purchases of property and equipment ( 76,000 ) — Sale of property and equipment 126,000 — Net cash used in investing activities 50,000 — Financing activities: Repayment of term-loan debt ( 17,010,000 ) ( 5,000,000 ) Proceeds from PPP Loan — 1,775,000 Proceeds from borrowing from line of credit — 760,000 Repayments of borrowing from line of credit — ( 2,258,000 ) Proceeds from sale of common stock 328,635,000 17,963,000 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 financing activities 320,378,000 15,133,000 Net increase in cash and cash equivalents 294,105,000 ( 117,000 ) Cash and cash equivalents at beginning of period 38,449,000 17,311,000 Cash and cash equivalents at end of period $ 332,554,000 $ 17,194,000 Supplemental cash flow disclosures: Cash paid for interest $ 487,000 $ 715,000 Supplemental disclosure of non-cash investing and financing activities: Transfer of instruments and servers from inventory to property and equipment $ 2,035,000 $ 1,191,000 Forgiveness of PPP Loan $ 1,775,000 $ — Issue stock for covenant waiver $ — $ 300,000 Warrant exercise pursuant to cashless exercise $ 129,000 $ — See accompanying notes to the condensed consolidated financial statements 6 Table of Contents BIONANO GENOMICS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Basis of Presentation 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. Basis of Presentation The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim reporting purposes. The condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, changes in equity, and comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances have been eliminated. 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. Liquidity 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. 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. However, 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 restrictions. 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. 7 Table of Contents 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. Significant Accounting Policies 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 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. 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, 2021 and interim reporting periods in 2022. The Company is in the process of evaluating the impact of adoption of the lease accounting guidance on the consolidated financial statements. 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 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. 8 Table of Contents 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’s early adoption of this accounting standard on January 1, 2021, did not have a material impact on the Company’s consolidated financial statements and related disclosures. 2. 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 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. 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): June 30, 2021 June 30, 2020 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 3. Revenue Recognition Revenue by Source 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 Consumables 1,338,000 711,000 2,505,000 1,160,000 Total product revenue 2,496,000 940,000 4,545,000 1,923,000 Service and other 1,360,000 242,000 2,479,000 395,000 Total revenue $ 3,856,000 $ 1,182,000 $ 7,024,000 $ 2,318,000 Revenue by Geographic Location 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 % EMEIA 940,000 25 % 315,000 26 % 2,518,000 36 % 705,000 31 % Asia Pacific 551,000 14 % 79,000 7 % 634,000 9 % 99,000 4 % Total $ 3,856,000 100 % $ 1,182,000 100 % $ 7,024,000 100 % $ 2,318,000 100 % 9 Table of Contents The table above provides revenue from contracts with customers by source and geographic region (based on the customer’s billing address) 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 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 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 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 $ 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. 4. Balance Sheet Account Details Accounts Receivable June 30, 2021 December 31, 2020 Accounts receivable, net: Accounts receivable, trade $ 4,906,000 $ 4,894,000 Less allowance for doubtful accounts ( 2,068,000 ) ( 2,119,000 ) $ 2,838,000 $ 2,775,000 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. 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. 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 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. Concentrations 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 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 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. 10 Table of Contents 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: June 30, 2021 December 31, 2020 Inventory: Raw materials $ 954,000 $ 2,283,000 Finished goods 3,936,000 1,033,000 $ 4,890,000 $ 3,316,000 5. 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 is 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. 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. 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, the “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 % 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 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 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. 11 Table of Contents Summary of Debt Obligations The carrying value of the Company’s debt for the periods presented was as follows: December 31, 2020 Term Loans $ 15,981,000 PPP Loan 1,775,000 Total principal 17,756,000 Less unamortized debt issuance costs ( 1,430,000 ) Total carrying value of debt $ 16,326,000 6. Stockholders’ Equity and Stock-Based Compensation Follow-on Public Offerings 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 of $ 293,000 . 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 of $ 435,000 . 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 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 $ 573,000 . 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 $ 422,000 . The Company terminated the Ladenburg ATM in March 2021. On March 23, 2021, the Company entered into the Cowen ATM which provides for the sale, in the Company’s sole discretion, of shares of common stock having an aggregate offering price of up to $ 350.0 million through or to Cowen, acting as sales agent or principal. The Company will pay Cowen a commission of up to 3.0 % of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights. As of the date of this filing, no shares have been issued pursuant to the Cowen ATM. 12 Table of Contents Stock Warrants 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- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2021 15,174,000 $ 2.34 3.76 $ 26,841,000 Granted — Exercised ( 10,789,000 ) 0.88 58,175,000 Canceled ( 24,000 ) 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 six months ended June 30, 2021 was as follows: Shares of Stock under Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2021 5,290,000 $ 1.91 8.7 $ 10,178,000 Granted 5,067,000 7.48 Exercised ( 162,000 ) 2.55 $ 1,102,000 Canceled ( 645,000 ) 2.64 Outstanding at June 30, 2021 9,550,000 $ 4.81 9.16 $ 27,042,000 Vested and exercisable at June 30, 2021 1,896,000 $ 3.86 8.02 $ 7,555,000 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 The Company recognized stock-based compensation expense for the periods presented as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Research and development $ 384,000 $ 66,000 $ 465,000 $ 133,000 General and administrative 1,374,000 262,000 1,664,000 523,000 Total stock-based compensation expense $ 1,758,000 $ 328,000 $ 2,129,000 $ 656,000 13 Table of Contents The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants during the periods presented were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Risk-free interest rate 1.1 % 0.4 % 1.1 % 1.1 % Expected volatility 80.4 % 77.9 % 80.4 % 72.2 % Expected term (in years) 6.0 5.5 6.0 5.9 Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 % Restricted Stock Units On May 12, 2021, the compensation committee of the Company’s board of directors granted 580,000 restricted stock units (“RSUs”) to R. Erik Holmlin, Ph.D., the Company’s President and Chief Executive Officer (the “Holmlin Grant”), and 240,000 RSUs to Mark Oldakowski, the Company’s Chief Operating Officer (the “Oldakowski Grant”), in each case with an effective grant date and vesting commencement date of May 12, 2021. 290,000 RSUs under the Holmlin Grant are subject to time-based vesting, with 50 % of the shares vesting on each of the first and second anniversaries of the vesting commencement date, subject to continued service through the vesting date, and 18 months vesting acceleration upon a termination without cause or resignation with good reason. 290,000 RSUs under the Holmlin Grant are subject to vesting upon the satisfaction of certain specified revenue targets within four years following the vesting commencement date. If Dr. Holmlin’s employment with the Company is terminated without cause or he resigns with good reason, then the shares will continue to be eligible for vesting upon satisfaction of the revenue targets within a period that is the shorter of 18 months following termination or four years following the vesting commencement date. The RSUs comprising the Oldakowski Grant are subject to time-based vesting, with 50 % of the shares vesting on each of the first and second anniversaries of the vesting commencement date, subject to continued service through the vesting date. 7. 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. 8. Income Taxes The Company is subject to taxation in the United States, United Kingdom and various state jurisdictions. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the full valuation allowance on the Company’s U.S. net operating losses. 9. Acquisition of Lineagen On August 21, 2020, the Company, 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 security-holders 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 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. 14 Table of Contents 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 was 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. 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. 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. 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) $ 1,940,000 Cash transferred for repayment of Lineage PPP Loan (b) $ 1,105,000 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) $ 4,100,000 Total estimated purchase price (c) $ 7,144,000 (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. (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. 15 Table of Contents 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 $ 596,000 Accounts receivable 337,000 Other assets 209,000 Property and equipment, net 111,000 Intangible assets 1,580,000 Goodwill 7,173,000 Accounts payable and other accrued liabilities ( 2,862,000 ) Net assets acquired $ 7,144,000 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 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. Six Months Ended June 30, (Unaudited) 2020 Revenue $ 4,931,000 Net loss ( 20,468,000 ) Basic and diluted net loss per share $ ( 0.30 )